Key changes and their implicationsKey changes industry participants need to be aware of include:
• broadening the right to progress payments;
• shortening payment timeframes of progress payments to subcontractors;
• requiring payment claims to state that the claim is made under the Act (in order to have the force of the Act);
• increasing penalties for a head contractor failing to properly provide a supporting statement by 500%; and
• enhancing investigative powers of the ‘authorised officer’ that include the ability to enter premises.
Some of the updates to the Act may have a significant impact on construction contracts which we discuss below.
1. Right to progress paymentsEntitlement to progress payments are no longer tied to the occurrence of a ‘reference date’. The right to a progress payment now arises simply by a person, under a construction contract, undertaking to carry out construction work or supplying related goods or services.
2. Payment timeframesUnder the new updates, progress payments to a subcontractor under a construction contract become due and payable 20 business days (previously 30 business days) after the payment claim is made under the Act.
3. Claim under the ActProgress claims are again required to state that they are ‘made under the Act’ (in order to have the force of the Act). This amendment aligns with the findings of the Murray Report which recommends a clear distinction is made between a claim under the Act and a claim that is made under contract. However, it also places the discretion back into the hands of the claimant and provides claimants an additional negotiation tool, ultimately enhancing the claimant’s bargaining power.
4. Increased penaltiesThe penalty for a head contractor failing to provide a supporting statement when serving a payment claim on a principal has increased from 200 penalty units to 1000 penalty units. In monetary terms, the penalty has increased from $22,000 to $110,000 per occurrence. In line with this rationale, the penalty for a head contractor providing a supporting statement that is known to be false or misleading when serving a payment claim on a principal has also increased from 200 penalty units to 1000 penalty units.
What do you need to do?The Security of Payment updates in New South Wales will require industry participants to update their contracts and contract administration processes to avoid falling foul of the amendments to the Act.
If you require further information or have any queries in relation to this legal update, please contact Goran Gelic, Brent Henderson or Alex McLeod.