Higher penalties, more offences proposed for the NSW Security of Payment Act

24 Aug 2018

Significant changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) – including to compliance and enforcement – could be on the way, if a draft Bill released for comment is passed. Stakeholders have until 18 September 2018 to comment on the proposed changes.

Increased penalties and personal liability for directors and managers

A key focus of the Draft Bill is on compliance and enforcement with the provisions of the SOP Act.

Directors and certain managers of a corporation would be guilty of an offence if:

  • they are an accessory to an offence committed by the corporation; or
  • for certain serious offences, if the director or manager knows or ought reasonably to know the offence is being committed and fails to take all reasonable steps to prevent or stop the commission of that offence.These serious offences relate to failures to comply with requirements relating to supporting statements, retention money held in trust accounts, and to provide requested information.

Penalties for a range of offences would be increased significantly, particularly for corporate offenders.

Specially appointed "authorised officers" would have the power to require the production of documents or answers to their questions, enter premises without a search warrant (other than residential premises), apply for search warrants, and issue penalty notices for certain offences (the recipient of the penalty notice can pay the penalty notice or contest the matter in court).

Finally, Authorised Nominating Authorities (ANAs) will be required to comply with a new code of practice (a draft of which is yet to be published). Contravention of this code could result in the Minister withdrawing an ANA's authority to nominate adjudicators, and could (in certain cases) constitute an offence with a maximum penalty of 50 penalty units ($5,500).

Reference dates

The Draft Bill provides a statutory minimum entitlement to a progress payment at least once per month in which work is carried out (each such date called a reference date). The Explanatory Statement suggests that this applies even when the construction contract provides for milestone payments or a single one off payment.

Parties can agree to more frequent reference dates (eg. weekly).

Also, if the construction contract is terminated, an additional reference date will occur on the day after the date of termination.

Requirement for endorsement

The Draft Bill reinserts the requirement to include in a payment claim a statement that the payment claim is made under the SOP Act.

Due date for payment

The Draft Bill reduces the time for payment by principals and head contractors to:

  • in the case of principals, 10 business days (currently 15); and
  • in the case of head contractors, 20 business days (currently 30),

after the payment claim is made.

No assistance for claimants in liquidation

Recently, there has been a number of court decisions about whether a claimant who is in liquidation can rely on the provisions of the SOP Act to recover moneys. Obviously, the issue faced by respondents in such circumstances is that any money paid to the claimant might not be recoverable. Notably, the courts in NSW and Victoria have adopted different positions on this issue.

Under the Draft Bill, a corporation in liquidation cannot serve a payment claim under the SOP Act, and cannot take any action in relation to or enforce a payment claim or an adjudication determination.

Judicial review

The Draft Bill expressly permits an adjudication determination affected by jurisdictional error to be set aside in whole or in part, or to be remitted back to the adjudicator for redetermination.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.