Northern Territory Second Reading Speeches

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CONSTRUCTION CONTRACTS (SECURITY OF PAYMENTS) BILL 2004


Bill presented and read a first time.

Dr TOYNE (Justice and Attorney-General): Mr Deputy Speaker, I move that the bill be now read a second time.

The bill is part of a package of reforms that this government is making to the building industry. A discussion paper was published in August 2002 which drew on recommendations for reform made by the Western Australian task force report on security of payments for Western Australian building and construction industry. Copies of the discussion paper were also sent to professional bodies, individuals, and companies who have participated in the government’s examination of the construction and procurement issues. Submission were received from several bodies and, subsequently, a construction industry reference group was established to consider contractors’ payments issues, together with a number of other issues of concern to the construction industry. That reference groups is comprised of representatives from the Territory Construction Association, Construction Accreditation Limited, the Construction Forestry, Mining and Energy Union, builders, the Australian Institute of Building for Surveyors, the Housing Industry Association, and the Civil Contractors Association. Additionally, it is supported by government officers from the Office of Commissioner of Public Employment; the Department of Justice; the Department of Infrastructure, Planning and Environment; the Department of Employment, Education and Training; and the Department of Business, Industry and Resource Development; and a member of the Building Practitioners Board and Building Appeals Board.

The bill is modelled on Western Australia’s Construction and Contracts Act 2004. The differences between the Northern Territory bill and the Western Australian legislation reflect different administrative arrangements in place in the Territory, and address the issues raised by the construction industry representatives over the past few months, and in the submission made by the Law Society Northern Territory and others in response to the 2002 discussion paper.

The result is the repeal of the Workmen’s Liens Act, a South Australian act which dates back to 1893, and its replacement by this legislation, which will promote good payment practices in the building and construction industry. It does this by prohibiting provisions in contracts that slow, or halt the movement, of funds through the contracting chain. It will also help speed up the movement of funds by providing a rapid, and cost-effective adjudication process, for payment disputes. The building and construction industry is vital to the Territory’s economy. The failure to pay at any stage in the contracting chain can have disastrous effects for those further down the chain waiting payment.

Until now, their only recourse was to register a lien against the title to land upon which the construction works were carried out, or to which materials were supplied in respect of those works, and then to litigate. The time limits and technical requirements of the Workmen’s Liens Act often meant that contractors lost their right to have a lien registered against the title. It also meant that titles would be encumbered by liens when disputes proceeded slowly through the courts. Sometimes the owner of the land would only be a spectator in a dispute between a contractor and a sub-contractor. Whilst the registration of the lien may have given some security for payment, it did little to speed up the payment process.

The bill, subject to exceptions contained in the bill, applies to all contracts for construction work and related services. It also covers contracts for the provision of related professional services, and for the supply of goods and materials, plant and equipment to construction sites. The bill does not cover drilling work carried out for the purpose of discovering or extracting oil or natural gas, or mineral bearing substances. It also does not cover the construction of shafts, pits, or quarries for the purpose of discovering or extracting minerals. However, it does cover other construction work which may be carried out in conjunction with mining activities. In this regard, the Northern Territory’s approach differs from that taken in Western Australia.

If need be, regulations can be used to clarify a role to the scope of the bill should any uncertainty arise during the course of its operation, or should it be decided in the future to extend or reduce the scope of its operation. The legislation supports privacy of contract between the parties. A party commissioned construction work must pay for the work. The obligation to pay cannot be made contingent upon the party with that obligation being paid first under some separate contract. The legislation prohibits pay, if paid, or pay when paid clauses in construction contracts. Apart from prohibiting these particular practices, the bill does not unduly restrict the normal commercial operation of the industry. The parties to a construction contract will continue to be free to set the range and actual terms, so long as they put those terms in writing and do not include these prohibited terms.

Where construction contracts are unwritten, the bill will imply various provisions that the government and industry consider are fair and reasonable with various types of parties. These provisions deal with payment terms and the clarification of the rights of the parties to deal with unfixed materials when one of those parties becomes insolvent during the course of the contract. When a party to a construction contract believes it is not being paid in accordance with the contract, the bill will provide a rapid adjudication process. It will operate in conjunction with any other legal or contractual remedy available to the parties. The adjudication process will allow an experienced and independent adjudicator to review the claim and, when satisfied that some payment is due, make a binding determination that money be paid. The primary objective of the process is to keep money flowing down the contracting chain by forcing timely payment, and sidelining protracted or complex disputes.

The process is kept simply and will therefore be cheap and accessible, even for small claims. If a party is not satisfied with the adjudication process, it retains its full rights to go to a court, or use any other dispute resolution mechanism available under the contract. Pending any such action, the determination of the adjudicator stands, unless an application is made to the local court for a review of the determination and the court exercises its discretion to order stay of the implementation of the determination pending the outcome of the review.

The aim is to ensure that court processes are not used to destroy the efficacy of the process for speedy adjudication outside the court system. The effectiveness of the adjudication process will depend on ready access to capable adjudicators. To achieve this, adjudicators will be registered by a Construction Contracts Registrar appointed under this bill to ensure that adjudicators have the necessary expertise and are independent.

The government notes the views of the Law Society that there may be a limited number of such experts in the Northern Territory. However, the government is confident that the market for professional services will prevail to provide the services as needed.

The parties to a construction contract may agree at the outset who they want as their adjudicator if a dispute arises during the course of a project. If they cannot agree upon an adjudicator, the party wishing to make a claim may go to a prescribed appointor who will appoint a suitable registered adjudicator. Prescribed appointors will typically be heads of professional bodies active in the industry and free of any sectional interests. This reflects a common practice in construction contracts to have an independent dispute arbiter appointed by an independent professional with the knowledge and expertise necessary to identify the issues in the dispute so as to be able to appoint someone with the appropriate expertise to arbitrate or adjudicate that particular dispute.

The Construction Contracts Registrar may be a public servant or may be appointed outside the public service. This bill will not remedy every security payment issue, but it will provide members of the construction industry with simple and effective tools to clarify their rights to be paid and enforce those rights.

I also indicate that it is intended that a bill providing for consequential amendments will be introduced at a subsequent sitting of the Assembly. This bill will deal with matters arising from the repeal of the Workmen’s Liens Act, the most significant such amendment being that of re enacting some of the general provisions regarding liens that are contained in sections 41 and 42 of the Workmen’s Liens Act.

Madam Speaker, I commend the bill to honourable members.

Debate adjourned.

 

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