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Harmonised security of payment.

29/05/2018

Legislative responsibility for security of payment in the construction industry rests with the states and territories.

There are  eight disparate pieces of legislation in Australia which deal with security of payment.  As a prominent judge noted some years ago:

“We now have a national scheme comprising 8 Acts. It is a scheme which has at least two common themes — the recognition of a common objective and a manifest divergence in approach to achieving it”

Since he said that,  the divergences between the states and territories have increased.  In 2017,  the law changed in Queensland and South Australia and there were major legislative reviews in NSW and the Northern Territory.   The escalating trend for each State to introduce its own changes has implications for the  protection afforded to subcontractors, particularly those operating across the country.

“More needs to be done to harmonise the various state and territory security of payments laws so that businesses and subcontractors operating in the building and construction industry are not required to be across several complex pieces of legislation at any given time”

As a result, there are significant differences in the legislation between Australian jurisdictions: differences in what can be claimed; differences in the timeframes for service of payment claims, payment schedules, adjudication applications and adjudication responses; and differences in the material that can be relied upon in an adjudication response.

The approach  in NSW and other Eastern States is to provide a statutory right to progress payments, which is quite separate from any contractual  entitlement.  Disputes can be referred to an independent expert for adjudication in a fast-track  process.   The statutory time-frame prevents the recipient from checking claims thoroughly.  In other words, the NSW-based legislation envisaged the adjudication process as a means to an end, namely; the enforcement of a statutory entitlement to progress payments.

In contrast, Western Australia and the Northern Territory treats adjudication as a mechanism to resolve all disputes arising under a construction contract.  The West Coast model simply provides mechanisms for disputes about construction contracts to be determined “as quickly, informally and inexpensively as possible’.

The need for consistency is well established and can be traced as far back as the 2003 Cole Royal Commission.  The most recent report, published last week by the Department of Jobs and Small Business, points out that

  1. A national industry requires a national approach.
  2. There should be an equality of rights and protections across jurisdictions.
  3. A national approach will reduce complexity and administrative burden.
  4. There is significant practical and legal experience to support a national approach.

The author of the report, John Murray AM, agitates for the consistent implementation of a single system across all states and territories.  It is a long-overdue and essential national reform that can only be achieved with the co-operation of  federal, state and territory governments.  The construction industry operates across State borders.  The costs of industry should not be inflated by legislative inconsistencies from State to State.

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