Asia Pacific: Construction law update


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For further information, please contact David Weare, Partner, Fladgate LLP (dweare@fladgate.com)


 

Important construction law changes are being introduced in some Asia Pacific countries which those involved in construction projects in the region must be aware of.  The changes in certain common law jurisdictions provide additional entitlements to certain suppliers within a legislative framework.

In August 2015, the Hong Kong Development Bureau’s consultation closed on the proposed introduction of security of payment legislation in Hong Kong.  The changes are intended to alleviate payment problems in the construction supply chain and include measures prohibiting pay when paid clauses.  It is also proposed to introduce a statutory entitlement to payment periods between applications and payments, but not exceeding 60 calendar days for interim periods or 120 days for final payments.

To deal with payments being delayed by disputes, a right to dispute resolution by adjudication is proposed.  The entitlement would apply to non-payment issues and to disputes about the value of work, services, materials or plant and/or disputes about extensions of time and financial claims under a contract.  Adjudications are proposed to be subject to a 55 working day limit unless otherwise agreed.  A statutory right to suspend work or reduce the rate of progress after either non-payment following an adjudicator’s decision or non-payment of amounts admitted as due is also proposed.

Unlike some other jurisdictions where similar legislation is in place, the proposed entitlements may not apply to all construction contracts but only to public sector contracts and private sector contracts for the construction of new buildings and where the main contract value exceeds HK$5,000,000 (approximately £423,000) for construction contracts and HK$500,000 (approximately £42,000) for professional services and supply contracts.  Details of the final arrangements to be introduced are expected shortly.

Meanwhile in New Zealand, legislation to amend the 2002 Construction Contracts Act received royal assent on 22 October 2015.  The amendments introduce additional entitlements to construction contracts in New Zealand entered into after 1 December 2015.  The changes extend the entitlements in the original legislation into areas of design and engineering work and quantity surveying work and remove the residential construction contract exclusion.  The amendments also introduce new requirements for payment claims and payment schedules, extend the adjudication form of dispute resolution into new areas and introduce changes to the adjudication procedure.

The final part of the Act introduces a new retention regime from 31 March 2017 which requires all retention money to be held on trust.  New South Wales introduced a similar statutory arrangement from 1 May 2015.

These construction law changes reflect a continued trend in countries with a common law tradition for suppliers on construction projects to be given additional entitlements within a legislative framework.

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