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ARTICLE · 25 MAY 2007

Building And Construction Update

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Security of Payment Act also affects financiers; Security of Payment changes in Victoria

AustraliaReal Estate and Construction

Contents
  • Security of Payment Act also affects financiers
  • Security of Payment changes in Victoria

Security of Payment Act also affects financiers

A recent decision of the Supreme Court of NSW (Over Fifty Mutual Friendly Society Ltd & Anor v Smithies & Ors [2007] NSWSC 291) (OFM decision) demonstrates that financiers who exercise their step-in rights, contained in project finance documents and (acting as the borrower) issue directions to contractors, will not escape the implications of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act).

Section 7(2) of the Act provides that the Act does not apply to a construction contract that forms part of a loan agreement, a contract of guarantee or a contract of insurance under which a recognised financial institution undertakes to lend money or guarantee payment of money or provide an indemnity with respect to construction work.

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