2017 Review of Security of Payment Laws - A Summary

Update: You can find a summary of Mr Murray's report, including a link to the report, by clicking here. 

The Australian Government has appointed John Murray AM to review the security of payment laws in the building and construction industry. His draft report is due in September and his final report is due by 31 December 2017.

The Government's terms of reference recognise that, 'while well-intentioned, the often vastly different security of payment laws operating in each jurisdiction are not working as well as intended'. 

The lack of consistency between jurisdictions is acknowledged as an ongoing issue within the industry. Mr Murray's review will examine the existing legislation to identify areas of best practice, taking into account past reviews and inquiries, and also the views of businesses, governments, unions and other interested parties.

In addition to the question of harmonising the legislation, the review will also look at 'various types of contractual clauses that restrict contractors in the construction industry from obtaining payment'. Onerous time bars (or 'Queen of Hearts' provisions) are one type of clause that is likely to be in the spotlight.

What submissions have been made?

Submissions have now been made to Mr Murray by a number of organisations, including legal bodies, industry bodies and adjudicators. These include submissions by:

• the Society of Construction Law Australia (SOCLA);
• the Law Council of Australia (Law Council);
• the National Electrical and Communications Association (NECA);
• Adjudicate Today; and
• the Resolution Institute.

The submissions demonstrate the enormous size and complexity of the task before Mr Murray. Nobody seems happy with the way the system currently works. But there is an enormous diversity of opinion on how it might be fixed.

The submissions do however shed light on the types of things Mr Murray is likely to consider, and therefore what may be contained in his final recommendations.

What is being considered?

Some of the key questions being considered by Mr Murray and that have been addressed by submissions are as follows:

1. Should there be uniform security of payment laws across the country? If so, how should they work? Currently there are major differences between jurisdictions, particularly between the 'East Coast' and 'West Coast' models.
2. Should time bars be regulated? If so, how? (See our thoughts here.)
3. Should the security of payment legislation  be extended to the housing sector? 
4. Should payment claims under the Act be invalid if they are not endorsed with prescribed wording (ie 'This is a payment claim under the Act')?
5. What should the timeframes be for making and responding to payment claims and adjudication applications under the Act?
6. How should adjudicators  be appointed (eg by Government or an independent regulator, by a not-for-profit nominating authority)?
7. What qualifications should adjudicators have?
8. Should ajdudication decisions should be published online?
9. Should there be different timeframes and processes for dealing with claims of different sizes or complexity?
10. Should certain types of claim  be excluded from the Act (as is currently the case in Victoria), such as claims in respect of latent conditions, delays or variations?
11. Should companies in liquidation be able to make claims under the Act?
12. Should claimants be able to make claims under the Act after a contract has been terminated?
13. Should consideration be given to the establishment of a statutory construction trust, to safeguard the flow of money from principals to subcontractors?
14. What, if anything, can or should be done to discourage principals or contractors from effectively bullying those further down the contracting chain to not take advantage of their rights under the legislation?

Even a cursory review of the submissions identified above will reveal a range of diverging opinions on these issues. Mr Murray's task is an unenviable one.

What is likely to happen?

Mr Murray's draft report in September 2017 should provide some guidance as to where the review is headed. We will provide an update then.

Keep in mind that Mr Murray's task is merely to make recommendations. At best, Mr Murray's final report will be a pre-cursor to possible future legislative reform.

Although the commissioning of the review is a positive step in that it indicates an intention by the federal government to improve the system, there is still a long way to go before substantive changes are likely to be made.