On the east coast this week, north and south of the border, there have been announcements regarding changes to the security of payment regimes.

Any change to these regimes is always newsworthy, particularly for trainspotters of a legal disposition.  However, these instances are notable for the stark contrast between the approaches taken in these two very closely connected jurisdictions. 

In New South Wales, from 21 April 2014:

  • Head contractors will be exposed to heavy penalties for failure to comply with payment claim requirements.
  • Principals and head contractors will have less time to pay payment claims under the NSW Act.

Is this a "far, far better thing"?

NSW readers will be very familiar with the findings of the Collins Independent Inquiry intoConstruction Industry Insolvency and its flow-on effect to the NSW Security of Payment Act (see Clyde & Co articles: Pay up or pay out: A warning to head contractors and A matter of trust - SOPA NSW changes regarding Retention Money).

On 11 April 2014, the NSW Government Gazette confirmed that the foreshadowed changes to the NSW Act will commence on 21 April 2014.  The changes are as follows.

  • Payment claims will no longer need to state they are being made under the Act, in order for the Act to apply.
  • Head contractors will need to provide to the principal a "supporting statement" that all subcontractors have been paid what is due and payable, insofar as the amount paid to the subcontractor is being claimed from the principal.
  • Head contractors must be paid within at least 15 business days of submitting a payment claim.
  • Subcontractors must be paid within at least 30 business days of submitting a payment claim.
  • Penalties will commence for a head contractor who serves a payment claim on a principal without a supporting statement, or who serves a payment claim accompanied by a supporting statement which they know to be false or misleading in a material particular.  The Government will appoint investigating officers with wide powers to ensure that there is compliance with these provisions.
  • The government has also published the Building and Construction Industry Security of Payment Amendment (Supporting Statement) Regulation 2014, which as the name suggests provides for the format of the "supporting statement" which must be included with any payment claim served on a principal by a head contractor.

These changes mean the imposition of significant administrative burdens on head contractors, as well as significant penalties.  No Regulation has yet been made in respect of the implementation of trust accounts for retention money.

At Parliamentary reading, the stated aim of these changes was the protection of subcontractors and the safeguarding of cashflow in the construction industry.  This position can be contrasted with the announcements this week from the Queensland government that there are to be changes to the Queensland Building and Construction Industry Payments Act.  In Part 2 of this update we will consider these Queensland changes.