New Draft Security of Payment Act Regulations 2019: Open for Public Consultation

DAVID GLINATSIS

NEW CONSULTATION PAPER

The NSW Government has issued a draft Building and Construction Industry Security of Payment Amendment Regulation 2019¹ (“Draft SOPA Regulations”) which is open for public consultation from 27 May to 21 June 2019.

Amendment Act 2018

On 21 November 2018 the Building and Construction Industry Security of Payment Amendment Bill 2018 (“Amendment Act”)² was passed by Parliament and was assented to on 28 November 2018. The Amendment Act was designed to promote cash flow in the supply chain, increase transparency of payments and provide greater protection to subcontractors (click here to read our article on this Amendment Act).

The Amendment Act has not commenced as yet.

In December 2018 an options paper was released for consultation on the implementation of the Security of Payment Reforms (click here to read our earlier article on this options paper). The options paper proposed a staggered approach for commencing the reforms in the Amendment Act.

The Department of Fair Trading³ has advised that the feedback on the Amendment Act indicated a preference to have a single commencement date for all of the reforms as soon as possible, whilst allowing the industry an appropriate period of time to prepare for commencement of the changes.

Nevertheless the proposed draft SOPA Regulations currently open for consultation are only of the reforms deemed critical to commencing the Act.

Proposed Reforms in these Regulations

The draft SOPA Regulations cover the following limited reforms:-

Exempt owner occupier construction contracts from the operation of the Act

The Amendment Act removed the exemption from the principal act with the intention that it be moved to the Regulations.

Specifying the offences with respect to retention money trust accounts as executive liability offences

Under the Amendment Act directors and people involved in the management of companies will be held responsible for the commission of corporate offences. Click here to read our earlier article in relation to this.

The proposed regulation specifies the offences in relation to retention money trust accounts to which executive liability applies.

Specifying the offences under the Act and Regulation for which penalty notices may be issued and the amount of the penalty payable.

The Amendment Act provides an authorised officer with the ability to issue a penalty infringement notice to a person or corporation where it has contravened the Act or the Regulation. An authorised officer is defined in 32C(1) as:-

“(a) a person employed in the Department of Finance, Services and Innovation who is appointed under this Part as an authorised officer, or

(b) an investigator appointed under section 18 of the Fair Trading Act 1987.”

The intention of this reform is to facilitate the quick resolution of more minor offences committed under the Act and serves as an important enforcement mechanism to bring about behavioural change within the building and construction industry, timely action and reduced legal costs, while achieving the purposes of the Act.

This proposed Regulation sets out a list of the offences subject to penalty infringement notices and the amounts payable.

Next steps in SOPA Reforms

The NSW Government has indicated that the proposed next steps re the Regulations and the broader SOPA reforms are as follows:-

Consultation period re proposed draft Regulations from 27 May to 21 June 2019;
It is anticipated that the amending Regulation will be finalised and published mid-year 2019.
It is proposed that the Amendment Act and amending Regulation will commence three months after the amending Regulation is published.
The Department of Fair Trading is also currently undertaking targeted stakeholder consultation for a Code of Practice for Authorised Nominating Authorities and intend to release a draft for consultation mid-year allowing it to be ready for commencement of the Amendment Act and amending Regulation.
Fair Trading will continue to develop further amendments to the Regulations which were not included in this draft as they were not deemed critical to facilitating commencement of the Amendment Act and intend to release a further draft Regulations later this year.

The draft SOPA Regulations are the next step in the broader proposed reform of the SOPA legislation and it is important that everyone keep abreast of the progress that will be sweeping all of these changes into force in the coming year.

David Glinatsis (Director, Kreisson) and Catherine Lucas (Solicitor).

For more information, contact us at excellence@kreisson.com.au or on 02 8239 6500.

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