Major security of payment changes on their way in South Australia

The Building and Construction Industry Security of Payment (Review Recommendations) Amendment Bill 2021 was introduced into the SA Parliament on 26 May 2021. Its primary focus is upon amending the scheme for construction industry payments under the State’s Building and Construction Industry Security of Payment Act 2009 (SA) and taking on board recommendations of John Murray AM’s 2017 Report.

There is resonance with recently-enacted Murray-driven reforms in NSW and WA, but some interventions proposed in the Bill – notably those on adjudicators and attempts to undermine the operation of the Act – go significantly further than those in other States.

A changing landscape for adjudicators and adjudications

The most extensive proposed amendments in the Bill relate to the registration of adjudicators under a new scheme to be administered by the SA Small Business Commissioner. If the Bill is passed, the Commissioner will be given explicit powers of investigation, monitoring and enforcement under the Act, and is to administer a scheme for the grading of adjudicators.

The Bill also proposes significant changes to the appointment process for adjudicators. Most notably, that authorised nominating authorities (ANAs) are to put forward candidates for each appointment, but the referral is to be made by the Commissioner. There is also more extensive regulation of ANAs themselves and provision for a code of conduct for adjudicators and ANAs. In turn, the SA approach is to become more closely aligned with that in Queensland since the 2014 amendments in that state substantially curtailed the role of ANAs in Queensland.

A sense of the level of intervention proposed by the Bill is given by: 

• it being a mandatory condition of registration that the adjudicators notify the Commissioner and the ANAs which appointed them when they become aware that adjudication determinations undertaken by them have been overturned by a court; and
• a $20,000 fine applying to people who are not registered as an adjudicator but accept or purport to decide an adjudication application. There are also substantial fines for adjudicators and ANAs failing to provide information requested by the Commissioner.

Stringent new guards against undermining the Act

The impetus and appetite for statutory intervention is also reflected in the Bill’s proposals:

• that it be an offence (backed by fines of up to $250,000 for bodies corporate) to “directly or indirectly assault, threaten or intimidate, or attempt to assault, threaten or intimidate, a person in relation to an entitlement to, or claim for, a progress payment under this Act”; and
• to extend the already extensive “no contracting out” provisions by rendering void notice provisions that condition rights to claim or receive payments, or obtain extensions of time in relation to the Act, if compliance with the requirement to give notice under such provisions is not reasonably possible, unreasonably onerous, or serves no commercial purpose.

Devil in the detail?

A number of the proposed amendments are primarily administrative, but are likely to have significant impact in practice. Those amendments include:

• removing the carve out from the operation of the Act for domestic building work;
• widening of the “Christmas blackout period” to 22 December-10 January during which time stops running under the Act, bringing it into line with the blackout period in Queensland;
• abolishing the concept of “reference dates” as the trigger for payment claims; this was recommended by the Murray Report following the High Court’s decision in Southern Han Breakfast Point Pty Ltd (in Liq.) v Lewence Construction Pty Ltd [2016] HCA 52 and has already been effected in NSW;
• including a new definition of “defects liability period” which has been brought in to dovetail with the provisions which replace “reference dates”;
• making clear that companies in liquidation are not able to make payment claims (and, therefore, take consequent action by way of adjudication or otherwise) under the Act. This was recommended by the Murray Report and has been implemented in NSW;
• providing that contracts cannot make progress payments due more than 25 business days after the payment claim is made and that payments will be due 10 business days after the claim unless the contract provides otherwise;
• reducing the maximum period which contracts may validly provide for responses to claims by way of payment schedules from 15 to 10 business days. The periods for the making of adjudication applications have also been shortened from 15 to 10 business days;
• extending the adjudicator’s jurisdiction to make determinations to matters relating to retention money and other forms of security;
• providing more extensive requirements for the content of payment claims under the Act, including that they be in an approved form. Additional requirements will apply where the work is on residential land. A form is to be mandated for payment schedules as well;
• requiring head contractors to provide “supporting statements” (about payments having been made to subcontractors) when serving payments claims to principals; and
• recording and publishing adjudication determinations by the Commissioner.

What happens next for security of payment in South Australia

If the Bill is passed, it is to come into force on a day to be proclaimed. Its amendments are proposed to apply to all contracts entered into after that date, subject to transitional provisions that will apply for adjudications then on foot.

This means that parties to contracts for “construction work” and/or “related goods and services” in SA need to review their contracting strategies and standard provisions ahead of the amendment Bill coming into force.