I have now had the opportunity of a further look at the recently released Murray Review, which I briefly mentioned the other day in my post Queen of Hearts – A Good Idea Endorsed.
The Review is a lengthy document, and overall it is a substantial and admirable piece of work. Some of it reaches conclusions that I would not have reached, but I need to be careful here, since it includes quite a bit that I wrote, or which has been redrafted from suggestions that I have made[1], in particular:
- The phrase “Pay now, argue later”, now widely used around the world to describe the fundamental nature of an excessive adjudication determination (page 82);
- The Queen of Hearts clause, quoted at page 289 and recommended at Recommendation 84;
- Several of the extracts from the 2014 SoCLA Report;
- The “Red card, yellow card” formula to be found in the South Australian Code of Conduct at pages 244 and 245 (Recommendations 67 and 68), which I had originally suggested to Alan Moss for the purpose of the Moss Review;
- Several of the extracts from SoCLA’s submission to the Murray review, including the recommendation of that system (page 63) and the summation of the June 2017 SocLA event (page 287).
John Murray is an accredited adjudicator in several East Coast jurisdictions, and no doubt one of the very best of them (he is clever, fair and diligent, as well as being good company). People tend to do what they have done in the past, and to recommend what they know; perhaps it is no surprise that the East Coast model is his preferred starting point for a national system. An unintended irony lies therein. John Murray includes a revealing graphic about international payment practices on page 14, as follows:[2]
Australia ranks very porly here. The East Coast model has held most of the field in Australia since its introduction in 1999. It plainly has not worked. And yet John Murray recommends its endorsement, albeit with some useful improvements. Why persist with something which does not work, especially where there are alternatives which do work? I tried to persuade him to look more closely, not just at security of payment in the region (Australasia and South-East Asia) but the worldwide and particularly UK experiences, but without success – the Review barely mentions the UK or Irish legislative scheme.
Personally, I believe the art of government is best practised with a light hand. The reason I am sceptical of totalitarian solutions – where government imposes rigid and mandatory controls on how people do business – is the empirical evidence that they have an appalling track record. That, it seems to me, is why the USSR collapsed and the EU is now also showing signs of collapse. In the field, the UK legislation is just a few pages long, and is popular and successful. By contrast, the Australian legislation is many hundreds of pages long, and the endless reviews and amendments stand testament to its unsatisfactory nature. The argument about poor payment practices mirrors, perhaps, the current debate about drugs. Few think they are a god idea: the real question is whether the problem is best addressed by the heavy hand of statutory control or by treating the problem more as a sickness to be cured. A problem with the East Coast system of adjudication is that it is very widely perceived to be Draconian, and so its use is widely and persuasively discouraged. Imposing criminal sanctions on that discouragement is unlikely, it seems to me, to work.
So, I strayed onto the ground of personal opinion. I have started, so I will finish. Here are the Murray Review Recommendations, colour coded with my own views as to whether the recommendations are welcome or not:
Green means that I agree with the recommendation.
Red means that I disagree with the recommendation.
Grey means that I think the jury is still out, or that the recommendation is a consequential one, or simply reflects a typical East Coast model provision.
Bold means that the recommendation is of particular note or importance
My comments are in italics.
I have not colour-coded references t o existing legislation where John Murray suggests suitable models from the existing legislation.
The Murray Recommendations
Chapter 7: A recommended best practice model
- Security of payment legislation should seek to promote prompt payment so as to maintain a contractor’s cash flow. Such an outcome is more effectively achieved through adoption of a legislative regime broadly based on the East Coast Model.
Section 7.5
- The legislation should be drafted and structured as simply as possible and not provide for a two-tier / composite system of ‘complex’ and ‘standard’ claims, as is the case under the Queensland legislation. However, the legislation should enable a respondent, in appropriate circumstances, to make a request to the adjudicator for additional time to respond to a claimant’s adjudication application.
Section 7.6
Chapter 8: The objects of the legislation
- The objects of the legislation should be to provide a party who has undertaken construction work (or supplied related goods and services) under a construction contract with:
(a) a statutory right to progress payments for that work (or for the supply of related goods and services), and
(b) a procedure whereby they can enforce their statutory right to progress payments.
The ‘object’ provision set out in Section 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the NSW Act) provides a suitable model.
Section 8.1
Chapter 9: Definitions
- The legislation should include a definition of ‘construction work’, which should be drafted in the broadest terms.
The definition of ‘construction work’ in section 5 of the NSW Act provides a suitable model.
Section 9.1
- The legislation should include the definition of ‘related goods and services’, which should be drafted in the broadest terms.
The definition of ‘related goods and services’ in section 6 of the NSW Act provides a suitable model.
Section 9.2
- The legislation should include a definition of ‘construction contract’ which is drafted in broad terms.
The definition of ‘construction contract’ in section 4 of the NSW Act provides a suitable model.
Section 9.3
- The definition of ‘construction contract’ should also clarify that a claimant contractor who undertakes to carry out construction work under a ‘construction contract’ must hold the requisite licence to carry out such construction work.
Section 9.3
- The legislation should include a definition of ‘business day’ which excludes:
(a) Saturday and Sunday
(b public holidays, and
(c) the period between 22 December and 10 January inclusive.
The definition of ‘business day’ as set out in section 4 of the Building and Construction Industry Security of Payment (Review) Amendment Bill 2017 (SA) provides a suitable model.
Section 9.4
Chapter 10: Application of the legislation
- The legislation should apply to any construction contract, whether written or oral, or partly both, but should not include construction contracts that form part of a loan agreement, a contract of guarantee or a contract of insurance or where the work is to be undertaken by an employee of the party for which the work is being done.
The ‘application’ provision in section 7 of the NSW Act provides a suitable model, other than the exception set out in section 7(2)(b) should not be included.
Section 10.1
- The legislation should not apply to a claimant corporation in liquidation.
Section 10.1
- The legislation should not include the carve-out of amounts that a person is entitled to under a construction contract.
The carve-outs referred to here are the exceptions referred to in the Victorian legislation which are outside the scope of the legislation. They have been problematic from the outset, and it is difficult to avoid the cynical observation that they were probably introduced with the deliberate purpose of making the Victorian legislation unworkable.
Section 10.2
- The legislation should apply to the residential housing sector so as to enable a residential contractor/builder to make a progress payment claim against an owner-occupier.
This is welcome, but it is a tricky issue. Quite often, residential building work is commissioned by individuals who are relatively wealthy – typically rather more wealthy than the builders who they engage. I have seen numerous cases where builders have not been paid by residential building owners, and the costs which they incur when they try to recover payment in court can often be horrendous. In that sense, it is particularly welcome to give those builders the benefits of this legislation. But historically, contracts with residential owners were excluded from the original UK legislation because of the very real fear that even the UK system of adjudication – much less Draconian than the East Coast model – would fall foul of human rights law. To some extent, the Moss review tempers the harshness of the East Coast model, but nevertheless there is a real risk of an outcry when mums and dads are deprived of the opportunity to challenge the money claims of their builders.
Section 10.3
- The legislation should prescribe that whenever a residential contractor/builder serves a payment claim on an owner-occupier, the payment claim must include:
(a) information on how the owner-occupier respondent can reply to the payment claim, and
(b) the time period within which the reply/payment schedule must be given.
Section 10.3
Chapter 11: Rights to progress payments
- To avoid confusion within industry the use of the expression ‘reference date’ should be abandoned. The legislation should provide that a person who has undertaken to carry out construction work (or who has undertaken to supply related goods and services) under a construction contract is able to make a payment claim for every named month, or more frequently if so provided under the contract.
If the East Coast model is to be retained, this would be particularly welcome. It gets rid of reference dates, which have proved to be a very troublesome concept. If there is to be a statutory entitlement to progress payment, it is far better that it should be a simple entitlement.
Section 11.1
- The legislation should include specific provisions dealing with single (oneoff)/milestone payments in circumstances where a construction contract makes no express provision in relation to these matters.
Section 9(2)(c) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Victorian Act) provides a suitable model.
Section 11.1
- The legislation should set out the manner in which the date relating to the making of a final payment claim can be identified.
Section 9(2)(d) of the Victorian Act provides a suitable model.
Section 11.1
- The legislation should enable a claimant, where a construction contract has been terminated, to make a payment claim for construction work carried out (or related goods and services supplied) up to the date of termination.
Section 67(2) of the Building Industry Fairness (Security of Payment) Bill 2017 (Qld) provides a suitable model.
Section 11.1
- The legislation should prohibit ‘pay-when-paid’ clauses in construction contracts. Section 12 of the NSW Act provides a suitable model.
Section 11.2
- The legislation should provide that the due date for when a progress payment is to be paid is:
(a) the date provided for under the terms of the contract, subject to the payment term not exceeding 25 business days after the payment claim has been made, or
(b) if the contract makes no express provision with respect to the matter, 10 business days after the payment claim has been made.
If the East Coast model is to be preserved, this provision is helpful so far as it goes. It might usefully address the question of when retention money must be paid.
Section 11.3
- The legislation should provide that the amount of a progress payment is to be calculated:
(a) in accordance with the terms of the contract, or
(b) if the contract does not make any such provision, on the basis of an assessment of the value of the construction work carried out, or goods and services provided.
Section 9 of the NSW Act provides a suitable model.
The legislation might usefully spell out the Plaza West point, namely the extent to which adjudicators should take any account of contractual mechanisms such as certifications, valuations and notice provisions
Section 11.4
- The legislation should provide that construction work and related goods and services is to be valued:
(a) in accordance with the terms of the contract, or
(b) if the contract does not make an express provision with respect to the matter, then having regard to:
(i) the contract price for the work/goods and services
(ii) any other rates or prices set out in the contract
(iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and
(iv) if any of the work/goods is defective, the estimated costs of rectifying the defect.
Section 10 of the NSW Act provides a suitable model.
Section 11.5
Chapter 12: Process for recovering progress payments
- The legislation should require a claimant to identify in its payment claim:
(a) the contract (or arrangement) on which the claim is based, and
(b) a breakdown of the items claimed, including:
(i) a description of the item
(ii) quantification of the item, and
(iii) an outline as to how the claimed amount has been assessed
Clause 5(2) of the Singaporean Building and Construction Industry Security of Payment Regulations 2006 provides a suitable model.
Section 12.1
- The legislation should expressly require a payment claim to:
(a) state that it is a payment claim made under the Act,
(b) provide the period for which a payment schedule is to be provided, and
(c) the potential consequences for failing to provide a payment schedule.
If the East Coast model is to be retained, this is welcome. One of the worst features of the East Coast model is to be seen when recipients of claims do not know whether those are contractual claims, or statutory claims, or both.
Section 12.2
- The legislation should require that, unless the construction contract provides for a longer period, a progress payment claim must be made within 6 months after the construction work was last carried out or the related goods and services were supplied.
Section 12.3
- The legislation should provide that where a payment claim relates to a final payment (including recovery of retention, or the return of alternative security) the claim must be made:
(a) within the period specified in the construction contract, or
(b) if the construction contract does not so provide, the later of:
(i) 28 days after the end of the defects liability period, or
(ii) 6 months after completion of all construction work had been carried out or related goods and services were supplied.
Sections 17A(3) and (4) of the Queensland Act provide a suitable model.
Section 12.3
- The legislation should require a payment schedule to identify:
(a) the payment claim to which it relates
(b) the amount that the respondent proposes to pay (schedule amount), and
(c) if the schedule amount is less than the claimed amount, the respondent’s reasons for withholding payment.
Section 12.4
- The legislation should provide the Regulator with powers to prescribe:
(a) the form that a payment schedule must take, and
(b) additional information requirements.
Section 12.4
- The legislation should require a payment schedule to be served by the respondent on the claimant within the earlier of:
(a) the time required by the relevant construction contract, or
(b) 10 business days after the payment claim was served.
Section 12.4
- The legislation should provide that when a respondent fails to provide a payment schedule within the prescribed timeframe or fails to pay the whole or part of the claimed amount by the due date of payment, the claimant may:
(a) make an application for adjudication, or
(b) recover the unpaid portion of the claimed amount as a debt from the courts.
Section 15 of the NSW Act provides a suitable model.
Section 12.5
- The legislation should provide that where a claimant elects to recover the unpaid portion of a claimed amount as a debt from the courts, the respondent is not entitled to:
(a) bring a cross claim against the claimant, or
(b) raise any defence in relation to matters arising under the construction contract.
Section 15 of the NSW Act provides a suitable model.
The existing section 15 formula has started to crack, in that the courts treat claims and defences under the Australian Consumer Law is as not arising under the construction contract, and have started to take the view that, at any rate for the purposes of summary judgment, even a shadowy such defence means that actions to recover the debt in the circumstances have to go to trial.
Section 12.5
- The legislation should provide that where a respondent has provided a payment schedule within the prescribed time period, but fails to pay the whole or part of the scheduled amount by the due date of payment, the claimant may:
(a) make an application for adjudication, or
(b) recover the unpaid portion of the claimed amount as a debt from the courts.
Section 16 of the NSW Act provides a suitable model.
Section 12.6
- The legislation should include a requirement for a ‘supporting statement’ to be included in any payment claims submitted by a head contractor to the principal, and that a copy of the supporting statement be provided to each of the subcontractors whose work has been included in the head contractor’s payment claim.
These supporting statements seem, in practice, to be very often untrue, and so the effect of this provision is to criminalise large portions of the construction industry.
Section 12.7
- A ‘supporting statement’ should include a declaration that all subcontractors have been paid the amounts due and payable to them for construction work done.
Sections 13(7)(9) of the NSW Act, and Regulation 19 of the NSW Regulations provide suitable models.
Section 12.7
- The legislation should provide that making a false or misleading ‘supporting statement’ constitutes an offence.
Section 12.7
Chapter 13: Adjudication of disputes
- The legislation should provide the following timelines for lodging an adjudication application:
(a) Where the amount set out in the payment schedule is less than the claimed amount, the adjudication application must be lodged within
(b) 10 business days after the claimant received the payment schedule, or
(c) Where the respondent, having provided a payment schedule, has nonetheless failed to pay the whole or part of the scheduled amount by the due date for payment, the adjudication application must be lodged within 20 business days after the due date for payment, or
(d) Where:
(i) a respondent has failed to provide a payment schedule, and
(ii) a respondent has failed to pay the whole or part of the claimed amount, and
(iii) the claimant has notified the respondent of their intention to apply for adjudication,
(iv) the adjudication application must be lodged within 10 business days after the end of the 5 business day period referred to in the claimant’s notice.
Sections 17(3)(c), (d) and (e) of the NSW Act provide suitable models.
Section 13.1
- The legislation should provide that a function of the Regulator is to appoint adjudicators (whether nominated by the authorised nominating authority, or otherwise) to determine an adjudication application.
Section 13.2
- The legislation should provide for authorised nominating authorities to make nominations of accredited adjudicators to the Regulator for appointment to determine an adjudication application.
Section 13.2
- The legislation should provide that the parties to a payment dispute may agree on an accredited adjudicator, but such agreement may only be made:
(a) at the time when the dispute arises
(b)_ within 2 business days of the claimant serving a notice of adjudication and a copy of the adjudication application on the respondent, and
(c) where the dispute relates to a payment claim of more than $250 000.
Section 13.2
- The legislation should require a respondent to provide an adjudication response within the later of:
(a) 5 business days after the respondent receives a copy of the claimant’s adjudication application, or
(b) 2 business days after the respondent receives a copy of the adjudicator’s acceptance of the claimant’s adjudication application.
Section 13.3
- The legislation should provide that a respondent may make a written application to the adjudicator to request an extension of time of up to 10 business days for giving an adjudication response, subject to that application:
(a) being made within 2 business days of the respondent having received a copy of the claimant’s adjudication application, and
(b) setting out the respondent’s reasons for requesting the extension.
Section 13.3
- The legislation should prohibit a respondent from including in its adjudication response any reasons for withholding payment unless those reasons have already been included in a payment schedule provided to the claimant.
Section 13.3
- The legislation should provide that the timeframe for an adjudicator to make an adjudication decision is:
(a) 10 business days after the respondent has lodged an adjudication response, or
(b) such further time as agreed to by the parties, subject to the total timeframe for the adjudicator to make a decision being not more than 30 business days.
Section 13.4
- The legislation should provide that a party to an adjudication is entitled to make an application to the Regulator for a review of an adjudication decision if:
(a) the adjudicated amount is:
(i) equal to or greater than $100,000 of the scheduled amount, or
(ii) lower than $100,000 of the claimed amount, or
(b) the adjudicator has rejected the adjudication application.
Section 13.5
Would the practical effect of such a right of review be that the process is slow down for such a review, or at least an application for such review, in virtually every substantial case?
- In making an application for adjudication review the legislation should provide that:
(a) the application must be made in writing to the Regulator within 5 business days of the adjudication decision being released to the disputing parties, and
(b) a copy of the application is to be provided to the other party within 1 business day of being lodged with the Regulator.
Section 13.5
- The legislation should provide that a party to an adjudication is not entitled to make an application for a review of the adjudication decision if the parties had agreed the adjudicator in accordance with Recommendation 38.
Section 13.5
- The legislation should further provide that, in relation to an application for adjudication review, a respondent:
(a) is not entitled to apply for an adjudication review unless it has lodged a payment schedule
(b) cannot include in its application for adjudication review reasons as to why payment is being withheld, unless those reasons have been included in the payment schedule, and
(c) must, when making an application for adjudication review, lodge with the Regulator’s trust account any amount the respondent is required to pay to the claimant as a consequence of the adjudicator’s decision.
Section 13.5
- The legislation should set out the relevant procedure for the conduct of an adjudication review. A suggested procedure is provided in Section 13.5 of this Report.
Section 13.5
- The legislation should require the Regulator to appoint the most senior registered adjudicator available to conduct the adjudication review.
Section 13.5
- The legislation should provide that (except in case of an adjudication review) where an adjudicator has determined that the respondent is to pay an amount to the claimant, the respondent must pay that amount:
(a) within 5 business days after the adjudication decision is served on the respondent, or
(b) by the date at which the adjudicated amount is determined by the adjudicator to be payable.
Section 13.6
- The legislation should provide that where an application for review of an adjudicator decision is made and the adjudication review decision differs from the original adjudicator decision, the party required to make payment as a result of the adjudication review decision must pay that amount:
(a) within 5 business days after the adjudication decision is served on that party, or
(b) if the review adjudicator has decided that payment may be made on a later date, then on or before that date.
Section 13.6
- The legislation should provide that a claimant may suspend construction work (or the supply of related goods and services) for the respondent in certain circumstances, and subject to the provision of notice to the respondent of its intention to suspend work.
Section 27 of the NSW Act provides a suitable model.
Section 13.7
- The legislation should provide that where the parties have the right to apply for an adjudication review, a claimant’s notice of intention to suspend work (or the supply of related goods and services) can only be made:
(a) after the end of the period allowed for completion of an application for adjudication review (i.e. 5 business days after a copy of the adjudication decision is served on the respondent), or
(b) if an adjudicator’s decision has been referred for an adjudication review and the respondent has not paid the amount determined by the review adjudicator by the due date, after the due date for payment has passed.
Section 13.7
- Absent implementation of a statutory trust (see Recommendation 85), the legislation should provide that:
(a) a claimant may serve a payment withholding request on the ‘principal contractor’ to require it to withhold sufficient money from payment that is, or becomes, payable by the principal contractor to the respondent to cover the claimed amount, and
(b) a principal contractor who fails to comply with such a request will become jointly and severally liable with the head contractor.
Sections 26A26F of the NSW Act provide a suitable model.
Section 13.8
The devil here would be in the detail. This sort of provision piles complexity on top of complexity.
- The legislation should provide that a claimant may withdraw its adjudication application and make a new application if:
(a) the claimant has not received notice that an adjudicator has accepted its application within 4 business days after the application was lodged, or
(b) an adjudicator has accepted the claimant’s application but failed to decide the application within the prescribed timeframe, or
(c) the adjudicator has given notice of their withdrawal from the adjudication.
Section 26 of the SA Act provides a suitable model.
Section 13.9
- The legislation should specifically provide that an adjudicator who has accepted an adjudication application may withdraw from the adjudication by giving notice to the parties.
Section 13.9
- The legislation should provide that a claimant is taken to have withdrawn its application if:
(a) it serves a notice of discontinuance on the adjudicator and the respondent, or
(b) the respondent pays the claimed amount, which is the subject of the adjudication application, to the claimant.
Section 35B of the Queensland Act provides a suitable model.
Section 13.9
- The legislation should expressly provide that, where an adjudicator has committed jurisdictional error of law in a part of the adjudication decision which does not affect the whole of the decision, a court with the power to sever that affected part of the decision may do so and allow the remainder of the decision to be enforceable.
Section 100(4) of the Queensland Act provides a suitable model.
Section 13.10
- The legislation should provide that where a claim is made under the security of payment legislation, a party’s contractual and other civil rights under the construction contract are preserved.
Section 32 of the NSW Act provides a suitable model.
Section 13.11
- The legislation should provide that if an authorised nominating authority or Regulator issues an adjudication certificate, the claimant can file the certificate as a judgement debt in any court of competent jurisdiction.
Section 25 of the NSW legislation offers a suitable model.
Section 13.12
Chapter 14: General provisions relating to adjudicators
- The legislation should contain provisions regulating the oversight of authorised nominating authorities, including in relation to:
(a) granting, renewing and withdrawing of authorisations
(b) the appeals process regarding decisions in respect of the granting, renewal and withdrawal of authorisation
(c) the functions of authorised nominating authorities
(d) requiring authorised nominating authorities to provide information to the Regulator in relation to its activities
(e) authorising the fees that authorised nominating authorities may charge, and
(f) statutory indemnity of authorised nominating authorities.
Section 14.1
- In determining an adjudication application, the legislation should include provisions setting out:
(a) the procedures an adjudicator may follow in proceedings
(b) what an adjudicator is to determine
(c) the matters the adjudicator is to consider
(d) the format and information that the determination is to include, and
(e) that the adjudicator may, on their own initiative, correct errors, defects etc. in the determination.
Sections 21(4) and (4A), and sections 22(1)(5) of the NSW Act offer a suitable model.
Section 14.2
- The legislation should include specific provisions dealing with an adjudicator’s disqualification due to conflict of interest. A suggested provision is provided in Section 14.2 of this Report.
Section 14.2
- The legislation should include specific provisions requiring an adjudicator to decide jurisdiction.
Section 14.2
- The legislation should provide that an adjudicator’s function (other than in respect to minor clerical tasks) is personal and non-delegable.
Section 14.2
- Legislation should provide for:
(a) the registration and renewal of adjudicators and for the suspension, cancellation or amendment of adjudicators’ registrations, and
(b) a process for reviewing decisions associated with adjudicators’ registrations.
The provisions relating to the regulation of adjudicators as set out in Part 4, Divisions 3, 4, 5 and 6, and Part 5 of the Queensland Act and clause 3 of the Queensland Regulation provide a suitable model.
Section 14.3
- Adjudicators should be registered and graded by the Regulator.
Section 14.3
- Where an adjudicator has been found, by a court in Australia, to have made technical errors in performing adjudications, an ANA must not nominate the adjudicator unless it is satisfied that the cause of the error has been resolved.
Section 14.3
- Where an adjudicator has been found by a court in Australia to have acted not in good faith twice or more within the last 5 years in relation to adjudication duties, an authorised nominating authority must not nominate the adjudicator for adjudication and the Regulator must not appoint such person as an adjudicator.
Section 14.3
- The legislation should provide that in the case of adjudication applications involving payment claims of up to and including $25 000, the fees that an adjudicator may charge should be fixed at a rate prescribed by the Regulator.
Section 14.4
- The legislation should provide that in the case of adjudication applications involving payment claims over $25 000, the fees that an adjudicator may charge should not exceed a capped rate prescribed by the Regulator, unless otherwise agreed by the parties.
Section 14.4
- The legislation should provide that in the case of applications for adjudication review, the fees that a review adjudicator may charge should be prescribed and published by the Regulator.
Section 14.4
- The legislation should provide that a claimant and respondent are equally liable for payment of the adjudicators fees, unless the adjudicator determines otherwise, and set out the matters an adjudicator may consider when deciding the apportionment of their fees and expenses.
Section 35A of the Queensland Act provides a suitable model.
Section 14.4
- The legislation should not require adjudicators’ decisions to be published.
Section 14.5
- The legislation should provide protection from liability for adjudicators.
The protections set out in section 46 of the Victorian Act provide a suitable model.
Section 14.6
Chapter 15: Miscellaneous issues
- The legislation should provide for a notice to be served on a person by:
(a) personal delivery
(b) post
(c) facsimile
(d) email, or
(e) any other method as provided in the construction contract or by regulations.
Section 31 of the NSW Act provides a suitable model.
Section 15.1
- The legislation should make it an offence to use coercive and threatening conduct, whether directly or indirectly, in relation to a person’s statutory rights to, or claim for, a progress payment under the legislation.
Clause 32A of the Building and Construction Industry Security of Payment (Review) Amendment Bill 2017 (SA) provides a suitable model.
Section 15.2
- The legislation should require ANAs/adjudicators to provide the Regulator with such information as reasonably requested to enable the Regulator to monitor the operation of the legislation and activities of ANAs/adjudicators.
Section 43B of the Victorian Act provides a suitable model.
Section 15.3
- The legislation should require the Regulator to publish an annual report on the operation and effectiveness of the legislation.
Section 15.3
- The jurisdictions should cooperate to develop a consistent set of standards for reporting data collected from authorised nominating authorities/adjudicators about the use of security of payment legislation. The reporting of such information should be based on the NSW format and published annually.
Section 15.3
- There should not be a separate mechanism besides the security of payment legislation to specifically deal with the enforcement of disputed progress payment claims.
Section 15.4
- The legislation should provide that all cash retentions are to be held on trust:
(a) In the case of a principal, the cash retentions should be held on trust for the head contractor.
(b) In the case of a head contractor, cash retentions should be held on trust for the subcontractors.
(c) In the case of a subcontractor, the cash retentions should be held on trust for the sub-subcontractor.
Section 15.5
There has been case law in the UK (Rayack Construction Ltd v Lampeter Meat Co Ltd (1980) 12 BLR 30) to substantially this effect for a very long time, requiring retention money to be held in separately designated trust accounts. In practice, the requirement is rarely enforced.
- The legislation should expressly provide for an adjudicator to be able to decide whether a retention amount and/or security is to be returned, and the date on which it is to be returned.
Section 15.5
- Trade credit insurance should not be made a legislative requirement. It is noted that while trade credit insurance can provide useful additional protection it is not a viable alternative to security of payment laws.
Section 15.6
Chapter 16: Unfair contract terms
- The legislation should void a contractual term that purports to make a right to claim or receive payment, or a right to claim an extension of time, conditional upon giving notice where compliance with the notice requirements would:
(a) not be reasonably possible; or
(b) be unreasonably onerous; or
(c) serve no commercial purpose.
Section 16.6
Chapter 17: Statutory trusts
- A deemed statutory trust model should apply to all parts of the contractual payment chain for construction projects over $1 million. The deemed statutory trust model outlined in the Collins Inquiry provides a suitable basis.
Section 17.4
- The Australian Government should take a lead role in working with the states and territories and key industry stakeholders towards the establishment of a nationally consistent deemed statutory trust model. The establishment and implementation of such a model should be accompanied by a program of industry-wide education and training.
Section 17.4
[1] I was one of 20 individuals consulted – see page 322.
[2] The graphic is headed “all industries” but as John Murray notes:
In Australia, the construction industry in particular is notorious for its payment issues along the whole supply chain.