ACT SOPA Reform: Some Welcome Harmonisation with NSW

Nick Ahern is an adjudicator with Adjudicate Today for NSW, Victoria, Western Australia and the ACT, a consultant with Ahern Construction Dispute Consultants, and a solicitor with Mills Oakley in Canberra.

On 12 December 2023, the ACT Legislative Assembly passed the Building and Construction Legislation Amendment Act 2023, which amended several pieces of legislation relating to the construction industry in the ACT. In particular there are changes to the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (‘the Act’), which will commence on 11 March 2024.

These amendments, while limited, better align the ACT with the cognate legislation in NSW, upon which the Act was originally modelled. In the author’s view, the amendments are a good first step to better achieve the object and purpose of the Act, but as the amendments are limited in scope further amendments will be required to ensure that the Act is fit for purpose in the long run. These changes reflect some of the recommendations outlined in the author’s previous article.

Two of the changes are:

  1. Improvements to the entitlement to make regular progress claims; and
  2. Maximum payment terms

1 Entitlement to make regular progress claims

The concept of ‘reference dates’ has been central to a claimant’s entitlement to make a payment claim, but has also been rightly criticised. The removal of the concept was a key recommendation of the 2017 report by John Murray AM Review of Security of Payment Laws – Building Trust and Harmony (‘Murray Review’). The Murray Review at recommendation 14 stated that “to avoid confusion within industry the use of the expression ‘reference date’ should be abandoned.” This recommendation followed and addressed the decision in Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 260 CLR 340 which held that the existence of a reference date was a jurisdictional fact and a precondition for a valid payment claim under the Act.

The concept of ‘reference dates’ has been removed, and instead a monthly claim may be lodged on the last day of each calendar month, or an earlier day in the calendar month as provided in the contract. This mirrors the NSW legislation and simplifies the procedural aspects of applying for an adjudication application.

Until this amendment takes effect, parties to a construction contract could elect to prevent a claimant from making a progress claim on a monthly basis, and could instead nominate longer periods between claims, or limit progress claims during a defects liability period so that only a single claim could be made after the expiry of that period. It was not uncommon for an unrepresented party to be unaware of this requirement and go through the time and expense of submitting an adjudication application, only for it to be invalid and potentially be exposed to the adjudicator’s fees. Its removal simplifies the adjudication process and is a welcome change.

The removal of reference dates also includes the specific provision that a payment claim may be given on or after the day of termination of a construction contract. Participants in the industry should be aware that this provision is likely to be interpreted consistently with the NSW legislation, which in BCFK Holdings Pty Ltd v Rork Projects Pty Ltd [2022] NSWSC 1706 was held to mean that only a single payment claim may be made under the Act after termination.

2 Maximum payment terms

Until the passage of the amendments, parties to a construction contract could set the due date for payment of a progress claim. Payment terms of up to 75 calendar days are not uncommon in the ACT, and that already-lengthy period is exacerbated when payments are late. Previously, it was only where the construction contract was silent as to the due date for payment that the default provision in section 13(1)(b) of the Act applied, and then the due date for payment was 10 business days after a payment claim was made.

The amendments now provide that the ‘due date for payment’ is the earlier of the following:

  1. 15 business days after a payment claim is given by a claimant; or
  2. the day when the payment becomes payable under the construction contract.

This timeframe is the same for head contractors and subcontractors, in contrast to NSW where the maximum payment terms for head contractors is 15 business days and for subcontractors 20 business days. It is probable that this distinction was not made in these most recent amendments because the Act does not distinguish between head contractors and subcontractors, and the introduction of that conceptual distinction is intended to be deferred to a later review in the coming years.

In addition to facilitating faster payment, this amendment also simplifies the process for applying for adjudication where a respondent did not provide a payment schedule. In that scenario, a claimant must first give a notice under section 19(2) of the Act within 20 business days after the due date for payment, and give the respondent an opportunity to provide a payment schedule after receipt of the notice. Until these amendments take effect, that could mean waiting 75 calendar days before being able to give a notice under section 19(2). With these amendments, the time to make an application has been standardised and most often will be reduced where no payment schedule was provided.