Marino Law has extensive experience in a wide variety of building and construction disputes including:
- matters under the Building Industry Fairness (Security of Payment) Act 2017 (Qld);
- matters relating to the Queensland Building and Construction Commission (formerly the Queensland Building Services Authority QBSA);
- disputes relating to the construction of homes;
- disputes relating to the construction of commercial buildings and civil infrastructure;
- disputes relating to variations, extensions of time, retentions, and liquidated damages;
- disputes between subcontractors and principal contractors;
- contract review;
- Court and Tribunal appearances; and
- debt recovery.
Historically, it has been the sub-contractor which is left exposed and unpaid when building and construction disputes arise. However, the introduction of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) and provisions therein for subcontractors to issue a Subcontractors’ Charge has afforded sub-contractors and contractors alike greater ability to recover payment for services rendered.
By consolidating the Building and Construction Industry Payments Act 2004 and Subcontractors’ Charges Act 1974, the BIF Act is a one-stop-shop for security of payment and subcontractors’ charges.
Building Industry Fairness (Security of Payment) Act 2017
The BIF Act applies to anyone who is a party to a contract for construction work or the supply of related goods or services under the construction contract.
With its strict time limits and severe consequences, special care must be taken to ensure any payment claim or document served on you is responded to swiftly and correctly or you could be left with a judgment debt and no defence as to why payment should not be made.
The BIF Act allows participants involved in a construction payment dispute to have the dispute decided by a registered adjudicator as an alternative to the court process.
A construction contract is a contract for construction work or the supply of related goods or services. The contract can be written, oral, partly written and partly oral.
Construction work includes the construction of buildings or structures, the installation in any building or structure of fittings, external or internal cleaning of buildings or structures, preparatory work or work performed to complete construction.
Related goods or services includes materials and components that will form part of any building or structure, plant or materials used in construction, the provision of labour to carry out construction and architectural, surveying, engineering, interior or exterior decoration, landscape advisory services and soil testing services relating to construction work.
Typically, contracts affected by the BIF Act may include:
- claims by contractors against principals/developers;
- claims by subcontractors against contractors;
- claims by plant and equipment hirers against subcontractors/contractors; and/or
- claims by consultants against clients.
Contracts which are excluded from the operation of the BIF Act include:
- a contract which forms part of a loan agreement, guarantee or contract of insurance;
- domestic building contracts where the owner is a resident owner; and/or
- a contract where the amount to be paid is not calculated based on the value of work done or the value of goods and services supplied.
Under the BIF Act, a person entitled to a progress payment (claimant) may serve a payment claim on the party liable to pay the amount (respondent).
The effect of submitting a payment claim is that the respondent must either:
- respond to the payment claim by providing a payment schedule, indicating the amount of the payment (if any) they propose to make within the prescribed period; or
- pay the whole of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
The BIF Act contains specific requirements as to the form, content and timing of service of either a payment claim or payment schedule. Failure to adhere to the strict timeframes and requirements of the BIF Act could mean that you are forced to pay the full amount on a payment claim without the opportunity to respond, defend or appeal.
The BIF Act introduces a few notable changes to the previous regime. These include:
- the claimant does not need to notify the respondent that it intends to proceed to adjudication;
- there is no ability to issue an adjudication response if the dispute proceeds to adjudication and no payment schedule was issued, nor can the respondent raise new reasons for withholding payment that were not included in the payment schedule;
- there is no longer any need to endorse the payment claim with the governing legislation i.e., ‘BIF Act’. A written document bearing the word ‘invoice’ is taken to satisfy the BIF Act;
- if a construction contract is terminated, and the contract does not provide for, or purports to prevent a reference date surviving termination, the final reference date for the contract is the date the contract is terminated;
- pecuniary penalties apply, and disciplinary action can be taken under the Queensland Building and Construction Commission Act 1991 (QBCC Act) for a failure to give a payment schedule as required under the BIF Act; and
- timeframes for submitting a payment schedule have been extended to whichever of the following periods ends first being either; the period, if any, worked out under the construction contract, within which the respondent must give the payment schedule or, 15 business days after the payment claim is given to the respondent.
The Subcontractors’ Charges Act 1974 will continue to apply for any subcontractors’ charge already issued under that Act however, the BIF Act will apply to all subcontractors’ charges subsequently issued.
The process under the BIF Act remains largely unchanged except for certain requirements. These are:
- to claim a subcontractor’s charge over money payable to the contractor under the contract, a ‘Notice of Claim’ is required to be given to the person obliged to pay the money under the contract;
- if the Notice of Claim is not prepared in compliance with the legislation or is otherwise affected by mistakes, the Notice of Claim is of no effect and the subcontractor’s charge does not attach. Previously the Notice of Claim of Charge could not be challenged on the grounds of technical faults;
- the Notice of Claim must be in the approved form and state the amount of the claim;
- it must contain details of the work done by the subcontractor and the certified amount and other information prescribed by regulation;
- a subcontractor can request any information they reasonably require to complete the Notice of Claim. The request may be in writing. The person must comply with a request for information to the greatest extent possible and, if the person fails to comply with such request they are personally liable to pay the subcontractor the amount the subcontractor is liable to be paid under the BIF Act;
- it is important to bear in mind the strict timeframes that apply to issuing a Notice of Claim. A Notice of Claim for work that is ongoing can be given at any time however, if the work has been completed, the Notice of Claim must be given within three (3) months after practical completion of the work. If the Notice of Claim relates only to a retention amount, the notice must be given within three (3) months after the expiration of the defects’ liability period; and
- the response time is 10 business days after the contractor is given the Notice of Claim and the response must be in the approved form and either accept liability to pay the amount claimed, accept liability to pay an amount stated in the response but otherwise dispute the claim, or dispute the claim. Pecuniary penalties up to 20 penalties units apply for a failure to comply with the prescribed time limit.
Enforcing a subcontractors’ charge will depend on the contractors’ response to the Notice of Claim. The possible scenarios are as follows:
- The superior contractor accepts liability to pay the amount claimed:
In this scenario, the person given the Notice of Claim must pay the subcontractor the amount the person is required to retain.
- The superior contractor accepts liability to pay an amount stated in response but otherwise disputes the claim:
The person given the notice of claim must pay the subcontractor the amount the person is required to retain, up to the amount stated in the response.
Compliance with the above is only required if the retained amount is sufficient to satisfy the claim. Payment also discharges the superior contractor from liability relating to the amount paid and of the costs of any court proceeding relating to the amount paid.
Subcontractors’ Charges are extremely powerful as they allow sub-contractors to secure moneys owed to it by a head/superior contractor from the head/superior contractor’s principal (“employer”).
The effect of the charge is to take moneys due from the employer to the head/superior contractor out of circulation, to be earmarked for payment to the sub-contractor. As you can appreciate the sub-contractor does not have a contract with the employer, but the effect is that the sub-contractor may get the money directly from the employer in certain circumstances.
The employer is obliged to retain the charge moneys, and if they fail to do so they are personally liable to pay its claim, not exceeding the amount that the employer was obliged to retain. The sub-contractor lodging the charge (and any other sub-contractors) become secured creditors for these monies retained by the employer, even against a liquidator of a head contractor.
It can have a devastating effect on the head contractor’s cash flow, so the sub-contractor must have a justifiable basis for lodging a sub contractor’s charge. If a sub-contractor vexatiously or without reasonable grounds gives a Notice of Claim, the sub-contractor is liable to pay to a person prejudicially affected by the claim an amount of damages the person incurs because of the claim. The damages must be decided by a court on an application by the person prejudicially affected.
The sub-contractor does not always receive all the monies it claims, particularly in cases where the head contractor has already gone or later goes into liquidation or the amount owed to the contractor is less than the amount of the sub contractor’s claim. However, the subcontractor benefits by at least getting some monies which otherwise are likely to be unavailable to them in liquidation.
Given the complexities of building and construction disputes, it is imperative you obtain urgent legal advice to ensure you seize on the opportunities and benefits the BIF Act affords sub-contractors.
Queensland Building and Construction Commission Act 1991 (the “QBCC Act”)
For building contracts other than domestic building contracts, the QBCC Act Part 4A sets out a number of notable provisions, including, but are not limited to:
- regularises retention amounts for a building contract;
- provides helpful guidance on the form that a building contract is to take (in writing depending on the value of the subject building work);
- establishes a statutory defects liability period of 12 months starting on the day of practical completion of the contract; and
- the contracted party’s right to suspend building work, the subject of the building contract, if the contracting party has not complied with an order of a court or the tribunal given in favour of the contracting party, or the amount is not paid.
Not dissimilar to the BIF Act, non-compliance with the QBCC Act can attract pecuniary penalties, and in some cases, imprisonment.
Whether you are a sub-contractor, contractor, principal, builder, owner builder, developer or consultant faced with a building dispute or construction dispute, our team of experienced building and construction Dispute Litigation Lawyers and accredited mediators can assist you through every step of the process.