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Changes to NSW security of payments laws


The NSW Government claims that the Building and Construction Industry Security of Payments Act 1999

  • provides speedy, low-cost method for resolution of disputed payment claims;
  • stimulates cash-flow along the supply chain; and
  • reduces litigation or arbitration of payment claims

On the other hand, the system has been criticised for mandating a peremptory  process that is entirely inappropriate for the resolution of complex disputes between sophisticated and well-resourced litigants.  A discussion paper has been published seeking public submissions about amendments to the Act.   The Government is considering a range of adjustments; namely that,

  • Contractors should be able to submit progress claims 90 days after commencement of work, regardless of any agreement to the contrary.
  • Progress claims should be paid within 30 days, regardless of any agreement to the contrary.
  • Adjudicators should be allowed up to ten days to consider his adjudication, counted from receipt of both the contractors application and the principal’s response.
  • Adjudicators should receive both the application and the response at the same moment, so an adjudicator does not get more time to consider a contractor’s submissions than the principal’s.
  • Payment claims should contain a prescribed warning to prompt principals about the importance of a timely payment schedule.
  • The content of payment schedules should be limited, so principals do not provide unnecessary or prolix reasons for its assessment.
  • Complex and “predatory” claims (like  extension of time, prolongation acceleration etc) should be excluded from adjudication.
  • Claims should be limited to work actually done within the preceding 12 months.
  • The Act should clarify that Courts and arbitrators have jurisdiction to order the refund of overpayments resulting from an incorrect adjudication.
  • Interest should be payable on refunds of such overpayments.
  • Where a head-contractor fails to pay an amount determined by an  adjudicator, subcontractors should be able to recover that amount from principals.
  • Several options are proposed for changes to the  Contractors Debts Act 1997
  • Court processes for recovery of unpaid debts should be improved.
  • Retention amounts and other forms of security should be held in trust accounts. .
  • A compulsory insolvency insurance scheme is not under consideration
  • The NSW Prequalification scheme should be reviewed to reflect COAG considerations
  • Proposals are broadly sought for streamlining the process and timetable under the Act
  • Costs and fees of adjudicators and authorised nominating authorities should be regulated for small claims under $1000.

Submissions close today, 8 October 2010.

Here is the full text of the discussion paper.

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