Murray Review: The good, the bad, the unlikely

Payment has long been a major source of dispute for the construction industry and for just shy of 20 years, intervention in the form of security of payment legislation has given contractors an entitlement to recover payments for works carried out under a construction contract. The legislation was intended to strengthen the industry by improving payment practices, ensuring cash flow to contractors and thereby preventing those builders from going belly up. 

Each state and territory government has implemented its own legislation, which can broadly be divided into two approaches – the east coast model and the west coast model. In December 2016, the Federal Government appointed John Murray AM to conduct a review of the various state acts, consult with stakeholders and identify areas of best practice for the construction industry. In May 2018, the final report, “Review of Security of Payment Laws: Building Trust and Harmony” was released (Murray Review). 

The Murray Review makes a number of recommendations, namely that the security of payment legislation across the country be harmonised in line with the east coast model. Further recommendations include:

• introduction of a Regulator with responsibility for the registration and grading of adjudicators, the power to prescribe the form of a payment schedule and additional information, and the publication of annual reports on the operation and effectiveness of the legislation
• removing the Victorian carve-outs regime under which specific claims can be excluded from the operation of the legislation
• broadening the application of the legislation to include the residential housing sector
• abandoning the term ‘reference date’ and instead providing that a payment claim can be made for every named month or more frequently if provided for under the contract, and in the case of termination, enabling a payment claim to be made up to the date of termination.

Introduction to project insurance

Project insurance, sometimes referred to as construction works insurance, is insurance that covers a specific project by reference to the construction contract. Generally, project insurance covers damage to the permanent or temporary works and equipment on the construction site and third party injury or property damage. The policy may be taken out by either the principal or the contractor, and generally covers any subcontractors working on the site. Depending on the construction contract, the policy may be held jointly by the principal, the contractor and any third party, such as the financier of the project.

Authors: Kyle Siebel & Jordan Barling

Upcoming seminar: 21 August 2018

Security of Payment and Insurance: the Murray Review and Project Insurance – do you understand what is covered?

Holding Redlich’s Melbourne Construction and Infrastructure team will provide a wrap-up of the Murray Review into security of payment legislation, followed by a brief introduction to project insurance.

The group will discuss a number of aspects of project insurance, including:

• what project insurance should cover
• what to look for in a project insurance policy
• what is commonly excluded from project insurance
• commercial risk and how the insurance policy interfaces with the construction contract.

You can register for this event here.

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. 

Published by:

Kyle Siebel

Jordan Barling

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