More changes ahead for security of payment?

In December 2014 former Judge Alan Moss was commissioned to review and recommend changes to the South Australian security of payment legislation (the SA SOP Act). The review was completed in March 2015.

The Moss Review is of interest to us here in the ACT because the SA SOP Act was introduced at roughly the same time as ours and, like ours, it was based on what the NSW legislation said at the time. The NSW legislation has been amended twice since, but both the ACT and SA still have their original Acts.

SA is the fourth state to undertake a review of the operation of their security of payment legislation. Here in the ACT we are still waiting.

Moss Review recommends abolishing ANAs

It will not be a surprise to read that the Moss Review suggested the SA SOP Act’s process, in particular the operation of Authorised Nominating Authorities (ANAs), was perceived to be biased in favour of the claimant, and that this perception led contractors to frequently challenge the adjudication process in courts.

Currently under the SA SOP Act the Minister can appoint an organisation to be an ANA, and the ANA then nominates the individual adjudicator. Both the ANA and adjudicator may charge a fee. This is the same process as under the ACT legislation.

ANAs are generally commercial organisations operating for a profit. Currently there are five ANAs in the ACT (SA has seven). The claimant chooses which of the authorised ANAs it will use for the adjudication. There is therefore a commercial incentive for an ANA to be perceived as ‘claimant friendly’. Whether any ANA is in fact nominating adjudicators who produce ‘claimant friendly’ decisions is debatable. However the Collins Review in NSW, the Wallace Review in Qld and now the Moss Review in SA have all identified the perception of bias to be a major flaw in the east-coast adjudication system.

The main recommendation from the Moss Review was that existing ANA authority be revoked, and that the Small Business Commissioner should be appointed as the sole ANA. This move would mirror the step taken by Qld earlier this year to change the legislation so that all adjudicators under the Qld security of payment legislation are now appointed by the Queensland Building and Construction Commissioner. This amendment was specifically introduced in an attempt to restore faith to users of the adjudication system that adjudicators are impartial and independent.

Moss Review also recommends differentiating between simple and complex claims

Another issue identified by the Moss Review was the lack of a distinction between simple and complex claims.

The review recognised that while the ‘quick and dirty’ adjudication process was reasonable for small and simple claims it was absurd to apply it to large and complex claims. It suggested that a clear distinction between simple and complex matters should be made and this would allow adjudicators to extend time limits for determination of complex matters. A move in this direction would be similar to the changes implemented in Qld, where the legislation now recognises that complex claims need to be treated differently to simple claims.

Will any change occur?

It is unclear if and when SA will actually amend the legislation. Indeed the review expressly states that SA needed changes, but now was not the correct time to introduce these changes. Certainly no changes have yet been foreshadowed here in the ACT.

Should the ACT make similar changes?

If the SA legislation is amended, Tasmania and the ACT will be the only jurisdictions retaining the original ‘east-coast model’. In our view, the ACT Government needs to urgently conduct a comprehensive review to consider whether we should follow the reforms made by Qld or NSW, or adopt some combination of the two. Of course, unless and until security of payment is dealt with at a national level, it is going to remain technically complex and a breeding ground for disputes.

If you would like to know more…

The Construction Project Delivery / Dispute Resolution team at Meyer Vandenberg specialises in security of payment disputes. If you have any questions about the recent reforms in NSW or QLD, or the Moss Review, or you would just like to know more about how the ACT legislation operates, feel free to contact us.

For more information contact the Construction Project Delivery / Dispute Resolution Team:

Alisa Taylor — Partner — Project Delivery / Dispute Resolution
(02) 6279 4388