Major Projects & Construction 5 Minute Fix 133: Murray Review, cladding, Vic Supplier Code of Conduct

Government Response to the Murray Review

In 2017, the Commonwealth Government commissioned John Murray AM to provide an independent review into Security of Payment (SOP) laws across Australia. The Murray Review examined SOP Acts across all jurisdictions and made 86 recommendations on 21 May 2018, primarily relating to:

• the need for national consistency in SOP legislation across the States and Territories;

• the need for stronger protections for subcontractors, including improved payment timeframes and enforcement mechanisms;

• the introduction of statutory deemed trusts to safeguard progress payments down the contracting chain; and

• concerns over unfair contract terms that affect payment rights and cash flow.

On 14 March 2025, the current Government released its formal response to the Murray Review. While recognising that a significant amount of time has passed since the Murray Review, the Government noted that economic conditions have worsened the pressures on cash flow in the sector and state and territory SOP laws have changed. The Government noted that it supported the recommendations and policy objectives of the Murray Review, however, it recognised its own limited legislative capacity over SOP laws and, as such, was pursuing "practical policy interventions" to address the recommendations set out in the Murray Review. These include:

• enhancing enforcement by strengthening ATO and ASIC powers to address illegal phoenix activity, and commencing a review of the unfair contract term reforms in November 2025 to assess their effectiveness;

• improving payment practices in Commonwealth procurement through the Supplier Code of Conduct, updated Statement of Expectations for Government Business Enterprises, and the new Payment Times Reporting Rules introduced in September 2024;

• prioritising ethical and secure work practices via the Secure Australian Jobs Code, which favours businesses with fair and sustainable practices in government contracting;

• leading national reform discussions through the Building Ministers’ Meeting and National Construction Industry Forum (NCIF), with the NCIF committing to publish a Building and Construction Industry Blueprint focused on further addressing security of payment issues (a draft of this Blueprint was published on 27 March 2025); and

• exploring project bank accounts for Commonwealth projects, while confirming statutory deemed trusts will unlikely be implemented at this stage due to lack of consensus among States and Territories.

The Commonwealth has committed to continuing discussions with States and Territories, including through the NCIF, to promote consistency and better payment practices. However, as it has noted, any changes to SOP laws themselves will ultimately be left to the States and Territories to pursue (see the recently announced changes for Victoria here).

The Commonwealth has made it clear that, while it supports reform in principle, its role will be limited to facilitating discussion and implementing changes within its own procurement framework. With the Federal election now underway, it remains to be seen whether the Commonwealth will maintain this stance following that election on 3 May 2025.

Major reforms proposed to Victoria's residential building laws

On 4 March 2025, the Victorian Government introduced the Building Legislation Amendment (Buyer Protections) Bill 2025 into Parliament. It proposes major reforms to Victoria’s building laws to take effect from 1 July 2026 (unless proclaimed to commence earlier), with a strong stated focus on protecting homebuyers, particularly purchasers of residential developments.

New Building Regulator and expanded VBA powers

The Bill seeks to establish a new Building and Plumbing Commission (BPC) to replace the Victorian Building Authority (VBA), consolidating oversight of builders, domestic building insurance (currently within the Victorian Managed Insurance Agency) and dispute resolution (through Domestic Building Dispute Resolution Victoria).

Statutory insurance scheme

Coinciding with the insurance oversight of the BPC, the Bill proposes the introduction of a "first resort" statutory insurance scheme to expand the availability of legislatively-mandated insurance for domestic building to circumstances where the builder has failed to comply with a rectification order issued by the BPC (in addition to the current "last resort" domestic building insurance scheme which is only available in limited circumstances where the builder has died, disappeared or becomes insolvent).

The Bill proposes that the insurance will apply to domestic building contracts worth $20,000 or more for the construction of one home and two or more homes in a building up to three storeys. If this is introduced, Victoria will become the second jurisdiction in Australia to offer this first resort insurance, after Queensland.

Developer bond for multi-storey projects

Victoria proposes to follow NSW's lead by requiring developers of residential buildings above three storeys to lodge a bond, initially 2% of the total project cost, as security for potential defect rectification. This bond must be paid before an occupancy permit will be issued. If the required bond is not paid in full, off-the-plan purchasers would be given a right to rescind their contracts and developers risk very substantial penalties. This is to address the current circumstances where there is no recourse to domestic building insurance afforded to owners of apartments (insurance of last resort) if a development contains more than three storeys.

Minimum financial requirements for builders

Builders who fail to meet new prescribed minimum financial standards could face fines, suspension or cancellation of their registration. These minimum financial standards are expected to relate to solvency and financial viability, ensuring builders have the requisite financial capacity to complete projects and meet their obligations regarding domestic building. The specifics of these requirements are expected to be detailed in a forthcoming regulation.

Land registration restrictions

The proposed amendments to the Sale of Land Act 1962 (Vic) will make it an offence for a landowner, such as a developer of a residential apartment project, to apply to register land (eg. a plan of subdivision) if that land is subject to certain notices, including notices of rectification orders for non-compliant or defective building work. This proposal means developers will have to address any outstanding building notices or orders before seeking to finalise title of lots for sale to the market.

Further information is set out in the "Building Statement: Strengthening Victoria's Building System" white paper.

Cladding rectification: product liability insurer still (potentially) on the hook

In AAI Limited v The Owners – Strata Plan No 91086 [2025] FCAFC 6, the Full Federal Court refused the insurer leave to appeal from the findings of Justice Wigney J which had opened the way to the Owner's Corporation claiming that the installation of defective cladding constituted "property damage" and therefore was covered under the relevant insurance policy.

In turn, Justice Wigney's findings – crucially, that cladding could not be replaced without damage to the existing building and that the original installation of the defective cladding constituted "property damage" – remain "clear and definitive" but expressly preliminary and based on the (extensive) evidence presented to him. If the case does now proceed to a more detailed trial, therefore, it will certainly be one to watch in the ongoing evolution of the response to the cladding safety crisis in Australia and beyond.

When not very much is enough: New South Wales District Court reaffirms high bar for summary judgment under section 15 of the SOP Act

Judge Cole's recent decision reiterates the high bar that exists when applying for summary judgment under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) (A&M Telecommunications Pty Ltd trading as SAWWA ACN 146873289 v WCED Pty Ltd [2025] NSWDC 7).

A&M Telecommunications Pty Ltd had been engaged by WCED Pty Ltd in May 2024 to provide demolition consultancy services for a building in Wollongong. A&M completed its work and, in July 2024, issued a payment claim. WCED received the payment claim but responded via email, questioning a number of time sheets and invoices attached to A&M's payment claim.

A&M subsequently sent a demand for full payment, asserting that WCED had failed to issue a valid payment schedule in accordance with the SOP Act. A&M argued that WCED’s email, which raised issues with the payment claim’s supporting documents, did not qualify as a proper payment schedule under the provisions of SOP Act. As a result, A&M filed for summary judgment, claiming that due to WCED’s failure to issue a valid payment schedule, it was entitled to recover the full amount of the payment claim as a debt.

In response to the claim, WCED's primary argument was that its email was, in fact, a valid payment schedule under the SOP Act. WCED also contended that A&M had engaged in misleading or deceptive conduct under the ACL and that A&M’s payment claim was invalid for failing to comply with the one-claim-per-month limitation imposed under section 13(5) of the SOP Act.

Her Honour considered the test for summary judgment to be whether or not A&M had shown WCED's defence was "obviously untenable or manifestly groundless", and was satisfied "that the matters raised by the defendant are all arguable to, at least, the extent necessary to defeat the application for summary judgment".

The motion for summary judgment was dismissed and A&M was ordered to pay costs.

From aspirations to minimum standards: Victorian Government's updated Supplier Code of Conduct, effective 1 April 2025

The Victorian Government's revised Supplier Code of Conduct has taken effect this month. With the aim of streamlining and clarifying the Government's expectations on suppliers conducting business with the Victorian Government, the revised Code enforces stricter compliance and imposes mandatory minimum standards to previous aspirational guidelines.

Background

The Code was first introduced on 1 July 2017 to ensure supplier practices align with the State Government's values, including for instance its standards of ethics, governance, environmental management, labour rights and health and safety. The Code applies to all contracts, agreements and purchase orders for the supply of goods, works and services (including construction works and services) between suppliers and all State agencies that are subject to the Standing Directions 2018 under the Financial Management Act 1994 (Vic).

Key changes to the Code

Expectations formerly described as "aspirations" which suppliers committed to under the previous Code are now prescriptive minimum obligations with which suppliers must "comply".

The application of the Code remains the same and every organisation tendering to provide works or services to Victorian Government departments and agencies will be required to commit to the standards set in the Code each time they submit a bid.

Key changes to the Code include but are not limited to:

• the introduction of notification requirements for suppliers to report any breaches of the revised Code, including the provision for contractual remedies (subject to the terms of the contract), such as:

  • remediation;

  • suspension or removal from pre-qualification schemes and panel arrangements; and

  • termination of contract;

• the extension of the Code's health and safety standards to now capture standards of "security", including the requirement for suppliers to provide a "culturally safe and secure work environment" for its personnel;

• greater flexibility in the way in which suppliers can demonstrate compliance with the Code, having regard to factors such as the relevant industry and the size, location and complexity of the supplier's business; and

• the removal of the requirement for suppliers to submit a commitment letter, with the consequent effect being that the action of submitting an offer or signing a contract will instead indicate a supplier's commitment to the revised Code.

What about existing agreements?

The revised Code applies to all applicable existing and new contracts from 1 April 2025. The terms and conditions of the relevant contract will guide how the revised Code is applied in each case. For existing contracts that only require a supplier to "aspire" to commit to the Code (per the language of the 2017 Code), compliance remains aspirational until the contract expires or the relevant clause is subsequently amended. For all other existing contracts that require mandatory compliance with the Code, including all new contracts containing the new standard model clauses, compliance with the revised Code is mandatory. Compliance with the Code under existing State purchase contracts (including panels and registers) will continue to be monitored and managed by the category manager responsible for implementing the Code in accordance with the contract terms and conditions of the relevant State purchase contract.

Key takeaways

Suppliers and principals are encouraged to read and understand the revised Code and, in the case of suppliers, review the minimum standards against their business operations, noting the Code's emphasis on suppliers ensuring that they are proactive in complying with the Code.

Get further information and announcements from the Victorian Government on the revised Code here.