SA Bill for Improved Security of Payment in the Building Industry
The Building and Construction Industry Security of Payment (Review Recommendations) Amendment Bill 2021 (SA) ('the Bill') was introduced into the South Australian Legislative Assembly on 26 May 2021 by the Attorney-General Vickie Chapman ('the Attorney-General'). The Bill has yet to pass the lower house.
According to the Attorney-General's second reading speech, the Bill:
"will make a raft of amendments to the Building and Construction Industry Security of Payment Act 2009 (SA) ['the B&CISP Act'] aimed at ensuring better payment practices and improved cashflow for businesses".
The Bill also proposes the making related amendments to the:
- Building Work Contractors Act 1995 (SA) and
- Plumbers, Gas Fitters and Electricians Act 1995 (SA).
Background to the Reforms
In her second reading speech the Attorney-General stated that significant problems in the building and construction industry stemmed from:
"cascading nature of contracting within the building and construction industry and imbalances of power in contractual relationships - for example, between a large head contractor and smaller subcontractors".
These issues that were highlighted in a 2017 report made by Mr John Murray, the Review of Security of Payment Laws: Building Trust and Harmony ('the Murray Review'). At page 12, the Murray review reports:
The B&CISP Act was designed to establish a statutory scheme to promote prompt payment to enable a flow of cash down the contractual chain. Currently, the scheme ensures that a person who carries out construction work, or who supplies related goods and services under a construction contract, is entitled to receive and is able to recover progress payments for carrying out that work.
The B&CISP Act also provides a mechanism for adjudicating payment disputes in the building and construction industry aimed at ensuring the rapid resolution of disputes. However, in her second reading speech, the Attorney-General indicated that since its commencement, the B&CISP Act had not had substantial amendment, and that the government is therefore:
Key Reforms Proposed by the Bill
Broadly the Bill seeks to:
- extend the application of the B&CISP Act 2009;
- promote better payment practices in the industry;
- improve the power imbalance between head contractors and subcontractors; and
- strengthen the integrity of the adjudication process.
Changes Proposed by the Bill
The more significant changes proposed by the Bill include reforms relating to the application of the B&CISP Act and administration of the B&CISP Act. These changes include:
- extension of the scope of the B&CISP Act to include construction contracts relating to residential premises, where the party for whom the work is carried out resides or will reside in those premises;
- new provisions to clarify that the Small Business Commissioner is responsible for the administration of the B&CISP Act and outlining the Small Business Commissioner's functions; and
- amendment of the definition of "business day" in the B&CISP Act to take into account the Christmas-New Year closure period, which is generally observed by the industry.
The Bill also proposes amendments in regards to progress payments, payment claims, and payment schedules. These amendments include:
- improved protections in relation to the timing of when a person is entitled to a progress payment;
- enhanced protections in regards to when a progress payment becomes due and payable;
- clarification of further requirements to be included in a payment claim to ensure that relevant information is provided to the person liable to make payment;
- clarification in regards to the timing of final payments in relation to a service of a payment claim;
- introduction of new requirements in the admission of supporting statements and payment claims;
- improvements to the process of payment schedules, in particular the introduction of forms to make it easier for a person, to whom a payment claim is served, to respond; and
- clarification of when a respondent becomes liable to pay the claimed amount to ensure consistency with security of payment legislation in other jurisdictions.
In regards to the adjudication process, the Bill proposes amendments that seek to:
- extend the right of adjudication to parties who are unable to reach an agreement about the return of retention money or securities;
- amend when an adjudication application is to be lodged;
- introduce a new process for referral of adjudication applications, and amend the relevant time frames and notification procedures;
- allow an adjudicator to grant an extension of time for lodging an adjudication response;
- insert a new provision to clarify that an adjudicator must make a determination in regards to relevant jurisdiction before determining the application; and
- clarify the circumstances under which a claimant may withdraw from adjudication and the required notification procedures.
The Bill also includes proposed reforms that aim to improve oversight of adjudicators and Authorised Nominating Authorities. These reforms include:
- introduction of a registration scheme for adjudicators, to be administered by the Small Business Commissioner, which would provide for:
- the registration and renewal, suspension or cancellation of a registration;
- an appeals process, where a person dissatisfied with a certain decision of the Small Business Commissioner relating to the registration scheme may appeal to the Administrative and Disciplinary Division of the District Court; and,
- grading of adjudicators in accordance with guidelines to be published in the Gazette and the Small Business Commissioner's website.
- improvement of the authorisation process by Authorised Nominating Authorities, including a requirement for the renewal of an authority;
- introduction of a new provision to enable the establishment of a new code of conduct by Authorised Nominating Authorities and adjudicators; and
- introduction of a new power to enable the Small Business Commissioner to publish a determination made by the adjudicator if the information does not identify any person or disclose the identity of any person referred to in the determination.
In regards to increased protections around threatening, intimidating behaviour, and unreasonable contractual terms, the Bill seeks to:
- introduce a new offence, which would make it illegal to directly or indirectly insult, threaten, intimidate, or attempt to assault a person in relation to an entitlement or claim for a progress payment; and
- make void certain provisions in contracts if the requirement to give notice would not be reasonably possible or be unreasonably onerous or serve no commercial purpose.
The Bill also includes suggested transitional provisions to aid in the commencement of the reforms.
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Building and Construction Industry Security of Payment (Review Recommendations) Amendment Bill 2021 (139 of 2021) (SA) and explanatory materials available on TimeBase's LawOne Service.