Legislation Update: the Construction Contracts Amendment Bill 2016

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Changes to the Construction Contracts Act 2004 (Act) may be operative as soon as 15 December 2016 following the introduction of amending legislation into State Parliament last month.

The Bill

The Construction Contracts Amendment Bill 2016 (Bill) seeks to implement key recommendations made by a 2015 statutory review of the Act by improving payment protection for subcontractors and facilitating better access to the rapid adjudication process under the Act.

In a media statement, Small Business Minister Sean L’Estrange announced that the Bill would be complemented by future reforms, including: a code of conduct for contractors which will be monitored by a compliance unit within the Department of Commerce and expanded powers of the Small Business Commissioner to review and mediate disputes between contractors and subcontractors.

The Evans’ Report

A 2015 independent review of the Act commissioned by the State Government and conducted by Professor Philip Evans was intended to measure the efficacy of the Act in meeting its objectives, namely as a mechanism for resolving contractual payment disputes quickly and at a low cost for parties.

The Evans’ report stressed that the Act was an important piece of legislation that had been successful in establishing a scheme that allowed for the fast and uncomplicated resolution of payment disputes.

However, the report also highlighted a number factors limiting the Act’s effectiveness, many of which stemmed from a lack of awareness in the building and construction industry about the Act and its objectives and the fact many parties did not have an understanding about their rights and responsibilities under the legislation.

Professor Evans made 28 recommendations in his report to improve the Act’s function, and the amendments introduced by the Bill are largely reflective of these.[1]

Key amendments  

Key changes to be introduced by the Bill include:

  • an increase in the time frame in which to apply for adjudication from 28 days to 90 business days;
  • a reduction in the time frame in which payment claims must be paid from 50 days to 30 business days;
  • allowing for payment recycling, meaning rejected or disputed payment claims may be included in any subsequent payment claims made by a party;
  • clarification as to when a payment dispute arises under s 6(1) of the Act and when an adjudication application should be made;
  • adjudicators will be given express powers to issue determinations giving effect to settlement terms reached between parties to a dispute;
  • adjudicators will also have the discretion to continue to adjudicate applications that may lack certain technical and formal requirements which they would have previously been required to dismiss under the Act;
  • faster and more efficient means of enforcing adjudication determinations with courts without the need to seek leave; and
  • a global amendment to time periods under the Act from calendar days to business days (which will exclude known holiday periods such as Christmas/New Years and Easter as well as public holidays).

The Bill in practice

The changes to be introduced by the Bill seek to strike a balance between facilitating greater access to the adjudication process whilst also maintaining the rapid nature of the scheme.  A clear example of this is the increased time frame to apply for adjudication, which will better accommodate complex disputes and smaller subcontractors who may be reluctant to commence payment claims immediately for fear of jeopardising further work opportunities, whilst also reducing the time in which payment determinations must be paid to keep money flowing in the construction claim.

The simplified process of enforcing adjudication determinations and the emphasis placed on the substance of an adjudication application over its technical form are further changes that are likely to positively improve the operation and effectiveness of the scheme.

For more information:

The Bill’s progress may be tracked here.

Click here to view a copy of the Bill.

[1] There are some deviations between the recommendations made in the report and proposed changes introduced by the Bill, for example: Professor Evans recommended that the time limit in which to bring an application for rapid adjudication remain 28 days, however this time limit has been extended to 90 business days under the amending legislation.

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