The South Australian (SA) construction industry must push for security of payment legislation that avoids New South Wales’ (NSW) mistakes if it wants to achieve a framework that is fair for all, warns a leading Sydney construction lawyer.
With passage of the SA Security of Payment Bill suspended while government senators consider amendments ‘to improve the bill’, Colin Biggers & Paisley lawyers construction partner, Avendra Singh, has urged local industry players to push for changes to ensure the bill avoids the worst excesses of the NSW legislation on which it is modelled.
“The original purpose of the Act was to fix the problem of builders not being paid for work done. But in NSW the balance has tipped so far in favour of claimants that respondents such as developers and head contractors are now at a significant disadvantage,” said Singh.
“The tight 10-day timeframe for responding to payment claims clearly gives claimants the upper hand. They are able to leisurely prepare a thorough claim yet can ambush payers by forcing them to respond in a matter of days.
“Some claims have been known to be in the tens of millions of dollars involving complex calculations and issues of fact and law. It is doubtful this is what the legislators had in mind. As payers become immediately liable for the full amount claimed if they miss the deadline, this is a very big risk indeed for developers and head contractors”.
Singh highlighted that the adjudication process for payment claims was also skewed in favour of claimants and had created a very powerful group of people — namely adjudicators — who were not all necessarily objective or appropriately qualified.
“If there’s a sure-fire way of bringing the security of payments process into disrepute, it is by stacking it with biased and unqualified adjudicators,” said Singh.
“In NSW as well as under the SA Bill, it is claimants who appoint the adjudicator to hear a dispute. In NSW this has led to an unhealthy proliferation of adjudicators who are perceived to be “claimant-friendly”.
“Moreover there’s no certification process for adjudicators to ensure they meet consistent minimum qualifications. An engineer may hang out a shingle because he can assess the value of building work but is he capable of resolving complex legal issues that arise?”
Singh emphasised that overall, the legislation had very strong merits and would be of great benefit to the SA construction industry provided local legislators took on board the lessons learnt from the other states — especially NSW and Victoria — who have had the security of payment regime in place for some years.
“South Australians deserve more than just a cookie-cutter approach. They have the luxury to choose the best elements of the existing regimes and should not squander this opportunity to create a first rate law,” said Singh.
Singh also noted that it was not too early for the SA construction industry to begin preparing for the new security of payment (SoP) legislation.
“The requirements of the Bill and timeframes for action are very different to current industry practices and will have a dramatic impact on the industry’s contracting culture. Companies that begin their transition planning now will ensure they are on the front foot when the rules inevitably come into force,” he said.