Update on the Construction Contracts Amendment Bill

The Construction Contracts Amendment Bill was referred to Parliament earlier this year. The proposed changes to the Act are intended to apply from 1 November 2013. The main changes are: 

• Removing the distinction between residential and commercial construction contracts; 
• Extending the application of the Act to design, engineering and quantity surveying work; and 
• Allowing for the enforcement of adjudication determinations about rights and obligations of parties to a construction contract. 

Removing the commercial/residential distinction

This is a significant change as it means that contracts between builders and homeowners for construction work will also be subject to the Act’s default provisions for progress payments, suspension of work for non-payment, and enforcement of adjudication proceedings. 

Once the Bill comes in to force, the information sheets explaining, for example, how a payer is to respond to a payment claim, will need to be served on all payers, not just residential occupiers. 

This will simplify things for contractors who carry out both residential and commercial construction work. Commercial contractors will need to update their payment claims so that they are compliant. 

Extending the application of the Act

The Bill proposes that the definition of construction work be extended so that it applies to design, engineering and quantity surveying work. The Bill does not yet define these work types so it may capture a wider group than anticipated. 

The main effect of this change is that the relevant parties will be able to use the payment provisions in the Act to enforce payment of their accounts. They will also be able to continue any pursuit for payment by using the adjudication and enforcement provisions of the Act. However, they may also find themselves on the receiving end of an application for adjudication. 

Enforcement of adjudication determinations

The Act currently provides for the enforcement of adjudication determinations in respect of payments, but it does not provide for the enforcement of determinations regarding the rights and obligations of parties to a construction contract. This is impractical as such determinations are essentially worthless if a party does not comply. 

The inclusion of rights and obligations determinations within the scope of the enforcement provisions is therefore a significant amendment to the Act. Adjudication will become a much more useful and efficient dispute resolution option and may increase its popularity and usage in relation to these types of disputes. 

Conclusion

It is likely that the next step will be an invitation for public submissions in advance of a select committee report. This should occur relatively soon given the proposed 1 November date. 

Overall, the Bill is aimed at increasing the Act’s efficiency and simplifying its procedures. Although there will be some additional work created for commercial contractors at the outset, the proposed changes to the Act are positive and are likely to be broadly welcomed. 

If you would like further information please contact Daniel Shore on 07 958 7477.