Detailed Report: BCISPA Act 1999 (as amended) for NSW Property Council

This report provides a comprehensive analysis of the Building and Construction Industry Security of Payments Act 1999 (BCISPA) (as amended), addressing key aspects for the Property Council of New South Wales. The report details how the Act functions, its historical context and rationale, and the recent amendments. It examines the Act's operational mechanisms, including payment claims, adjudication processes, and the rights of subcontractors. The report explores the reasons behind the Act's introduction, focusing on addressing issues of non-payment in the building and construction industry. It also analyzes the impact of recent amendments, such as the removal of the reference date precondition, shortened payment terms, and the powers of the Supreme Court. The report concludes by summarizing the key changes and their implications for stakeholders in the construction industry. The report is structured to provide a clear understanding of the BCISPA's provisions and their practical implications.

Author Name(s)
Institution
Student Name Student ID

Contents
How the Act Work...................................................................................................................3
Why Was It Introduced............................................................................................................5
Recent Amendments................................................................................................................7
Removing the precondition for the "reference date"...........................................................7
Shortened terms of payment and reforms in the adjudication process................................8
Provisions for Withdrawal of Claims..................................................................................8
Supreme Court Powers to Quash Adjudicator’s Decision...................................................9
Appointment of Investigator................................................................................................9
Conclusion.............................................................................................................................10
Bibliography..........................................................................................................................11
Student Name Student ID

Executive Summary
The NSW Parliament passed the amendment bill on the Building and Construction Industry
Security of Payments act 1999 (BCISPA) Amendments Act of 2018 On 21 November 2018.
Participants in the construction industry need to be aware of the significant effects that these reforms
will bring to various areas of the construction industry. In particular, the new provisions will affect
future projects as well as any varied construction contract. Other areas where there would be an
impact include areas with those people who are in construction projects management and contract
administration. The Act aims to ensure that people are complying with the security of payment
regulations. This report seeks to discuss the key provisions in the amendment act.
Student Name Student ID

How the Act Work
The NSW led other Australian jurisdictions in coming up with a legislation that specifically
aimed to streamlined issues of payment in the building and construction industry (BCI). The Building
and Construction Industry Security of Payment Act 1999 (NSW) (‘BCISPA) was assented on 5the
October 1999 and came into force on the 26th of March 2000. Later, other states followed by enacting
similar legislation.
The introduction of BCISPA came with the regulations that aimed to counter the unfair actions
that were common in BCI. Particularly, the intended to end issues of non-payment of some of the
parties in construction contracts.1 Therefore, the government included statutory provisions that
specifically operate in parallel with the construction contract. That is, a party could choose to recover
payment through enforcing the contractual obligation or through the contract or statutory provisions.
There are various provisions for the enforcement of payments. Among them is the claimant’s right to
progressive payments.2 Under these provisions, the claimants start by making a payment claim. As per
section 13, any person who completes construction work supplies materials, or provides services
under a BCI contract has entitlement to a progress payment through a payment claim. Payment claims
are claimants’ documents that contain all the details of the completed work and the amount which
supposed to be paid.3 Apart from enforcement of the payment, s11 also directs that the claimant
should receive interest on the owed payment.4
The Act further directs that after the claimant can issue the payment claim as per the referenced
date under the contract or send the claim 12 months from the last day when the project was
1 Commonwealth of Australia, Insolvency in the Australian Construction Industry: ‘I Just Want to Be
Paid’ (2015) <https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/
Insolvency_construction/Report/>.
2 Building and Construction Industry Security of Payment Act (BCISPA) 1999 8.
3 Ibid.
4 Ibid sec 11(2).
Student Name Student ID

completed.5 Once a payment claim has been sent, section 14 directs the persons to who the claim has
been sent (respondent) to either pay the owed sum or send a reply showing his/her side of the case.6
Both s15 and s16 provide further direction on circumstances the respondent fails to pay.7 Section 15
provides for consequences in claims with no schedule while s16 provides direction for the
consequences where the claim provide schedules for the payment.8 Section 17 has the provision for
dispute resolution through an adjudicator.9 That is, the Act allows the parties to choose an independent
adjudicator who makes interim determinations on the claimed payments.10 Whereas only the claimant
or the subcontractor can initiate the adjudication process, the law allows the head contractors or the
defendants to submit the side of their proof or defense.11
In addition to the right of interests, adjudication, and payments, the Act provides the claimant
with more rights to suspend any ongoing work with the payment in moments when there is withheld
payment under the construction contract.12Along with this right is the right of lien which is the right to
retain or hold possession of chattels or the real property as security for the owed payment.13More
importantly, the acts forbid the inclusion of clauses that allows ‘payed-when-payed’ actions which
allow the defendant to pay for work only when paid by the owner.14Also, the Acts prohibits any other
clauses that seek to contract out or create rights that are contrary to the provisions of the Act.
5 Ibid sec 13.
6 Ibid sec 14.
7 Ibid 15 & 16.
8 Ibid.
9 Ibid sec 17.
10 Andrew Burr, International Contractual and Statutory Adjudication (2017)
<http://www.myilibrary.com?id=1005307>.
11 Building and Construction Industry Security of Payment Act (BCISPA) 1999 s. 17(3)(b).
12 Building and Construction Industry Security of Payment Act (BCISPA) 1999 sec 15(2), 16(2), 24(1).
13 Ibid 11(3).
14 Ibid s. 12(1), s. 34.
Student Name Student ID

Why Was It Introduced
BCIPA was introduced to Australia after the UK statue for the regulation of housing, building,
and construction industry.15 The intention of the NSW government when enacting BCIPA was to
counter the rampant problems in the building industry with non-payment of subcontractors. According
to John Murray, the commonwealth Australia state that there were consistent failures in the then BCI
in ensuring that there was an effective and timely payment to all the participants as included in a
construction contract.16The general meaning of the ‘security of payment’ (SOP) is the overall
subcontractors, suppliers, and contractors, the entitlement of their due payments as agreed under the
construction contract manual.17
The NSW government assented BCISPA on 5th October 1999 and commenced on 26th March
2000.18 The BCISPA brought new statutory rights which included the claimants right to (a) progress
payments; (b) aright to received interest on the delayed payments (c) rights to suspend any ongoing
work under the contract; (d) the right of lien (e) the right to a fair adjudication process.19 While this
seemed to favor more the interests of the subcontractors, the Government said that the results from
their data analysis led them to come up with the act which was going to benefit all stakeholders in the
construction industry. 20 The manner in which the act was going to benefit all the stakeholders was
particularly through elimination of all the unfair and corrupt conducts that was rampant in the
industry. As per the NSW Government, the new act was intended to counter the tactics used in the
industry for delaying payments, devaluing work, and withholding of payment contrary to the terms
15 Housing Grants, Construction and Regeneration Act 1996 (UK).
16 John Murray, Review of Security of Payment Laws: Building Trust and Harmony (Department of Jobs
and Small Business, 2017).
17 Ibid.
18 NSW Government, Department of and NSW Finance & Services, ‘Building and Construction Industry
Security of Payment Act 1999 Adjudication Activity in New South Wales ANNUAL REPORT 2011/12’ (2012)
<https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0010/371287/
Adjudication_annual_report_2011_2012.pdf>.
19 Ibid.
20 Ibid.
Student Name Student ID

agreed under the construction contract.21 As reported by Andrew Burr, the minister for social work
stated that the government was experiencing frequent cases from subcontractors who included the
carpenters, bricklayers, plumbers, and electricians whose money was withheld. The minister further
stated that contractors could not afford to sustain their lives financially due since withholding their
payments caused them and their families to experience severe consequences.22
Notwithstanding these consequences, the legal system back then was not effective enough to
provide justice to subcontractors. As reported by Julian Bailey, the subcontractors relied on
contemporary means of pursuing justice which mainly included negotiation with the main
contractor.23 Where negotiations failed, they ended going to the court as their attempt to recover their
payment. However, courts were not helping much due to either lengthy court system which took
months or years to decide the case.24 Due to this length of time, the subcontractors ended up
surrendering their payment to instead work on other projects as a way of saving themselves from a
financial crash.25
While explaining the necessity for the enactment of BCISPA, the NSW Government explained a
critical issue of bankruptcy in the BCI mainly contributed by the “contractual chain.”26Contractual
chain referred to the nature of construction contracts where they feature a multi-tier hierarchy made
up of principal owners, their agents, main contractors, and at the bottom are the suppliers and
subcontractors.27 Just as the instructions follow the chain, even the payments follow the same
structure. While there is no problem with if money followed the same chain smoothly, problems
21 NSW Government, Department of and NSW Finance & Services, above n 20.
22 Burr, above n 11.
23 Julian Bailey, Construction Law. (Taylor and Francis, 2014).
24 NSW Government, Department of and NSW Finance & Services, above n 20.
25 Bailey, above n 26.
26 Michael C Brand and Philip Davenport, ‘Adjudication in Australia: An Analysis of the Amendments
Introduced by the Building and Construction Industry Security of Payment Amendment Act 2010 (NSW)’
(2012) 4(3) International Journal of Law in the Built Environment 189.
27 NSW Government, Department of and NSW Finance & Services, above n 20.
Student Name Student ID

arose where one of the persons in the chain stifled the flow preventing money from reaching the
people at the bottom.28 In other cases, the head contractor would go to insolvency making it even
more difficult for the subcontractors to get their pay.29After recognizing these issues, the NSW
government decided to put together legal principles that would protect the subcontractors and other
parties in the construction contract from suffering injustices from the other parties.30
Recent Amendments
In 2018, NSW parliament made several amendments in their ongoing efforts in ensuring
effective regulation of the BCI under BCISPA. The government also announced that these
amendments will commence starting from 21st October 2019. The key amendments to the Act were as
follows:
Removal for the precondition for the "reference date"
Under the previous Act, s8 and 13 made it a precondition that for the claimant to be eligible to a
progress payment the claimant, both parties need to have included a reference date in the construction
contract.31 This was also recently confirmed by the High Court when while referring to s 13(1) and
s8(1), the Court unanimous held in a joint judgement that for the claimant to be entitled to a progress
payment, it is a pre-condition for that the construction contract must have a reference date for the
validity of the claim.32 However, the new amendments have eliminated this requirement and a
reference date is no longer a precondition that the claimants have to prove to validate their payment
claims. The advantage of this change to the subcontractors is that they will be able to bring claims
even when the contract does not have any reference date. Besides, it eliminates confusion in
circumstance where the reference date falls on a weekend as witnessed in the Audi Construction Pte
28 Brand and Davenport, above n 29.
29 Commonwealth of Australia, above n 1.
30 NSW Government, Department of and NSW Finance & Services, above n 20.
31 Building and Construction Industry Security of Payment Act (BCISPA) 1999.
32 Southern Han Breakfast Point Pty Limited (in liq) v Lewence Construction Pty Limited (2016) 5 HCA.
Student Name Student ID

Ltd.33 Instead, the new amendments allow the claimant to bring payment claims at least once in a
month or bring one final claim where the main contractor terminated the contract.
Shortened terms of payment and reforms in the adjudication process
The original act allowed the main contractors to give payment within 30 days after they have
been issued with a payment claim. Under s11(1B)(a) of the Amendment Act, this time has been
reduced to “20 business days”.34 It is an advantage to subcontractors since they would not have to wait
for 30days to get back their financial flow. On the other hand, it is having negative effects on the main
contractors as they have to either file their defense or issue the payment within 20days.
Provisions for Withdrawal of Claims
Unlike the original Act, the Amendment Act has provisions where the claimant can withdraw the
claim before any appointment for the adjudicator has been made. Section 17 provides that the
claimant may remove the application before the appointment of the adjudicator or before the
adjudicator makes a determination in cases where the decision to withdraw came when the
adjudication had already been appointed.35In addition, the Amendment Act under 21(3)(a) has
extended the adjudicators’ time for determination to 10 days.36 This is different from the original act
which only offered 10 business days from the date when the adjudicator informs the parties of the
adjudication process.37
Supreme Court Powers to Quash Adjudicator’s Decision
The added section 32A provides gives powers to the Supreme Court to quahs the adjudicators’
determination only when there is a jurisdiction error as opposed to an error in law.38Under the same
condition, the court allows the Supreme court to set the decision aside as a whole or to only set aside
33 Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd (2018) 4 SGCA.
34 Building and Construction Industry Security of Payment Amendment Act 2018 No 78.
35 Ibid.
36 Ibid.
37 Building and Construction Industry Security of Payment Act (BCISPA) 1999.
38 Building and Construction Industry Security of Payment Amendment Act 2018 No 78.
Student Name Student ID

the part that was a result of jurisdiction error. This provision is in accordance with the High Court of
Australia decision where it ruled that in even though the NSW Supreme Court can grant relief on
matters of jurisdictional error resulting from an adjudicator’s determination, the Act does not allow
the supreme court to quash the determination on an error of law.39To the subcontractor, this saves the
litigation time and protecting them from suffering the repercussion of the errors in law. For instance,
in the Probuild Case, the High Court saved Shades from liquidation.40
Appointment of Investigator
Under the new amendment Part 3A, an investigator should be appointed together with the
establishment of frameworks for enforcement of the compliance with principles of the Act and those
for fair trading practices.41This is helpful to subcontractors as the legal frameworks for the
enforcement of the rules would oversee justice in the construction industry.
Conclusion
The Amendment Act will start applying to all construction contracts that are made after 21st
October 2019 and will not apply to any ongoing contract made before then. It is from this time when
the industry will see robust investigations and enforcement legal principles which will be modeled
from the powers provided by the Act. Significantly, participants in the construction industry need to
inform themselves about the new changes. This is because the changes will come with more liabilities
alongside more exposure of those people engaged in unfair practices.
39 Maxcon Constructions Pty Ltd v Vadasz (2018) 5 HCA; Probuild Constructions (Aust) Pty Ltd v Shade
Systems Pty Ltd (2018) 4 HCA.
40 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 4 HCA.
41 Building and Construction Industry Security of Payment Amendment Act 2018 No 78.
Student Name Student ID

References
Bailey, Julian, Construction Law. (Taylor and Francis, 2014)
Brand, Michael C and Philip Davenport, ‘Adjudication in Australia: An Analysis of the Amendments
Introduced by the Building and Construction Industry Security of Payment Amendment Act 2010
(NSW)’ (2012) 4(3) International Journal of Law in the Built Environment 189
Burr, Andrew, International Contractual and Statutory Adjudication (2017)
<http://www.myilibrary.com?id=1005307>
Commonwealth of Australia, Insolvency in the Australian Construction Industry: ‘I Just Want to Be
Paid’ (2015) <https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/
Insolvency_construction/Report/>
Murray, John, Review of Security of Payment Laws: Building Trust and Harmony (Department of Jobs
and Small Business, 2017)
NSW Government, Department of and NSW Finance & Services, ‘Building and Construction
Industry Security of Payment Act 1999 Adjudication Activity in New South Wales ANNUAL
REPORT 2011/12’ (2012) <https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0010/371287/
Adjudication_annual_report_2011_2012.pdf>
Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd (2018) 4 SGCA
Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & Anor (2003) 394 NSWCA
Façade Treatment Engineering Pty Ltd (In Liq) v Brookfield Multiplex Constructions Pty Ltd (2016)
247 VSCA
Maxcon Constructions Pty Ltd v Vadasz (2018) 5 HCA
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 4 HCA
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liquidation) (2019) 11 NSWCA
Southern Han Breakfast Point Pty Limited (in liq) v Lewence Construction Pty Limited (2016) 5 HCA
Building and Construction Industry Security of Payment Act (BCISPA) 1999
Building and Construction Industry Security of Payment Amendment Act 2018 No 78
Housing Grants, Construction and Regeneration Act 1996 (UK)
Student Name Student ID