proposed securityof payment legislation … · connection with the construction activities security...
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SCOPE OF APPLICATIONPublic and private sectors
Types of construction contracts
Geographical scope
Written or oral contracts
Hong Kong or foreign laws
Exclusions of small contract value
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PUBLIC AND PRIVATE SECTORSThe proposed SOPL will apply to all constructioncontracts entered into by the Government andspecified public corporations.
The SOPL will apply to sub contractors of any tier inrelation to such contracts.
The SOPL will only apply to private sectorconstruction contracts where the ultimate employeris procuring a new building (excluding maintenanceworks).
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TYPES OF CONSTRUCTION CONTRACTSThe construction contracts include the following types:
Contracts for construction activitiesServices contracts relating to construction activities (e.g.architectural design, quantity surveying and engineeringdesign)Supply contracts for materials, equipment or plant inconnection with the construction activities
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UK NSW WA NZ SGP MALApplicable to contracts forprofessional servicesApplicable to contracts forsupply of materials and plant
GEOGRAPHICAL SCOPEThe proposed SOPL will only apply to constructionactivities carried out within Hong Kong.
Contracts for materials made outside Hong Kong willbe covered if the materials are supplied for theconstruction activities in Hong Kong. Se
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UK NSW WA NZ SGP MALOnly applicable to contractsfor works carried out insidethe home jurisdiction
WRITTEN OR ORAL CONTRACTS &HONG KONG OR FOREIGN LAWS
The proposed SOPL will apply to relevant contractsregardless of
whether they are written, oral, partly written and partlyoral, andwhether they are subject to Hong Kong law or anotherlaw.
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UK NSW WA NZ SGP MALWritten contract onlyWritten or oral contractHong Kong or foreign law
EXCLUSIONS OF SMALL CONTRACTVALUE
The proposed SOPL will not apply to private sectorconstruction contracts unless the original maincontract value exceeds $5M (construction works) or$0.5M (professional services and supply onlycontracts).When the main contract is covered by SOPL, then allsub contracts of any tier will be covered by SOPL,regardless of value.When the main contract is not covered by SOPL, thensub contracts will not be covered by SOPL, regardlessof tier or value.
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PAYMENTMaximum payment periods
Default payment intervals and periods
Statutory Payment claims
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MAXIMUM PAYMENT PERIODSParties are free to agree the payment term and period.
However, such period shall not exceed 60 calendar days forinterim Progress Payments or 120 calendar days for finalProgress Payment.
Any provision purporting to impose longer periods shall beineffective.
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UK NSW WA NZ SGP MALMaximum payment periodwhich parties can agree to apply
50days
35days
No maximum payment period
DEFAULT PAYMENT INTERVALS AND PERIODSIf the parties do not have express agreements on payment terms,the following “default provisions” shall apply:
a) Parties (e.g. contractors) are entitled to claim a Progress Paymentevery calendar month.
b) The value of work is based on any contract rates agreed orotherwise having regard to market rates.
c) Payment is paid within 60 calendar days for interim ProgressPayments or 120 calendar days for final Progress Payments.
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UK NSW WA NZ SGP MALDefault payment intervals 28 days monthly Claims as
work is donemonthly monthly monthly
STATUTORY PAYMENT CLAIMSParties are entitled (but not obliged) to make statutoryPayment Claims in respect of Progress Payments.
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UK NSW WA NZ SGP MALNo express exclusion of anyparticular types of claim
UK NSW WA NZ SGP MALDefault response period 24
daysN/A 14
days28
DaysN/A N/A
If failure to respond:1. Paying the whole amount ofpayment claim2. No set off against amounts due
PAYMENT RESPONSESA party (e.g. developer) receiving a Payment Claim is entitledto serve a Payment Response no later than 30 calendar daysafter receipt of a Payment Claim.
The paying party cannot set off any amount due under aPayment Claim unless relevant details are provided in aPayment Response. Se
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PROHIBITION OF CONDITIONALPAYMENT TERMS
Pay when paid clause
Pay when certified clause
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PAY WHEN PAID CLAUSEProvisions making payment conditional on the payerreceiving payment from a third party (e.g. pay whenpaid clause) shall be ineffective.
Even in the special circumstance of insolvency
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UK NSW WA NZ SGP MALProhibition of “pay when paid”clause“Pay when paid” is not effective incases of insolvency
PAY WHEN CERTIFIED CLAUSEProvisions making payment conditional on theoperation of any other contract or agreement (e.g.pay when certified clause) shall be ineffective.
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UK NSW WA NZ SGP MALProhibition of “pay whencertified” clause
ADJUDICATIONAdjudication up and down the contractual chain
Limitation on scope
Time Limit for commencement
Notice of adjudication and appointment of adjudicator
Time limit for response
Time limit for decision
Adjudicator’s power to extend time for defence
Ambush – disregard submission and resign
Legal costs and adjudicator’s fees and expenses
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ADJUDICATION UP AND DOWN THECONTRACTUAL CHAIN
Both parties to a contract will be entitled to referdisputes to adjudication.
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UK NSW WA NZ SGP MALRight to adjudicate is limited toclaims made up the contractualchain for paymentRight to adjudicate applies to anyclaims made or disputes arisingup or down the contractual chain
LIMITATION ON SCOPEAdjudication is limited to the following disputes:a) The valuation of work and materials (i.e. normal works
done) claimed in a Payment Claim; and/orb) Money claims (i.e. direct loss and exposes) claimed in a
Payment Claim; and/orc) Set offs and deductions (e.g. liquated damages) against
amounts due under Payment Claims.d) The time for performance (i.e. completion date) or
entitlement to extension of the time for performance(i.e. extension of time).
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TIME LIMIT FOR COMMENCEMENTThere is a time limit for commencement ofadjudication of 28 calendar days.
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UK NSW WA NZ SGP MALTime limit for commencement ofan adjudication
28days
28days
28days
No time limit on whenadjudication is commenced
NOTICE OF ADJUDICATION ANDAPPOINTMENT OF ADJUDICATOR
The claiming party will commence adjudication byserving a notice of adjudication, setting out thenature of the dispute and the amount claimed.
The adjudicator is appointedby agreement or by nomination from an agreednominating body or(if none) by HKIAC within 5 working days ofcommencement.
within 5 working days of commencement.
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TIME LIMIT FOR RESPONSEThe claiming party must serve their submissions(together with all supporting evidence) on theresponding party on or before the date ofappointment of the adjudicator.
The responding party has 20 working days fromreceipt of the claiming party’s submissions to respondwith their own submissions.
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UK NSW WA NZ SGP MALTime for responding partyto prepare defence
7days
14days
7days
7days
14days
TIME LIMIT FOR DECISIONThe adjudicator shall reach and publish their decision,with reasons, within 20 working days of receipt of theresponding party’s submissions
extendable by the adjudicator up to 55 working days fromthe date of appointment of the adjudicator, andto in excess of 55 working days if both parties agree.
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UK NSW WA NZ SGP MALOverall adjudication time fromservice of claim to decision
28Days
21Days
28Days
35Days
21Days
119Days
ADJUDICATOR’S POWER TO EXTENDTIME FOR DEFENCE
The adjudicator shall have the power to vary the timefor the responding party to provide their responseprovided that the adjudication can be concludedwithin 55 working days from the appointment date orany agreed extended period. Se
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UK NSW WA NZ SGP MALAdjudicator has power toextend time for defence
AMBUSH – DISREGARD SUBMISSIONThe adjudicator is entitled to disregard anysubmission submitted by the claiming party to theextent that the adjudicator considers the samecomprises submissions
which the responding party was unaware of at the timethe notice of adjudication was served andwhich should reasonably have been served with aPayment Claim or in advance of the notice of adjudicationandwhich cannot fairly be responded to by the respondingparty in the adjudication.
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AMBUSH RESIGNThe adjudicator is entitled to resign if it is not possibleto decide the dispute fairly in the time available(being the maximum time available including anyextended periods agreed by the parties).
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LEGAL COSTSEach party will bear its own legal costs of theadjudication.
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UK NSW WA NZ SGP MALAdjudicator has power toorder one party to pay theother’s legal costsAdjudicator has no suchpower
ADJUDICATOR’S FEES AND EXPENSESThe adjudicator may decide which party pays theadjudicator’s fees and expenses or the proportionspaid by the parties.
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UK NSW WA NZ SGP MALAdjudicator has power toorder one party to pay theadjudicator’s costs andexpensesAdjudicator has no suchpower
ENFORCEMENT OF ADJUDICATOR’SDECISIONS
Adjudicator’s decisions can be enforced in the sameway as judgments of the court and without set off ordeduction.
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