Man looking at a progress payment claim while on the phone

Payment Claims in
the Construction Industry

We have previously touched on the new Building Industry Fairness (Security of Payment) Act 2017 (“the BIF Act”) and summarised some of the changes effected by its introduction.  The following article will explore how progress payments are claimed under the new regime.

Making a Payment Claim

Making a Payment Claim (also known as a progress payment) under the BIF Act is one of the ways you can obtain payment for work completed or the provision of goods and services within the building and construction industry in Queensland.  It is a fast-track “pay now, fight later” system designed to minimise the need for Claimants to go to court.

Under the previous regime (the Building and Construction Industry Payments Act 2004 (“BCIPA”)), a Payment Claim was only valid if it was endorsed.  That is, the Payment Claim specifically provided that it was made in accordance with BCIPA.  The new regime removes this requirement, and accordingly, any tax invoice rendered that identifies the works completed and the value of same will constitute a valid Payment Claim.

I’ve received a Payment Claim what do I need to do?

The BIF Act also imposes an obligation on the recipient (known as the Respondent) of a valid Payment Claim to respond to same by issuing a Payment Schedule, unless of course, payment is made in full by the due date.  Essentially, a Payment Schedule will set out how and when the Payment Claim will be paid.  Under the BIF Act, a Respondent is now required to make payment of the debt, or issue a Payment Schedule, within 15 business days of receiving the Payment Claim (or earlier, if specified in the Contract).

What if I fail to comply with a Payment Claim?

Importantly, there are now no second chances to issue a Payment Schedule.  Under the previous regime, a Claimant was required to notify a Respondent of an intention to apply for adjudication by serving them with a Notice of Intention to Apply.  This was essentially a “second chance” for a Respondent to issue a Payment Schedule (or make payment of the debt).  The BIF Act has abolished this requirement, and now a Claimant can make an application for adjudication without notice.

Accordingly, failure to comply with a Payment Claim (either by making payment or issuing a Payment Schedule on time) may have serious consequences, including a fine of up to 100 penalty units (currently $13,055.00).  Further a Claimant may:

  • make an application for adjudication;
  • commence court proceedings (subject to applicable notice requirements); and/or
  • suspend work until three business days after the Payment Claim has been satisfied.

We understand that making or responding to a claim can be confusing and stressful, especially if you are unsure of the timeframes and drafting requirements.  If you need assistance in understanding your rights and obligations under the new regime, one of our friendly, local experts may be able to assist.

Contact us on 07 4963 2000 or via our online contact form.

Dannielle Woodward, Solicitor, Wallace & Wallace Lawyers Mackay

Dannielle Woodward
Solicitor
Litigation & Dispute Resolution

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Important Changes to
the Building Industry

In 2017, the Queensland Parliament passed legislation to reform many aspects of the building and construction industry.  Although the Building Industry Fairness (Security of Payment) Act 2017 (“the BIF Act”) commenced on 10 November 2017, many of the reforms are being commenced in stages.  Importantly, on 17 December 2018, the security of payment provisions commenced, repealing and replacing the Subcontractor’s Charges Act 1974 (“the SCA”) and the Building and Construction Industry Payments Act 2004 (“BCIPA”), “creating a one stop shop” security for payment regime in Queensland.

Although the fundamental concepts of the SCA and BCIPA endure in the BIF Act, there are a number of significant changes.  It is therefore imperative that those involved in the building and construction industry understand those changes and the potential effect on their dealings within the industry.

Payment Claims

Under the previous regime, payment claims were only valid if they specifically provided that they were made pursuant to BCIPA.  The BIF Act, however, removes this requirement.  Accordingly, payment claims will be valid so long as they identify the building and construction work and the value claimed.

Payment Schedules

Previously, payment schedules were generally required to be served within 10 days of receipt of a valid payment claim.  Under the new regime, a payment schedule must be issued within 15 business days of receipt of a payment claim, or by the expiry of the response period set out in the contract (whichever falls first).

Further, there are now serious consequences for non-compliance with payment schedule timeframes.  Under BCIPA, the recipient of a payment claim was afforded a second chance to issue a payment schedule if they failed to comply in the first instance.  There is no such provision in the BIF Act.  Accordingly, failure to comply with a payment claim (either by making payment or issuing a payment schedule on time) has serious consequences, including a fine of up to 100 penalty units ($13,055.00)  Further, a claimant may:

  • commence court proceedings;
  • make an application for adjudication; and/or
  • suspend work until three business days after the payment claim has been satisfied.

Simplified Contractor’s Charges Provisions

Although the fundamental concepts of the SCA have been incorporated into the BIF Act, these provisions have been simplified.  Further, unpaid subcontractors are now permitted to place a charge on payments owed to the debtor by a third party (for related building works).  For example, if Bob is unable to pay James’ invoice of $1,000.00, but Bob is expecting payment of $1,000.00 from Alice, James can place a charge over the funds owed by Alice.

What’s next?

The BIF Act aims to amalgamate and simplify the law relating to payments in the building and construction industry.  To simplify this process, the provisions are being rolled out in stages.  Early next year, further provisions will commence, including:

  • amending the minimum financial requirements for licensees, including greater financial reporting obligations; and
  • extending the requirement for Project Bank Accounts to civil building and construction projects.

If you would like further information about the newly introduced security for payment provisions, or any of the BIF Act provisions and their effect on you, contact one of our local experts today on 07 4963 2000 or via our online contact form.

Dannielle Woodward Solicitor, Wallace & Wallace Lawyers Mackay

Dannielle Woodward
Solicitor
Litigation & Dispute Resolution

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Dream Home
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There has been a substantial increase in insolvency in the building and construction industry, and with the significant pressure placed on builders, there is little surprise. Builders – both sole traders and construction companies – are required to manage sub-contractors, suppliers, home-owners (and their financial institutions) all whilst striving to meet often unattainable deadlines.

So what happens when your builder succumbs to those pressures and building your dream home turns into a nightmare?

Fortunately, assistance may be available under the Queensland Home Warranty Scheme (“QHWS”). The QHWS is essentially an insurance policy a builder is required to take out for all construction work over $3,300.00. The insurance policy can be relied on by the owner in certain circumstances, including where their builder becomes insolvent. In essence, the scheme will pay any shortfall owing above the original contract price to a substitute builder.

By way of example, John has entered into a contract with Dream Home Constructions Pty Ltd for the construction of a new home. The parties agree to the contract price of $395,000.00. John makes regular payments throughout the construction process totalling $200,000.00, however prior to completion Dream Home Constructions Pty Ltd is placed into liquidation. In such circumstances, the QHWS may provide relief. If John’s claim is accepted, the Queensland Building and Construction Commission (“QBCC”) will appoint another builder to complete the work (including remedy of any defects). John will be required to pay the new builder for work up to the value of the original contract (i.e. $195,000.00). Any amounts over the original contract price will be paid by the insurer under the QHWS.

Claims under the QHWS are subject to meeting certain criteria, such as lawfully and properly terminating the building contract. It is therefore recommended that legal advice is sought at the onset of any issues in respect of building contracts, thus ensuring legal rights are protected.

If you are experiencing any issues with your building contract, contact our local, expert team for advice today. We are also able to assist with various other building and construction industry matters, including:

  • Sub-contractors charges under the Building Industry Fairness (Security of Payment) Act 2017;
  • Payment claims under the Building Industry Fairness (Security of Payment) Act 2017;
  • Defective work claims; and
  • Commercial building disputes

Please do not hesitate to contact our office on (07) 4963 2000 or via our online contact form should you have any queries.

Dannielle Woodward Solicitor, Wallace & Wallace Lawyers Mackay

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Solicitor
Dispute Resolution

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