Proposed Legislation for Security for Payment

Not getting paid by main contractors is a recurring problem for sub-contractors in Hong Kong. The report "Construct for Excellence", prepared by the Construction Industry Review Committee (commonly known as the Tang Report), identified the problem and said that there was "much room for improvement in the area of security for payment". The Construction Industry Council commissioned a survey on the problem and found that it is indeed serious in Hong Kong and the Government is preparing a consultation paper to be published this year on the legislation to introduce measures to assist sub-contractors to secure payment from main contractors. It is anticipated that the bill will be put to the Legislative Council in 2015 or 2016.

Whilst it is not clear what will be proposed by the Government, it is generally expected that the following measures will be put forward, judging by other jurisdictions, such as the UK, Australia, New Zealand, Singapore and Malaysia that have security for payment legislation in place:-

1. prohibit "pay when paid" or "pay if paid" provisions in sub-contracts;
2. give statutory rights to sub-contractors to suspend work for non-payment;
3. require main contractors to give prior notice before withholding payment; and
4. introduce statutory regime for adjudication of payment disputes.

"Pay when paid/pay if paid" provisions have been troubling the construction industry for many years, as we have reported in an article above. It is hoped that after the passing of the security for payment legislation, this question will go away or at least be alleviated and the energy of the parties can be better spent on completing their construction projects.

Key Contacts

Kwok Kit (KK) Cheung

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9427