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Review of security of payments laws released

Posted on : Monday, 18 June 2018

A new issues paper into the matter of security of payment laws provides an appropriate introduction into the final report concerning the review of these laws in Australia released on 21 May 2018.

 

In December 2015 the Senate Economic References Committee inquiry into insolvency in the Australian construction industry found that vastly different security of payments laws operating in each jurisdiction were not working as well as intended and that there were barriers to access. The Committee also found that it is a fundamental right of anyone that performs work in accordance with a contract to be paid without delay for the work they have done.

 

On 21 December 2016 the Australian Government announced a review of security of payments laws in the building and construction industry (the Review), noting the significant differences in approach to security of payments laws as an ongoing issue. In doing so, the Federal Government appointed John Murray, a former Director of the Master Builders Association to conduct the Review.

 

The purpose of the Review was to identify legislative best practice, with a view to improving consistency in security of payment legislation and the level of protection afforded to construction industry subcontractors to ensure they obtain payment for work they have completed or for goods and services they have supplied. Security of payments has been identified as an issue in the building and construction industry by many reviews and inquiries over the past 15 years.

 

Background

 

Security of payment is a state and territory matter, as such the final report emphasises the importance of the Commonwealth, states and territories working together to implement the recommendations and create nationally consistent security of payment legislation.

 

The final report states that over the past 18 years, every state and territory government has progressively enacted security of payment legislation with the prime objective of facilitating prompt progress payments. All of the jurisdictions, other than Western Australia and the Northern Territory, have based their legislation on the Building and Construction Industry Security of Payment Act 1999 (NSW) and such legislative regimes have come to be referred to as 'the East Coast model'. The legislative regimes that operate in WA and the NT are based on the 'West Coast model'.

 

Final report

 

The final report makes 86 recommendations to improve consistency in security of payment legislation and enhance protections to ensure subcontractors get paid on time for work they have done, regardless of which state or territory they operate in. Key amongst these is the recommendation to make security of payment laws nationally consistent with the East Coast model. Specifically, the report states that "the East Coast model is considered best able to achieve this policy objective because the legislation includes a provision requiring the recipient of a progress payment claim to respond within a prescribed time period. The failure to do so results in the claimed amount being deemed to be a debt and capable of being enforced in a court of competent jurisdiction".

 

Following the release of the report, the Federal Government is anticipated to meet with respective state and territory governments to consider these recommendations.