The New South Wales Government has announced that amendments to the Security of Payment Act 1999 (NSW) (the Act) and Building and Construction Industry Security of Payment Regulation 2008 (NSW) (the Regulations) will commence on 21 October 2019. 

The Building and Construction Industry Security of Payment Amendment Act 2018(the Amendment Act) and the Building and Construction Industry Security of Payment Amendment Regulation 2019 (the Amendment Regulations) provide key amendments to the existing security of payment regime in NSW. The amendments will apply to construction contracts entered into on and from 21 October 2019,  construction contracts entered into before this date will still be governed by the old regime.

Key amendments to the Act

We have previously given a detailed breakdown of the key amendments introduced by the Amendment Act hereA brief summary of those amendments is set out below:

Key amendments to the Regulations

Severance of adjudication decision 

As noted above, the Amendment Act now provides a mechanism for the Court to sever parts of an adjudication that are ‘infected’ by jurisdictional error. This concept recently received judicial consideration in WA, where the majority of the Court of Appeal found that the common law principles of severance could be applied to remove the invalid portion of the adjudication determination.[1] To read more on this case see here.

A recent English case also dealt with the issue of severance of an adjudication. The decision in Willow Corp S.à.r.l v MTD Contractors Limited [2019] EWHC 1591 (TCC) on 25 June 2019 permitted the part-enforcement of a flawed adjudication decision. While the case dealt with an error of law, rather than a jurisdiction error, the case highlighted the common sense approach that an adjudicators decision may be severed where the error may be contained to a specific and contained issue. 

In this regard, the amendments to the Act may be seen as responsive to a growing trend of saving adjudicators’ decisions where possible. Given that adjudicators’ decisions are by their nature interim, this approach aligns with the purpose of the legislation, namely to maintain cash flow certainty for subcontractors. Queensland still offers no assistance in relation to an adjudication determination which contains jurisdictional error,[2] highlighted by a recent decision handed down by the Queensland Supreme Court.[3]

Looking ahead

Industry participants must ensure they are aware of the 21 October 2019commencement date. Some key practical tips are:

  • Be mindful of what may or may not constitute a payment claim.  Without endorsement, a payment claim will not enliven the Act.
  • Contract drafting will have to reflect the reduced time for payment between head contractors and subcontractors.
  • Consider if a jurisdictional error contaminates the whole adjudication decision or whether it is a discrete, severable portion of the decision.