Understanding Recent Security of Payment Act Amendments Across Australia | GRM LAW Property Developers

Understanding Recent Security of Payment Act Amendments Across Australia

Introduction

Security of Payment (SoP) legislation exists in every Australian state and territory, designed to ensure contractors and subcontractors in the construction industry receive timely progress payments for work performed. These laws provide rapid adjudication processes to resolve payment disputes outside of lengthy court battles. However, the SoP landscape is not static. Recent years, particularly 2024 and leading into 2025, have seen significant amendments and proposed reforms in several jurisdictions, alongside important court decisions clarifying the Acts' application. For property developers, understanding these changes is crucial for managing contracts, cash flow, and potential disputes.

Why SoP Matters to Developers

While primarily aimed at protecting downstream contractors, SoP laws directly impact developers (as principals). Developers must adhere to strict timeframes for responding to payment claims (via payment schedules) and making payments. Failure to comply can result in a contractor obtaining a legally enforceable adjudicated amount, potentially disrupting project finances. Furthermore, understanding contractors' rights under SoP helps developers anticipate and manage potential claims effectively.

Key Recent Amendments and Developments

1. Victoria: Sweeping Reforms Proposed (Supported by Government)

Following a parliamentary inquiry, the Victorian Government has indicated support for extensive reforms to its SoP Act, aiming to align it more closely with other states. Key proposed changes include:

• Removing "Excluded Amounts": Victoria's unique regime preventing claims for certain costs (like latent conditions, time-related costs, some variations) is set to be abolished. This means contractors will likely be able to claim a wider range of costs in progress claims.
• Abolishing "Reference Dates": The complex concept determining when a claim can be made will likely be replaced with a simpler system, allowing at least one claim per month and a claim upon contract termination (similar to NSW).
• Statutory Payment Timeframes: A maximum timeframe for payment (likely 25 business days after a claim) will be imposed, overriding longer contractual terms.
• Extended Claim Periods: The time limit for making a progress claim is proposed to increase from 3 months to 6 months after the work was done.
• Protection Against "Unfair" Time Bars: Adjudicators may gain power to disregard contractual time bars for notices if compliance is deemed not reasonably possible or unreasonably onerous (similar to WA).
• Claiming Retention Money: An express right to claim retention money via the SoP Act is proposed.
• Adjudication Changes: Prohibiting new reasons for non-payment in adjudication responses and streamlining adjudication timelines.

Status: These are government-supported recommendations; legislation enacting these changes is anticipated.

2. Australian Capital Territory (ACT): Amendments Effective March 2024

The ACT implemented changes aimed at simplifying claims and speeding up payments:

• Removal of "Reference Dates": Similar to the proposed Victorian changes, the ACT removed reference dates, simplifying the entitlement to make a claim.
• Monthly Claims: Contractors can now lodge a payment claim on the last day of each calendar month (or earlier if the contract allows) for work done during that month, or upon contract termination.
• Statutory Payment Timeframes: A maximum payment timeframe (earlier of 15 business days after a claim or the contractual due date) now applies, overriding longer contractual periods.

Status: These changes are in effect and apply to existing and new contracts from 11 March 2024.

3. New South Wales (NSW): Key Court Decisions

Recent NSW Court of Appeal decisions have provided important clarifications:

• Adjudicator's Role (Ceerose): Confirmed that an adjudicator's role is to decide the dispute based only on the payment claim, payment schedule, and submissions. They don't need to investigate the "true merits" beyond what's presented. This underscores the critical importance for respondents (developers) to include all reasons for withholding payment in the payment schedule, as new reasons cannot typically be introduced later in the adjudication.
• Claiming Security (EnerMech): Affirmed that a payment claim doesn't strictly need to be for "construction work" itself. It was held possible for a claimant to use the SoP Act to recover security called upon by the respondent, provided the claim is carefully prepared and linked to an entitlement under the contract.

4. Queensland: Statutory Trusts Delayed, Claim Requirements Emphasised

• Statutory Trusts: The phased rollout of statutory project trusts (designed to protect subcontractor payments) under the Building Industry Fairness (Security of Payment) Act 2017 (QLD) has faced further delays for private sector projects, pending reviews. Developers need to monitor updates, as compliance will involve significant administrative changes when implemented.
• Payment Claim Validity (MWB): The QLD Court of Appeal highlighted the need for payment claims to clearly and sufficiently identify the construction work or related goods/services being claimed. Vague claims referencing only percentages of work categories were deemed invalid. This reinforces the need for contractors to be specific, but also serves as a point for developers to check when assessing claims.

5. General Trends and Implications for Developers

• Harmonisation Efforts: While differences remain, amendments (like removing reference dates in ACT and proposed in VIC) show a trend towards greater consistency across states, often modelling changes on the NSW Act.
• Focus on Payment Schedules: The Ceerose decision in NSW reinforces a universal principle: the payment schedule is the developer's crucial opportunity to state their position. Failure to provide a detailed schedule within the strict timeframe severely limits the developer's ability to defend a claim in adjudication.
• Time Bars Under Scrutiny: The proposed Victorian changes regarding unfair time bars reflect a growing trend (already present in WA) to prevent principals from relying on overly strict notification requirements in contracts to defeat otherwise valid claims.
• Limited Judicial Review: Courts consistently affirm that SoP adjudication is intended to be rapid, and grounds for overturning an adjudicator's decision are very limited (generally restricted to jurisdictional errors, not errors of law within jurisdiction, as highlighted in the VIC Roberts Construction case).

Conclusion

The Security of Payment landscape across Australia continues to evolve through legislative amendments and court interpretations. Key trends include moves towards greater national consistency, stricter requirements for principals responding to claims (payment schedules), and potential relief for claimants from overly onerous contractual time bars. For property developers, staying informed about the specific SoP laws in the jurisdictions where they operate is vital. Proactive contract management, meticulous record-keeping, and issuing timely, comprehensive payment schedules in response to every payment claim are essential practices to manage risks and maintain control over project payments under these regimes. Seeking legal advice specific to your contracts and circumstances remains crucial.

Disclaimer: This article provides general information only and does not constitute legal advice. Developers should seek specific advice tailored to their circumstances and the relevant state/territory legislation.