Background

After nearly three years of reviews and consultation with the construction industry, the Building and Construction Industry Security of Payment (Review) Amendment Bill 2017 (SA) (Bill) was tabled last week in the Parliament of South Australia. The Bill proposes amendments to the Building and Construction Industry Security of Payment Act 2009 (SA) (Act) with the stated aim of increasing transparency of the Act and thereby its use within the industry.

Former District Court judge, Mr Alan Moss, undertook an initial review of the Act in 2015, providing a suite of recommendations later tabled in Parliament (Moss Review). Following the collapse of Tagara Builders in 2016, the Small Business Commissioner (Commissioner) undertook further industry consultation.

Both reviews identified that the Act is failing to achieve its underlying purpose, which is to ensure smaller sub-contractors achieve payment without unnecessary delay, due in part to the Act being under-utilised by the very entities it aims to protect. For example, despite soaring insolvency rates in the industry of late, only 38 adjudication applications were submitted across South Australia in the 2015/16 financial year; most of these applications were not made by small sub-contractors.

Accordingly, the Bill proposes a series of amendments, targeted at rectifying under-use of the Act, whilst resolving administrative and governance issues that have plagued the Act's application.

Key Changes

Penalty Provisions

In order to address the Commissioner's finding that subcontractors may fear retribution from head contractors if they make use of the Act, the Bill proposes a new offence relating to assault or other threatening behaviour in relation to progress payments. The Bill proposes harsh penalties for entities that engage in direct or indirect assault, threatening behaviour, or intimidation, in order to apply undue pressure on a party to not seek payment under the Act. These penalties include fines of up to $250,000 for bodies corporate, and up to $50,000, or two years in prison, or both, for individuals.

This amendment demonstrates the Commissioner's intention to make examples of individuals and companies that engage in this behaviour. Head contractors and developers, and their agents, will need to be conscious of the serious penalties which may soon attach to this conduct.

Commissioner's functions – increasing transparency

The Bill seeks to formalise the Commissioner's responsibility to administer the Act and also sets out further functions of the Commissioner.

Those functions include the Commissioner:

• having the power to publish determinations of adjudicators in relation to adjudication applications, in a manner determined by the Commissioner;

• investigating and researching matters affecting the interests of parties to construction contracts; and • conducting and facilitating education programs intended to provide greater transparency of the adjudication process, and educate subcontractors and other building industry participants of their rights and obligations under the Act.

Authorised Nominating Authorities

The Commissioner's review identified perceptions of bias from, and conflicts of interest with, Authorised Nominating Authorities (each an ANA) in relation to parties applying for adjudication under the Act. The Bill proposes greater regulatory power to the Minister of Small Business (Minister) to restrict ANAs, including:

• the imposition of a renewable five-year term to act as an ANA (previously open-ended); and

• the requirement that an ANA provide the Commissioner with a copy of any adjudication determination or other information upon request, with penalties imposed for non-compliance.

If the Bill is passed in its current form, all current ANAs will have their powers revoked and will need to reapply to the Minister to continue operating as an ANA.

Business Day

In an attempt to prevent parties being 'ambushed' with payment claims over the Christmas/New Year shut-down period, the Bill clarifies that, for the purposes of the Act, any day that falls between 22 December in any year and 10 January of the following year is excluded from the definition of 'business day'.