The SA SoP Bill

The Building and Construction Industry Security of Payment Bill 2008 (SA) (“the SA SoP Bill”) was introduced into the Legislative Council and received its second reading speech on 24 September 2008. The Bill has not been passed but will continue to be considered when Parliament is next in session beginning 3 February 2009. We will keep you updated on its progress.

The object of the SA SoP Bill is to ensure that a person who carries out construction work or who supplies related goods and services is entitled to and able to recover relevant ‘specified progress payments’.

Specifically, the SA SoP Bill would establish procedures for:

• The making of a payment claim by a person claiming payment
• The provision of a payment schedule by the person making payments
• The referral of disputed claims to an adjudicator for determination
• The payment of the amount of the progress payment determined by the adjudicator, and
• The recovery of the progress payment in the event of a failure to pay.

The SA SoP Bill would also make related amendments to the Commercial Arbitration and Industrial Referral Agreements Act 1986 (SA).

The extent to which the SA SoP Bill would in effect displace the Worker’s Lien Act 1893 (SA) is uncertain. That Act provides contractors and subcontractors with a right to a lien for their contract price over the land of the owner who ultimately benefits from the work done or materials received. The SA SoP Bill, however, only allows claimants to exercise a lien over unfixed plant or materials supplied by the claimant for use in connection with the delivery of construction work, in respect of an outstanding progress payment.

Comparison with legislation in other jurisdictions

The SA SoP Bill gives a person statutory rights to make progress claims and receive payment even where the contract does not contain progress payment provisions. The SA SoP Bill follows closely from the Security of Payment regimes in NSW and Queensland.

The SA SoP Bill, to a large extent, adopts the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the NSW SoP Act”), with the following key differences:

• Section 18(8) permits parties to agree upon the appointment of an adjudicator. If they do so, the nominating authority must refer the adjudication application to that adjudicator. This provision should create greater confidence in the adjudicator’s determination and reduce the likelihood of subsequent disputes.
• Section 19(1) requires adjudicators, in addition to having the qualifications, expertise or experience prescribed by the regulations, to also have undertaken the training prescribed by the regulations and to have been nominated as being suitable for appointment as an adjudicator by a building and construction industry body prescribed under the regulations.
• Section 22(3) requires an adjudicator to determine an adjudication application within 15 business days after the date on which the adjudicator notified the parties of his or her acceptance of the application (or within such further time as the parties may agree). Section 21(3) of the NSW SoP Act only gives the adjudicator 10 business days.
• Section 24 permits either party to apply to the District Court for a declaration that the adjudicator’s determination is beyond the power conferred on the adjudicator by or under the Act. This provision may have the effect of delaying payment, and thus frustrate the purpose of the SA SoP Bill, which is to provide a speedy mechanism to resolve payment disputes. For this reason, similar provisions in the Judicial Review Act 1991 (Qld) were repealed in 2007.
• Section 28 permits an adjudicator to order one party to pay some or all of the costs of the other party (apart from the adjudicator’s fees and expenses), where the adjudicator is satisfied that the other party incurred costs due to the first party’s ‘frivolous or vexatious conduct’ or ‘unfounded submissions’. This provision should serve as a deterrent to parties intending to initiate claims which are spurious.
• Section 32 specifies that if the adjudicator’s fees are not agreed between the adjudicator and the parties, the adjudicator’s payment will be an amount calculated according to the hourly rate prescribed by the regulations. However, under Section 29 of the NSW SoP Act, the adjudicator’s fees are calculated based on an amount considered ‘reasonable having regard to the work done and expenses incurred by the adjudicator’.
• Section 32 also adds that if the respondent refuses to pay the required contribution to the adjudicator, the claimant may elect to pay both the respondent’s and the claimant’s contribution, in which case the adjudicator must add that amount to the progress payment required to be paid by the respondent.
• Section 36 requires the Minister to maintain a public register of adjudicators and authorised nominating authorities. A similar type of register is also required by the Security of Payment legislation in Victoria (in regards to authorised nominating authorities only), Western Australia, Queensland and the Northern Territory.

The Bill has not been passed but will continue to be considered when Parliament is next in session beginning 3 February 2009. We will keep you updated on its progress.

If the SA SoP Bill is passed as an Act, the ACT and Tasmania will remain the only jurisdictions that have not enacted Security of Payment legislation.