Building and Construction Industry (Security of Payment) Bill 2009

Overview

Objectives of the Legislation
The objective of the legislation is to entitle certain persons who carry out construction work (or who supply related goods or services) to a timely payment for the work they carry out and the goods and services they supply.

This will be achieved through establishing a procedure for securing progress payments to which a person becomes entitled under this Bill.

Reasons for the objectives and how they will be achieved
Security of payment has been an issue in the building and construction industry over many decades. Several taskforces and the 2003 Cole Royal Commission into the Building and Construction Industry flagged security of payment as a significant industry matter and cited strong anecdotal evidence across all jurisdictions to support the notion that security of payment problems are widespread within the industry.

The building and construction industry is particularly vulnerable to security of payment issues because it typically operates under a hierarchical chain of contracts with inherent imbalances in bargaining power. The failure of any one party in the contractual chain to honour its obligations can cause a domino effect on other parties resulting in restricted cash flow, and in some cases, insolvency.

The Bill establishes a system of rapid adjudication for the interim resolution of payment on disputes involving building and construction work contracts.

Rapid adjudication will be conducted by an independent adjudicator with relevant expertise. If the decision of the adjudicator is in whole, or in part, in favour of the applicant, the respondent is required to pay a specified amount directed by the adjudicator to the applicant. Decisions by the adjudicator are enforceable as a judgement debt.

Rapid adjudication does not extinguish a party’s ordinary contractual rights to obtain a final resolution of a payment dispute by a court or tribunal of competent jurisdiction.

The adjudication process will cover all forms of construction contracts other than contracts for the carrying out of domestic building work where an ordinary "resident owner" is a party to the contract.

Administrative arrangements
Private providers will conduct the adjudication on a user pays basis. The ACT Planning and Land Authority and will act as the Minister’s delegate for authorising and monitoring adjudicators and authorised nominating authorities (the organisations that appoint adjudicators).

Extensive consultation was undertaken with industry stakeholders over an 18 month period. This included a series of meetings with relevant stakeholders and the release of a discussion paper to key employee and employer groups from the industry so that all organisation were given the opportunity to comment on the development of the legislative model.

This is a technical clause that names the Act. The name of the Act is the Building and Construction Industry (Security of Payment) Act 2009.

The Act commences on 1 July 2010.

This clause establishes that the dictionary at the end of the Building and Construction Industry (Security of Payment) Bill 2009 (the Bill) is part of the Bill.

This clause establishes that notes in the Bill are explanatory and not part of the Bill.

This clause establishes that other legislation applies in relation to offences against this Bill.

This sets out the object of this Bill is to ensure that a person is entitled to receive, and is able to recover, progress payments if the person:

(a) undertakes to carry out construction work under certain construction contracts; or

(b) undertakes to supply related goods and services under certain construction contracts.

In particular, this Bill:

(a) grants an entitlement to a progress payment for construction work, whether or not a construction contract provides for progress payments; and

(b) establishes a recovery procedure for construction work progress payments.

This clause defines the expression construction work for the purposes of the Bill. The definition of construction work also includes building work within the meaning of the Building Act 2004.

This clause provides for the application of the Bill to all construction contracts, whether written or oral, or partly written and partly oral.

Certain classes of contract are excluded from the Bill, as are certain classes of contractual provisions.

Other classes of construction contract can be excluded from the Bill by regulations under the Bill.

This clause provides that on and from each reference date, a person who has undertaken to carry out construction work, or to supply related goods and services, becomes entitled to a progress payment.

A reference date is a date ascertained in accordance with the terms of the construction contract as a date for making a claim for a progress payment or as a date by reference to which the amount of a progress payment is to be calculated or, if the contract contains no such terms, the last date of the named month in which the construction work commenced, or the related goods and services were first supplied, under the contract.

This clause provides for the amount of a progress payment to be ascertained in accordance with the terms of the construction contract or, if the contract contains no such terms, according to the value of construction work carried out, or related goods and services supplied, under the contract.

This clause provides for the manner in which the value of construction work carried out, or related goods and services supplied, under a construction contract is to be valued.

This clause provides that a progress payment becomes due and payable in accordance with the terms of the construction contract or, if the contract contains no such terms, 10 business days after a progress claim is made in relation to that payment under Part 4 of the Bill.

Clause 14 Effect of pay when paid provision
This clause provides that a “pay when paid” provision of a contract has no effect in relation to construction work carried out, or related goods and services supplied, under a construction contract. A “pay when paid” provision is a provision that makes one person’s payment dependent on another person’s payment or dependent on the operation of another contract.

This clause enables a person who is entitled to a progress payment under proposed section 10 (1) (the claimant) to serve a payment claim on the person who is liable to make the payment (the respondent). The claim will set out the amount to which the claimant claims entitlement.

This clause enables the respondent to reply to the claim by providing a payment schedule to the claimant. The schedule will set out how much the respondent proposes to pay the claimant and when.

This clause provides that a claimant will be able to recover the whole amount of his or her claim as a debt, and to suspend carrying out construction work, or supplying related goods and services, if the respondent fails to provide a payment schedule within the time allowed under clause 16 (4).

This clause provides that a claimant will be able to recover the amount set out in the respondent’s payment schedule, and to suspend carrying out construction work, or supplying related goods and services, where the respondent provides the payment schedule within the time allowed under clause 16 but fails to pay that amount by the due date referred to in clause 13.

This clause enables a claimant to apply to an authorised nominating authority for adjudication of the amount of a progress payment payable in the event that the amount set out in the respondent’s payment schedule is less than the amount set out in the claimant’s payment claim. The application will have to be made within 5 days after the claimant receives the payment schedule, and will be able to be made to an authority authorised to nominate adjudicators for the purposes of the Bill.

This clause requires an adjudicator to be an individual and to have such qualifications, expertise and experience to perform adjudications and has successfully completed a relevant training course. It also prohibits a person from being an adjudicator in relation to a particular construction contract if the person is a party to the contract, or the person is employed or represents a building and construction industry organisation or in such circumstances as are prescribed by the regulations.

This clause provides that the appointment of an adjudicator is effected when the adjudicator gives notice of his or her acceptance of the adjudication application to the claimant and the respondent. The adjudicator must also at the same time, with the notice of acceptance, give the respondent a copy of the adjudication application.

This clause enables the respondent to lodge, in writing, with an adjudicator the respondent’s response to the claimant’s adjudication application.

This clause sets out the manner in which, and the time within which, an adjudicator is to determine an adjudication application.

This clause provides that the adjudicator is to determine an adjudication application by determining the amount of the progress payment to be paid and the date on or before which it must be paid and the rate of interest on the amount.

This clause provides that if the adjudicator determines an amount that the respondent must pay as a progress payment, the respondent must pay that amount to the claimant on or before the relevant date.

This clause entitles a claimant to suspend the carrying out of construction work (or the supply of related goods and services) if at least 2 business days have passed since notice of intention to do so has been given as referred to in clause 17, 18 or 26. A claimant who suspends the carrying out of construction work (or the supply of related goods and services) under the proposed section will be immune from civil liability as during the period of suspension.

This clause enables the relevant Minister to authorise, or refuse to authorise, persons as nominating authorities (to nominate adjudicators for the purposes of the proposed Act) and to withdraw any authority so given. The Minister’s decision to refuse an application is a reviewable decision.

Clause 34 Costs and expenses-authorised nominating authority
This clause provides for the costs and expenses payable to an authorised nominating authority in relation to the adjudication of an adjudication application.

Clause 36 Costs and expenses-adjudicator
This clause provides for the costs and expenses payable to an adjudicator in relation to his or her adjudication of an adjudication application. In particular, an adjudicator will not be entitled to be paid any fees if he or she fails to determine such an application within the time allowed under clause 21 (3).

Clause 37 Protection from liability-adjudicators and authorised nominating authorities
This clause ensures that no action will lie against an adjudicator or any other person for anything done or omitted to be done by the adjudicator honestly and without recklessness in the exercise of the adjudicator’s functions under the Bill.

Clause 38 Effect of part on civil proceedings
This clause ensures that nothing done under this part will affect any civil proceedings arising under a construction contract, except that a court will be required to make appropriate set-offs and any orders necessary to provide for the restitution of money paid as a consequence of its decision in the proceedings.

This clause provides the meaning of reviewable decision for the purposes of this part.

Clause 40 Reviewable decision notice
This clause requires that if a person makes a reviewable decision, the person must give a reviewable decision notice to each entity mentioned in schedule 1,
column 4 in relation to the decision, and under s 67A of the ACT Civil and Administrative Tribunal Act 2008, the person must also take reasonable steps to give a reviewable decision notice to any other person whose interests are affected by the decision.

Clause 41 Applications for review
This clause provides that an entity mentioned in schedule 1, column 4 in relation to the reviewable decision, or any other person whose interests are affected by the decision, may apply to the ACT Civil and Administrative Tribunal for review of a reviewable decision.

This clause avoids any provision of an agreement that purports to exclude, modify or restrict the operation of the Bill.

This clause provides for appeals on questions of law by parties to an adjudication decision to the Supreme Court. The provision is modelled closely on the appeal provision under section 38, part 5 of the Commercial Arbitration Act 1986, save for one respect, in that the period in which an adjudicator must make a new decision has been reduced to 10 business days after the decision has been remitted. This reduction is consistent with the subject matter of the Bill.

This clause provides that the Supreme Court has jurisdiction to determine any question of law arising in an application to the court made by any of the parties to adjudication. The provision is modelled closely on the appeal provisions under section 39, part 5 of the Commercial Arbitration Act 1986.

This schedule lists the decisions and the respective provisions under the Bill that are able to be reviewed.

This part provides the amendments to other Acts as a consequence of this Bill.

The Dictionary defines terms used in the Bill.