This article continues our series on motor accident compensation in NSW. You can read about the history of motor accident compensation in Part 1 found here.
The Motor Accidents Compensation Act 1999 (MAC Act) came into force on 5 October 1999. In addition to promoting competition in CTP premium setting, the legislative changes were designed to encourage early and appropriate treatment and rehabilitation for those injured in a motor accident. The Act aimed to make more appropriate provision for the future needs of those with ongoing disability and encourage the early resolution of claims.
There are many outstanding claims under the MAC Act, which has proven to have a very long tail. There are even some new claims being made to this day.
Similar reforms to motor accident compensation have been made in all Australian jurisdictions, with the exception of the ACT, where unmodified common law applies. That scheme is underwritten solely by NRMA and purportedly operates very well.
There have been a number of changes to the scheme since the introduction of the MAC Act, which provide greater access to benefits for injured people. Some of the main features of the scheme are listed below.
The Accident Notification Form (ANF) was introduced to provide early access to treatment and rehabilitation for those injured in a motor vehicle accident.
When first introduced in 1999:
Reforms in 2007 increased ANF benefits to:
Further reforms in April 2010 expanded ANF access to:
To encourage early resolution:
If the claim cannot be resolved, the matter may be referred to the Claims Assessment and Resolution Service (CARS) for assessment.
The scheme established CARS as an independent claims assessment and resolution service to reduce adversarial litigation under the previous system.
CARS features include:
Once exemption is granted by the Principal Claims Assessor (PCA), court proceedings may commence.
CARS procedures emphasise:
Many CARS Assessors came through the former Philadelphia Arbitration Scheme, which similarly diverted civil claims from complex court processes.
While courts operate under an adversarial common law system, CARS uses an inquisitorial model in which the Assessor controls the hearing, subject to fair hearing and due process requirements.
Under the Motor Accidents Injuries Act 2017 (MAIA), Assessors determine a broader range of procedural matters known as:
These are set out in Schedule 2 to the MAIA.
The Medical Assessment Service (MAS) determines disputes concerning:
Assessments are conducted by medical experts with specialised credentials. Given the complexity of MAS, further detail will be provided separately.
The MAC Act replaced a subjective test for non-economic loss with a threshold requiring:
This threshold:
An innocent victim of a motor accident is entitled to damages for non-economic loss if WPI exceeds 10%, as agreed or determined by MAS.
Key entitlements include:
Awards are reduced to reflect contributory negligence.
Read more in Part 3 of this series, “Procedural Requirements Under the MAC Act.”
If you are looking for a team of lawyers that can help with Advocacy, Equity, and Statutory Compensation, contact us.
My aim in this series of articles is to give you a practical understanding of Western Australia’s motor injury insurance framework as it operates today, particularly in cases involving incapable persons under management. This article is necessarily an overview and does not delve into case law detail. Any comments are made in my private capacity.
Western Australia’s system is different from the eastern states. It is administered by the Insurance Commission of Western Australia (ICWA) and governed primarily by the Motor Vehicle (Third Party Insurance) Act 1943 (WA) and the Motor Vehicle (Catastrophic Injuries) Act 2016 (WA).
Before compulsory insurance, injured road users in WA were required to establish negligence and seek compensation directly from the at-fault driver. As elsewhere:
WA introduced compulsory third-party bodily injury insurance in 1943, one of the earliest statutory schemes in Australia. From the outset, ICWA was designated the sole insurer — a structure that remains today.
Post-war Western Australia experienced rapid growth in motor vehicle use, long-distance travel, and heavy industry. More vehicles meant more serious crashes and higher claim numbers.
By the 1960s, remote-area crashes and the unique geography of WA presented additional challenges, including:
These realities placed pressure on the scheme and triggered repeated reviews.
Throughout the 1970s and 1980s, reforms sought to stabilise premiums by:
As in NSW, high inflation and increasing legal costs contributed to volatility in claims and premiums.
For decades, WA was the only Australian jurisdiction without no-fault cover for catastrophic motor vehicle injuries.
This changed in 2016 with the introduction of the Motor Vehicle (Catastrophic Injuries) Act 2016, extending lifetime treatment, care, and support to catastrophically injured people regardless of fault.
This reform fundamentally reshaped WA’s system, creating:
Western Australia now operates a dual-pathway system:
The structure aims to balance affordability with strong statutory protection for those with severe, life-changing injuries.
Part 2 of this series, “The Modern Scheme,” will provide a detailed overview of WA’s current compensation framework.
If you require assistance with advocacy, statutory entitlements, or claims involving incapable persons, please contact our team.
My aim in this series of articles is to give you a practical understanding of the ACT’s motor accident compensation framework as it currently stands, including considerations when making a claim on behalf of an incapable person under management. This is necessarily an overview, and I will not explore detailed case law. Any comments I make are strictly in my private capacity and not on behalf of the ACT Compulsory Third-Party Regulator.
The ACT has undergone significant transformation of its motor accident compensation framework since the introduction of compulsory insurance in the 1970s. The current scheme is governed by the Road Transport (Third-Party Insurance) Act 2008 (ACT) and the Motor Accident Injuries Act 2019 (ACT).
Prior to mandatory CTP cover, injured road users in the ACT relied entirely on common law:
As motor vehicle use grew in the 1960s and 1970s, the ACT followed other Australian jurisdictions by introducing compulsory third-party personal injury insurance, originally administered by private insurers and later heavily regulated by government.
By the 1980s and 1990s, several pressures emerged:
These concerns set the stage for ongoing restructuring of the ACT CTP environment.
Throughout the late 1980s and 1990s, reforms focused on:
As in NSW, the combination of inflation, inconsistent awards, and perceived abuse of the system led to widespread political and legal scrutiny.
The 2008 Act marked a significant overhaul of the ACT’s CTP landscape.
Key features included:
Despite these reforms, criticism continued regarding access to compensation and affordability.
In response to sustained concerns, the Motor Accident Injuries Act 2019 (ACT) introduced:
The 2019 reforms aligned the ACT more closely with modern hybrid schemes in other jurisdictions.
The ACT’s present CTP structure combines:
Part 2 of this series, “The Modern Scheme,” will examine these components in detail.
For advice relating to advocacy, statutory compensation, and claims for incapable persons, please contact our team.
My aim in this series of articles is to give you a practical understanding of Queensland’s motor accident compensation scheme as it exists today, with particular reference to what is required when considering or making a claim on behalf of an incapable person under management. As this is necessarily an overview, I will not descend into case law detail. Any comments I make are in my private capacity and not on behalf of the Motor Accident Insurance Commission (MAIC) or the Nominal Defendant.
Compulsory third-party (CTP) insurance in Queensland has been reshaped several times since its introduction in the 1930s. The legislation that currently applies is the Motor Accident Insurance Act 1994 (Qld) (MAI Act).
Before compulsory insurance in Queensland, all personal injury rights were governed by common law:
To address these injustices and the growing rate of motor vehicle use, Queensland introduced mandatory third-party injury insurance in 1936, administered initially by the State Government Insurance Office (SGIO). The aim was simple: protect injured road users and prevent financial ruin for motorists.
After World War II, motor vehicles became more affordable, and road usage increased sharply. Serious injuries and fatalities rose proportionally, placing pressure on private insurers and the SGIO.
By the 1960s and 1970s, concerns emerged about inconsistencies between workers’ compensation and motor accident compensation systems. Rising claims costs, inflation, and inconsistent judicial awards led to widespread calls for regulatory reform to stabilise the scheme.
The 1970s and early 1980s saw several incremental amendments aimed at:
These reforms had mixed success. Fraudulent and exaggerated claims became a pressing concern, with multiple claimants often arising from comparatively minor collisions. As in NSW, there was no shortage of work for personal injury lawyers at the time.
The MAI Act 1994 fundamentally re-organised Queensland’s CTP landscape.
Key features included:
establishment of the Motor Accident Insurance Commission (MAIC)
The MAI Act preserved the right to common law damages but introduced significant structure and oversight to limit volatility and protect affordability.
Throughout the late 1990s and early 2000s, premiums were stable and comparatively low due to:
However, by the mid-2000s, increasing treatment and care expenses, rising serious-injury claims, and ongoing fraud concerns placed upward pressure on premiums. Incremental legislative adjustments attempted to balance affordability for motorists with adequate compensation for the seriously injured.
Today’s Queensland CTP scheme balances:
Queensland remains a hybrid fault-based scheme, but with robust statutory controls and pre-court processes to improve efficiency and reduce disputes.
Part 2 of this series, “The Modern Scheme,” will explore Queensland’s system in more detail.
If you require assistance with advocacy, statutory compensation, or claims involving incapable persons, contact our team.
My aim in this series of articles is to give you a practical understanding of the motor accident compensation scheme as it is now, with particular reference to what is necessary in considering and making a claim, on behalf of an incapable person under management. As this is necessarily an overview, I won’t descend into the detail of case law. Any comments I make necessarily are in my private capacity and not as a Claims Assessor of the Dispute Resolution Service of the State Insurance Regulatory Authority.
Compulsory third party (CTP) insurance in NSW has been re-shaped many times since it was first introduced in 1942. The legislation that currently applies is the Motor Accidents Compensation Act 1999 (MAC Act) and the Motor Accidents Injuries Act 2017 (MAIA).
Early history: Why Have a CTP Scheme
In considering the scheme as it is now, it might be helpful to briefly describe the history and development of the scheme since its inception almost 80 years ago.
The Motor Vehicles (Third Party Insurance) Act 1942 introduced the first CTP personal injury insurance scheme to NSW.
Before this Act, all personal injury entitlements in NSW were determined by common law:
• An injured person had to establish the legal negligence of the ‘at fault’ driver to receive compensation;
• The injured person then recovered their personal injury costs directly from the at-fault driver. This often-had devastating financial consequences for an at-fault driver without insurance; and
• If the at-fault driver did not have adequate financial resources, the injured person would not receive compensation.
The Changing World
After World War II, cars became more affordable and public road use increased rapidly. The increase in the number and severity of motor vehicle accidents and personal injuries in the first decade of compulsory cover resulted in a 370% growth in policies.
By the early 1950s, the media had focused on the disparity between compensation for personal injuries resulting from a motor vehicle accident and those arising in the workplace. Similar criticisms are made today. Convergence can be expected with the announced intention to establish a Compensation Tribunal which will combine the functions of the State Insurance Regulatory Authority and the Workers Compensation Commission (WCC). That process is underway and is being overseen by the president of the WCC.
Early Attempts to Contain Costs
In the mid-1960s, the scheme was reformed by removing juries and having all matters heard by a judge.
In the 1970s, compulsory personal injury insurance was back on the political agenda due to high inflation, which significantly increased the cost of policies (indexed at the time). The Government Insurance Office (GIO) was the sole underwriter.
In 1984, the first legislative attempt to directly limit claims costs, including limits on damages, was made under the Motor Vehicles (Third Party Insurance) Amendment Act 1984. However, the legislative changes did not control the rising cost of policies, which not only reflected increases in the amount of awards for damages, but also the increasing incidence of fraud. It was not uncommon to have multiple claims arising from a 2-car collision. They were bountiful days for personal injury lawyers. I don’t mean to imply that some lawyers aided and abetted fraudsters. There simply was a lot of work available.
TransCover
TransCover was a fault-based scheme introduced in 1987 under the Transport Accidents Compensation Act 1987, administered by the GIO. It was a radical departure from the previous common law scheme as it set statutory benefits for pain and suffering, and medical expenses, as well as capping weekly economic loss benefits.
TransCover was introduced in tandem with Workcover in the worker’s compensation space by the Unsworth Labor Government. To say that the changes were opposed by personal injury lawyers, particularly the Labor lawyers, is an under-statement. The Law Society and Bar Association successfully lobbied the newly-elected Greiner Coalition Government which scrapped Transcover (to much lawyerly rejoicing) and introduced the Green Slip scheme.
The Green Slip Scheme
The introduction of the Motor Accidents Act 1988 restored the right to bring common law actions for damages, while introducing some restrictions, like indexed caps on general damages and exclusion of general damages for small claims. The Act provided for the payment of treatment and rehabilitation expenses as they were incurred by the injured person. There are no outstanding claims under the 1988 Act.
The insurance policies were called Green Slips.
The Act also re-opened the market to private insurers. Fixed premium rates resulted in a very profitable start for insurers, with an average rate of return of nearly 90% in 1991. Green Slips policies were deregulated at the end of 1991 and prices quickly plummeted – reaching a low of $199 for good risks in 1993- as insurers competed for market share.
However, as prices dropped, the cost of claims was rising. By 1994 insurers were losing money and Green Slip prices began to rise. By 1995 Green Slips were nearly double the lows of the early 1990s.
The 1988 Act was amended by the Motor Accidents Amendment Act 1995 in an effort to slow the rise in the costs of Green Slips. The Act reduced access to non-economic loss (pain and suffering) benefits for minor claims. It also limited access to non-economic loss to those whose ability to lead a normal life had been, or was likely to be, significantly impaired for a continuous period of not less than 12 months. These changes were reflected in similar restrictions introduced by the Civil Liability Act 2002 in relation to awards of damages in civil claims generally.
While the cost of claims fell by 16% in 1996, the success of the 1995 amendments was short-lived. The cost of pre-1995 claims (the long tail of the scheme) continued to grow.
Read more about Motor Accident Compensation in NSW in Part 2 of the series, “The Modern Scheme”, available here.
If you are looking for a team of lawyers that can help with Advocacy, Equity, and Statutory Compensation. Contact us.
A recent matter before the Supreme Court of Queensland Court of Appeal has provided clarity on the establishment of a s588FG(2) Corporations Act 2001 (Cth) defence to an unfair preference claims.
The topical judgment in Queensland Quarry Group Pty Ltd (In Liquidation) & Anor v Cosgrove [2019] QCA 220 (the Case) has firmly placed the onus of proof on a creditor to demonstrate that there were insufficient facts known to the creditor to create suspicion of insolvency.
The Facts in the Case
Queensland Quarry Group Pty Ltd (In Liquidation) (the Company) and the Defendant entered into a joint venture to quarry and develop land that was owned by the Defendant, in his capacity as trustee of a trust. The Defendant and the Company entered into a lease agreement but eventually, the Company defaulted on its obligations and became indebted to the Defendant under the lease agreement.
During the period December 2013 to August 2014, the Defendant was involved in winding up applications against the Company to recover funds owed to the Defendant by the Company under the lease agreement. A settlement was reached but subsequently broke down and no agreed payments were executed.
In September 2014, the Defendant issued a statutory demand to the Company which was not complied with. Subsequently, the Defendant applied to wind up the Company in October 2014. Prior to the hearing for the winding up application a settlement was reached, and payments were made in the amounts of $45,000, $16,250 and $50,000. The winding up application was discontinued.
The Company was eventually wound up following the issuing of a separate statutory demand and subsequent winding up application. The liquidators of the Company, during the course of their investigation, identified the above payments to the Defendant to be preferential and sought to recover the funds as unfair preference payments.
The s588FG(2) Defence
An unfair preference payment is a voidable transaction under s588FE(2A)(a)(i) and s588FF(1) authorizes the Court to make an order to void the transaction(s) in question.
The defence made out by the Defendant under s588FG(2) precluded the Court from making an order where the person to whom a transaction was in favour of; became a party to the transaction in good faith, had no reasonable grounds to suspect that the company was insolvent at that time and any reasonable person in the person’s circumstances would have reached the same conclusion.
On appeal, the Court plainly stated, “ultimately, what is required to be shown to establish the defence…is that there were ‘no reasonable grounds for suspecting’ insolvency.” Further, the question that must be answered in the affirmative is whether, “the matters appreciated by the creditor were insufficient to induce a suspicion of insolvency.”
The Decision by the Courts
At trial before the Queensland Supreme Court, the payments were admitted to be voidable transactions under s588FE(2A)(a)(i) but the Defendant successfully made out a defence under s588FG(2).
The appeal by the Company and the Liquidator was allowed by the Court of Appeal and the trial judge’s decision that a defence had been established was overturned.
The Court assessed the objective facts known to the creditor prior to the transaction in question being executed between the Company and the Defendant. The Court recognized that the original lease agreement that the Company defaulted on and the settlement discussions collapsing all plainly supported a reasonable suspicion that the Company was insolvent. More convincingly, the fact that the Defendant made a winding up application against the Company inherently spoke to a belief on the Defendant’s behalf that the Company was or would become insolvent.
Lessons from the Case
In establishing the s588FG(2) defence, the trial judge placed more emphasis on the good faith and valuable consideration requirements which formed the foundation of how the Defendant successful founded the defence. On trial, however, it became apparent that the question of whether there were “reasonable grounds for suspecting insolvency” was not to be dismissed as procedural, but instead to be treated as almost determinative.
The relevant legislation is comprehensive and with the decision of this recent appeal, the indicia for establishing a defence are not only clearer, but their comparative weighting reflects a stance which is not sympathetic to ignorance or careless business.
Importantly, businesses should remain cautious and vigilant in their dealings with potentially insolvent companies. The courts have shown little appetite to reward ignorance or incompetency in business dealings.
With the onus of proof now sitting on recipients of unfair preferential payment to demonstrate that on the knowledge at hand, is was insufficient to develop suspicion of insolvency, business owners/directors should be on alert to protect their business from similar claims by liquidators of companies. Conversely, liquidators of companies with apparent unfair preference payments are aided by the courts willingness to impose a reasonable person test, making the recovery of potential unfair preference payments far more accessible.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
Are you thinking of buying a unit in Canberra?
If you intend to live in your unit or rent it out to tenants, you need to know what the place is like to live in, how it’s being managed and whether or not your neighbours get along. If a property is unpleasant for an owner it’s likely an investor will have problems retaining tenants. You’ll also want to know where the property is today and where it might be in 5-25 years’ time. The last thing you want is to foot a major damage bill for leaky pipes etc.
A badly managed body corporate can affect the re-sale value of your property, blow out your budget and your net rental return. Excessive strata management costs also have the potential to affect your ability to service your mortgage. At best, a body corporate report can reassure you that the scheme you’re buying into is a nice place to live with well-maintained amenities. At worst, it may uncover fiscal mismanagement, disputes between owners, high levies or unresolved legal issues.
What to look out for
• Is the property adequately insured?
• Is the complex financially well managed (consider age of the building, size of sinking fund, etc.)?
• Does the building have any defects? How are they being addressed?
• Does the complex meet council and safety regulations?
• Is there any evidence of legal action or public liability claims (e.g. between strata management and builders)?
• Is there any history of disputes (e.g. between owners and strata management)?
• Are there any outstanding invoices or building works that could result in a special levy?
• What is the future of the building, is it clear?
• Is the complex and the land it’s built on structurally sound?
To obtain further advice on purchasing property, please contact our property law specialists team.
The Treasury Law Amendment (Combating Illegal Phoenixing) Bill 2019 (the Bill), after initially being introduced in February 2019, has now re-surfaced.
In its current form, the Bill is slated as a countermeasure to increasingly common illegal phoenixing activities. It is the position of the Government that illegal phoenixing activities cause serious harm to our economy – being estimated that the direct costs to Australian businesses, employees and governments are between $2.85 and $5.13 billion in years past.
What is Phoenixing?
”Phoenixing” or any similar terms in this context adopts a colloquial meaning – it is not defined in any current Australian legislation. The phrase takes its meaning from the Greek mythological bird – the one that is born again from the ashes of its predecessor. In a business context, phoenixing is essentially the ‘rebirthing’ of an enterprise by transferring one company’s assets to a new entity.
It is essential to understand that phoenixing can be legal, and moreover, for businesses in financial distress, legal phoenix business rescue is a viable option you should speak to an experience legal expert or insolvency practitioner about immediately. Legal phoenixing by a regulated practitioner is also the subject of relevant ASIC and ARITA guidelines. At the core of legal phoenixing is the protection and preservation of business value for valuable and commercial consideration in periods of financial distress. It also takes into consideration the “better off” test and should be considerate of creditor positions rather than seeking to defeat creditor claims.
What is *Illegal* Phoenixing?
Unlike legal phoenix business rescue, illegal phoenixing is often characterised by deceit, fraud and dishonest intentions.The Australian Securities and Investments Commission (ASIC) defines illegal phoenixing as ”a transfer of assets (often below market value) to a new company, and the old company deliberately liquidated with the intention of defeating the interest of creditors (such as the ATO and employees and suppliers).”
In doing so, the first company is commonly rendered asset-less and unable to meet its obligations to creditors (ATO, employees, suppliers, subcontractors, etc) and the new company commonly becomes rich with assets and unencumbered by any pre-existing liabilities.
Phoenixing activities rely on our judicial bodies being reluctant to ”pierce the corporate veil.” The notion of a corporate veil is underpinned by the Legal Entity Doctrine, which recognises an incorporated entity as a separate legal entity from its director(s). The corporate veil refers to the invisible barrier separating a company and its directors/shareholders. As such, piercing the corporate veil refers to the Court’s deciding to hold a corporation’s directors/shareholders personally liable for the corporation’s actions or debts. While it may be argued that the corporate veil enables illegal phoenixing activities, it is essential to remember that the Legal Entity Doctrine is instrumental to the health of our economy as it inherently promotes and protects those that decide to go into business.
Seeking to better define and profile the difference between legal and illegal phoenixing, a Monash Business School research team defined phoenixing in these 5 categories:
1. Legal phoenix: also known as ‘business rescue’, where directors have no intention to defraud creditors, and saving the business (but not the company) is the best course of action for all stakeholders and the economy in the current circumstances.
2. Problematic phoenix: technically legal, where there is no evidence of directors intending to defraud creditors, but the net effect of the phoenixing is not beneficial to creditors or wider society (may involve director/s who have had past business failures).
3. Illegal type 1: where a company was set up with the best intentions, but finds itself in financial difficulty, whether by bad practice or unfortunate circumstances. An intention to defraud creditors is then formed at or immediately before the time of business failure.
4. Illegal type 2: phoenix as a business model, where the company is incorporated and designed for the sole purpose of engaging in personally profitable phoenix activity (i.e. the business was never operated so as to succeed).
5. Complex illegal: phoenix as a business model which also coincides with and occurs alongside more serious crimes perpetrated by the same individuals within the same framework, involving practices such as creating false invoices (e.g. GST fraud), false identities, fictitious transactions, money laundering, visa breaches, and misusing migrant labour
Current Countermeasures for Illegal Phoenixing Activities:
Although there is no offence relating to illegal phoenixing activity, there are some ways in which the existing law prohibits it.
Liquidators of companies that have plausibly engaged in illegal phoenixing activities are able to pursue legal actions against directors and/or their associates for uncommercial transactions, insolvent trading and unreasonable director-related transactions.
ASIC, often on referral of Liquidators, can take action against the director(s) for breaches of duties (namely the duties to act in the interest of the company and to act for a proper purpose).
The ATO may fund a Liquidator to pursue the above legal actions. Importantly, these actions do not help creditors. These actions target the directors and/or associates, rather than return assets/funds to the company in liquidation.
The most aggressive countermeasure has very recently developed through cases such as Yeo v Alpha Racking [2019] FCA 1338, where illegal phoenix companies have been wound up by the Court under the ”just and equitable” clause found in section 651(1)(k) of the Corporations Act 2001 (Cth).
Notably, all these countermeasures are reactive.
Potential Regulations under the Bill:
The Bill intends to combat illegal phoenixing activity by:
1. Introducing new duties for directors to not dispose of assets in a manner that appears to defeat creditor interests;
2. Limiting director resignations to avoid instances where companies are left with no directors and consequently nobody to take action against; and
3. Introducing a broad recovery power for ASIC under which they may order a person to return assets/funds to the company in liquidation for a Liquidator to sell and distribute to the creditors. This power is intended to apply to land and other assets. In circumstances where an asset has been immediately sold by the illegal phoenix company, ASIC may order they pay the company in liquidation a sum equal to the market value of the asset at the time of sale.
The future?
The Bill will most likely be passed in early 2020. Legal phoenixing will remain an accessible and viable possibility for struggling businesses.
With the Bill’s passing, insolvency practitioners can expect more tools in their pursuit of directors of illegal phoenix companies. ASIC’s broad new recovery power will render them a powerful guardian against illegal phoenixing activity.
With the goal of eradicating the practice of illegal phoenixing, the Bill is a strong step in the right direction.
If you have any questions or concerns regarding bankruptcy please contact Chamberlains and talk to one of our reconstruction lawyers today.
A recent decision handed down in the Supreme Court of New South Wales has shed light on new reasons for why a Court may set aside a creditor’s statutory demand that is served upon a company.
Section 459G of the Corporations Act 2001 (Cth) (Act) provides that a company may apply to the Court for an order to set aside a statutory demand that it is served with. Section 459J of the Act further provides that in order to make such an order, the Court must be satisfied that there is a defect in the demand which will cause substantial injustice unless it is set aside OR there is “some other reason” why the demand should be set aside.
In the matter of Nanevski Developments Pty Limited (No 2) [2019] NSWSC 1217, the ground raised by the company to set aside the statutory demand was that the affidavit verifying the statutory demand (which is required pursuant to section 459E of the Act) was sworn two days before the statutory demand was issued. Since this affidavit must be in compliance with the relevant rules, it was a contentious issue whether the deponent of the affidavit needed to swear or affirm that the debt described in the statutory demand is due and payable on the day that the affidavit is sworn or affirmed, in order to properly support and verify the statutory demand.
Justice Rees relied on the principles set out in Wollongong Coal Limited v Gujarat NRE India Pty Limited (2015) 104 ACSR 425 (Wollongong Coal), which confirmed that an affidavit that predates a demand does not or cannot verify that demand, and it is not necessary to point out any substantial injustice in such cases.
In the end, the Court made an order to set aside the statutory demand that was served on the company on the basis that there was “some other reason” for why such an order should be entered against the creditor. This settles that an affidavit verifying a statutory demand must be sworn or affirmed by the deponent during the same time or after the demand was dated. The Court highlighted from Wollongong Coal that while this is “a highly technical point”, it is “nevertheless a good point”.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
The Building and Construction Industry Security of Payment Amendment Act 2018 No 78 (NSW) (Amendment Act) has come into force today, 21 October 2019, bringing with it substantial changes to the Building and Construction Industry (Security of Payment) Act 1999 (NSW) (Act).
Construction contracts entered into on or after this date will be subject to the below reforms. Construction contracts entered into before this date will be subject to the old regime.
Some of the amendments which will have significant impact on the construction industry include:
Payment claims must be endorsed
The Amendment Act once again makes it necessary for claimants to state that a payment claim is made pursuant to the Building & Construction Industry (Security of Payment) Act 1999 (NSW) (new section 13(2)(c)).
For contracts entered into after 21 October 2019, an invoice which does not include the words “This is a payment claim made pursuant to the Building and Construction Industry (Security of Payment) Act 1999 (NSW)” will not be a valid payment claim.
Reference dates are abolished
Reference dates, one of the most heavily litigated aspects of the Act, have been abolished.
For contracts entered into after 21 October 2019, a payment claim may be served on and from the last day of the named month in which the construction work was first carried out and each subsequent named month (new section 13(1A)), or alternatively, if the contract makes provision for an earlier date, then it may be served on and from that date (new section 13(1B)).
Section 8, allowing a person under a construction contract the right to receive a progress payment, is also amended to remove the requirement that a reference date has arisen.
If a construction contract is terminated, a payment claim may be served on and from the date of termination (new section 13(1C)).
Section 13(5) of the Amendment Act also allows contracting parties to serve payment claims more than monthly, or specifically, as provided for in the construction contract.
Owner-occupier contracts are excluded under the Regulations
Residential works are still largely excluded, however it appears that extending the Security of Payment regime to also apply to residential works may be something Parliament will consider in the future. This is because the restriction on the Act applying to residential works has now been placed into the Regulations (which are easier to change) rather than the Act itself.
The Amendment Act deletes section 7(2)(b) of the Act which exempted construction contracts for the carrying out of residential building work within the meaning of the Home Building Act 1989 (NSW). Instead, the Regulations now deal with the definition of an “owner occupier” contract rather than an “exempt residential construction contract”.
An owner occupier construction contract has been defined as a construction contract for the carrying out of residential building work within the meaning of the Home Building Act 1989 (NSW), on such part of any premises as the party for whom the work is carried out resides or proposes to reside in.
This amendment does not change the status-quo as the Act has never applied to residential construction projects where the owner (or Principal) either resides in the property, or intends once construction is complete to reside in the property, however it leaves the door open for the Act to be expanded in the future.
Payment times under subcontracts are shortened
Section 11 (1B)(a) currently provides that a progress payment made under a subcontract become due and payable 30 business days after it is submitted; for contracts entered into after 21 October 2019, the time for payment has been reduced to 20 business days.
Withdrawal of adjudication application
A claimant’s rights surrounding adjudication applications are now part of the legislation, with a new provision section 17A allowing an application to be withdrawn at any time before an adjudicator is appointed, or before they make their determination. However, and critically, if the respondent objects to the withdrawal, and if the adjudicator determines it is in the interest of justice to uphold the objection, the adjudication will proceed. This requires adjudicators to consider the purpose of the legislation, and balance it against both the claimant’s and respondent’s rights in all of the circumstances.
Additional powers of the Court to identify and sever jurisdictional error
The new section 32A of the Amendment Act allows the Supreme Court to sever and void any part of an adjudicator’s determination found to contain jurisdictional error, but leave the balance (to the extent possible) as enforceable.
This has the potential to greatly reduce the number of adjudication determinations set aside by the Supreme Court. Previously, in accordance with the Supreme Court’s decision in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, if a party was able to convince the Supreme Court any part of an adjudication determination was affected by jurisdictional error, the entire determination was unenforceable.
Claimants in liquidation cannot seek relief under the Act
The Amendment Act introduces section 32B, which expressly provides that a corporation in liquidation cannot serve a payment claim under the Act, take action to enforce a payment claim including by way of adjudication, or enforce an adjudication determination (new section 32B(1)).
Similarly, should a corporation enter into liquidation, and an existing adjudication is not finally determined immediately before the day on which it commenced to be in liquidation, the application will be taken to have been withdrawn on that day (new section 32B(2)).
Other notable amendments regarding compliance and penalties
Part 3A of the Amendment Act introduces a raft of investigative, compliance and penalty measures under the Act. Division 3 provides for the power of authorised officers to enter and search premises with or without the authority of a search warrant (however residential premises will require the permission of the occupier), if they believe on reasonable grounds that a requirement under the Act is being contravened.
New section 32E allows for extraterritorial application of notices under the Act, so long as the construction work was carried out in New South Wales, or to related goods and services supplied within New South Wales.
Various penalties are codified for offences under the Act and for contravening compliance requirements. For a corporation, these range from 40 penalty units for failing to comply with a requirement of the Act, to 500 penalty units for providing false or misleading information. Further, directors may commit an offence if a corporation does so under the Act, and that person assisted or conspired to facilitate the offence. These are not insignificant measures.
Of note is also new section 35(4), which creates an offence for failing to provide information required by the regulations to a subcontractor when entering into a subcontract, with a penalty of up to 100 penalty units.
We’re here to help
We at Chamberlains appreciate the difficulties builders, contractors and homeowners alike have been facing in recent times. Should you or your business need some assistance to navigate any legal issues which have arisen during these unprecedent times, please do not hesitate to contact our building and construction law team.