Proposed Security of Payment Legislation for Hong Kong’s Construction Industry
- Joseph Chung
In June 2015, the Development Bureau (DEVB) of the Hong Kong Government issued a consultation document on the “Proposed Security of Payment Legislation for the Construction Industry”. In April 2016, following the consultation period (which received some 1116 responses), the DEVB issued a Report, detailing its findings and conclusions, which support the introduction of Security of Payment Legislation (SOPL). The background to the consultation paper and details of the consultation paper itself are outlined in our previous article “Security of Payment Legislation for the Construction Industry proposed in Hong Kong”.
The aim of the SOPL is to help main contractors, sub-contractors, consultants and suppliers receive payments on time for their work and provide a mechanism whereby disputes can be resolved quickly and to bring Hong Kong in line with other common law jurisdictions which already have such legislation to address similar problems, such as the United Kingdom, Australia, New Zealand, Singapore and Malaysia.
The Report concludes that although there was a divergence of views in respect of some aspects of the proposed framework, there was positive support for SOPL and the Government intends to proceed with the legislation. The next step is for the DEVB to finalise the framework for the legislation and prepare a Bill for submission to the Legislative Council.
The Report states that the following key elements of SOPL received particular positive public support:
• SOPL applying to all Government contracts and contracts entered into by specified statutory and/or public bodies and corporations.
• Limiting the coverage of SOPL to contracts relating to construction activities in Hong Kong.
• SOPL applying to contracts for the supply of materials or plant.
• Retaining full freedom for parties to agree when payments can be claimed and the basis of valuation of the same, but limiting the maximum payment periods which can be imposed once a party is entitled to claim.
• Providing a recognised mechanism to ensure those who undertake work or provide services, materials or plant can claim payments and payers can respond to the same.
• Providing “default” payment terms in the event that parties do not make express provision in their contracts as to when payments can be claimed, how they are to be valued and responded to and when amounts due must be paid.