SECURITY OF PAYMENT LEGISLATION

QUEENSLAND



The security of payment legislation in Queensland consists of three acts:

Building and Construction Industry Payments Act (Qld) 2004

(Qld) (Qld Act)



When does the legislation apply | What rights does the legislation confer on contractors | What must a principal do when faced with a claim | Contractor's rights if not paid - how to enforce its rights


When it was introduced, the Qld Act mirrored many of the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW Act). However, since the Qld Act was amended on 15 December 2014, there are noteworthy differences between the two Acts which are covered in this chapter.


When does the legislation apply?



The Qld Act applies to construction contracts entered into on or after 1 October 2004. A contract can be written or oral, or a combination of both.

A construction contract is broadly defined and applies to a contract, agreement or other arrangement under which one party undertakes to carry out construction work for or to supply related goods and services to another party (construction contract).

'Construction work' and 'related goods and services' are defined in a similar manner to the NSW Act. However, under the Qld Act construction work also includes building work within the meaning of the QBCC Act.

The Qld Act does not apply to construction contracts involving domestic building work if a resident owner is a party to the contract and lives in or intends to live in the building.

The Qld Act does not apply to the drilling for, or extraction of, oil or natural gas or the extraction, whether by underground or surface working, of minerals, including tunnelling or boring or constructing underground works for that purpose but does apply to all other construction contract works at a mine or on a mining lease.

The Qld Act does not apply to a construction contract to the extent that it deals with construction work carried on outside Queensland or the supply of goods and services for construction work carried on outside Queensland.


Contracts cannot include a 'pay when paid' provision, which is where a contractor makes its liability to pay a subcontractor dependent on payment to the contractor by the principal.

It is not possible to contract out of the provisions of the Qld Act.


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What rights does the legislation confer on contractors?



The right to a progress payment



The Qld Act entitles a person to a progress payment if they have undertaken to carry out construction work, or supply related goods and services, under the construction contract.

Claimants who are required to be licensed for building work under the QBCC Act but who are not licensed are not entitled to a progress payment.


A progress payment is a payment to which a person is entitled under section 12 of the Qld Act, and includes, without affecting any entitlement under that section to a final payment, a single or one-off payment or a milestone payment.


When can a contractor make a claim?



From 15 June 2015, a claimant may serve:

  • the period worked out under the construction contract; or
  • six months after the construction work or related goods and services to which the claim relates were last carried out or supplied;

  • the period worked out under the construction contract;
  • 28 days after the end of the last defects liability period under the contract; or
  • six months after the completion of all construction work or supply of related goods and services.

Only one payment claim for each reference date under the construction contract can be served. A reference date is the date for making a payment claim as specified under the contract, or as provided for under the Qld Act (ie the last day of the named month in which the construction work was first carried out and the last day of each subsequent month). However, a claimant can include in a payment claim an unpaid amount that has been the subject of a previous claim. A claim, or an item within a claim, that has been the subject of an adjudication determination cannot be re-agitated.


How does a contractor make a payment claim?



A valid payment claim must:

  • identify the construction work or related goods and services;
  • specify the amount of the progress payment claimed (the claimed amount); and
  • state that it is made under the Qld Act.


What amount can be claimed?



A person is entitled to claim the amount calculated under the contract. If the contract does not provide for the valuation of the construction work and related goods and services, the entitlement is the amount calculated on the basis of the value of the work having regard to the contract price, any applicable rates and prices, any variation and, if the work is defective, the cost of rectifying any defects.

The due date for payment and interest on unpaid amounts is dealt with differently in Queensland to New South Wales due to the application of the QBCC Act. A progress payment under a construction contract becomes payable:

  • if the contract contains a provision about the matter that is not void under section 16 of the Qld Act or under sections 67U or 67W of the QBCC Act — on the day on which the payment becomes payable under the provision; or
  • if the contract does not contain a provision about the matter or contains a provision that is void under section 16 of the Qld Act or sections 67U or 67W of the QBCC Act — 10 business days after a payment claim is made under Part 3.

Interest on the unpaid amount of a progress payment is payable at the greater of the following rates:

  • the rate specified under the contract.

For a construction contract to which section 67P of the QBCC Act applies (because it is a building contract) interest is payable at the penalty rate under that section.

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What must a principal do when faced with a claim?



How to respond to a payment claim



A principal served with a contractor's claim will have to comply with the strict timing regimes set out in the Qld Act and the QBCC Act (if this Act applies). The principal's right to recover any disputed amount will remain intact under the contract or at law.

The Qld Act makes a distinction between 'standard payment claims' and 'complex payment claims' being claims for an amount more than $750,000 (excluding GST).



Respondent to serve a payment schedule



If a respondent is served with a standard payment claim, it is required to serve a payment schedule within 10 business days of receipt of that payment claim (unless the contract clearly provides an earlier time for service).

If a respondent is served with a complex payment claim then (unless the contract clearly provides for an earlier time for service) the respondent is required to serve a payment schedule within:


  • 15 business days of receipt of the payment claim, if the claim was served within 90 days of the reference date; or
  • 30 business days of receipt of the payment claim, if the claim was served more than 90 days after the reference date.

A payment schedule must state all reasons that the respondent has for withholding payment from the claimant.

If the respondent assesses that there is an amount payable to the claimant, and the QBCC Act applies because the work under the contract is ‘building work’, that payment must be made within 15 business days of receiving the payment claim (for commercial building contracts) and 25 business days of receiving the payment claim (for construction management trade contracts and subcontracts).


Contractor's rights if respondent fails to serve a payment schedule



If a respondent fails to serve a payment schedule within 10 business days, then, within 20 business days following the due date for payment, the claimant may give the respondent a notice giving the respondent a second opportunity to provide a schedule. The respondent then has 5 business days to serve the schedule.

If the respondent still fails to respond, the claimant's options are to proceed to adjudication or (and in most cases the chosen option of a claimant) proceed to recover the unpaid portion of the payment claim in any court of competent jurisdiction, as a debt owing to the claimant. The respondent is not allowed to raise any defence under the construction contract or make any counterclaim in those proceedings.


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Contractor's rights if not paid - how to enforce its rights?



Adjudication - how and when to make an application



Where a claimant commences an adjudication application, the respondent may provide an adjudication response:

  • for a standard payment claim, within 10 business days of receiving a copy of the adjudication application or within 7 business days after receiving notice of an adjudicator's acceptance of the application, whichever is later; or
  • for a complex payment claim, within 15 business days of receiving a copy of the adjudication application or within 12 business days after receiving notice of an adjudicator's acceptance of the application, whichever is later.

For a complex payment claim a respondent may also request from the adjudicator an extension of time for responding of up to an additional 15 business days. This request must be made within the later of 5 business days after receiving the adjudication application or 2 business days after receiving notice of the adjudicator's acceptance of the adjudication application.

The adjudication response must be in writing, identify the adjudication application to which it relates and may contain submissions in support of the response.


The respondent may give the adjudication response to the adjudicator only if the respondent has served a payment schedule on the claimant within the time specified in the Qld Act. When responding to a standard payment claim, the respondent cannot include any reasons for withholding payment in the adjudication response unless those reasons have already been included in the payment schedule. When responding to a complex payment claim, a respondent may include reasons for withholding payment in the adjudication response which were not included in the payment schedule.

However, if the respondent includes new reasons for withholding payment in its adjudication response to a complex payment claim a claimant has a right to reply to those reasons. The claimant may give the adjudicator a reply to new reasons within 15 business days after receiving a copy of the adjudication response. The claimant must notify the adjudicator within 5 business days after receiving a copy of the adjudication response that it intends to provide a reply. The claimant must serve its reply on the respondent no more than 2 business days after it is given to the adjudicator.



What is the adjudication procedure?



An adjudicator must decide an adjudication application as quickly as possible and in any case for a standard payment claim within 10 business days and for a complex payment claim within 15 business days after:

  • the date on which the adjudicator receives the adjudication response; or
  • the date on which the adjudicator should have received the adjudication response; or
  • within the further time that the parties have agreed.

Adjudicators may seek the consent of the parties to an extension to these timeframes.

An adjudicator is to decide:


  • as a preliminary matter, whether he or she has jurisdiction to adjudicate the application;
  • the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount);
  • the date on which any amount became or becomes payable; and
  • the rate of interest payable on any amount.

The adjudicator must only consider:

  • the provisions of the Qld Act to the extent they are relevant;
  • the provisions of the QBCC Act, Part 4A;
  • the provisions of the construction contract from which the application arose;
  • the payment claim to which the application relates together with all submissions and relevant documents properly made in support of the claim (ie the adjudication application);
  • the payment schedule together with all submissions and relevant documents properly made in support of the schedule (ie the adjudication response); and
  • the results of any inspection by the adjudicator of any matters to which the claim relates.

The adjudicator’s decision must be in writing and include the reasons for the decision, unless the parties have both asked the adjudicator not to include the reasons in the decision.

The adjudicator, or any other adjudicator in a subsequent application involving the same work or goods and services, must give the work the same value as that previously valued by an adjudicator, unless a party satisfies the adjudicator that the value of the work or goods and services has changed since the previous determination.

Once an adjudicator has made a decision as to the amount payable, the respondent is required to pay that amount on or before the relevant date. Relevant date means the date that is 5 business days after the date on which the adjudicator’s decision is served on the respondent or a later date decided by the adjudicator.

The payment is only a progress payment, and the right to recover any disputed amount will remain intact under the contract or at law.


Reviewing the adjudicator's decision



An adjudication decision can be challenged in court for jurisdictional error.


Judgment debt



A claimant may apply to the court to claim an unpaid amount as a judgment debt in two circumstances:

  • first, where the respondent has agreed to an amount payable under a payment schedule, or the adjudicator has determined an amount is payable, and the respondent has not paid;
  • secondly, where the respondent has failed to give a payment schedule within time (which includes the second chance period), and the payment claim is effectively deemed to be a debt owing.

In the second circumstance, section 19(6)(b) of the Qld Act provides that the respondent is not entitled in the court proceedings to either bring a counterclaim or raise any defence under the construction contract. By not issuing a schedule the respondent loses the protection of the contract. However, the respondent may raise other non-contractual defences, for example, instances of misleading and deceptive conduct under the Competition and Consumer Act 2010 (Cth).


Suspension



If the respondent fails to deliver a payment schedule, fails to pay a scheduled amount or fails to pay an adjudicated amount, the claimant may suspend the works on 2 days' notice until 3 business days after the respondent has remedied its defaults. The respondent is also liable to pay for any loss or damage sustained by the claimant as a result of removing any work from the claimant due to the claimant's decision to suspend the works. A claimant is not liable for any losses suffered by the respondent due to the claimant's suspension.

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Queensland Building and Construction Commission Act 1991

(Qld) (QBCC Act)



Although the Qld Act applies to both 'construction work’ (which includes ‘building work’ as defined under the QBCC Act) and 'related goods and services', the QBCC Act deals only with 'building work', which is defined more narrowly. Where a construction contract includes the performance of building work, the special provisions applying to building work under the QBCC Act will also apply to that construction contract. For example, the time when payments are to be made and default interest.

See Chapter 14 – Building industry regulation: Queensland.

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What rights does the legislation confer on contractors?



Part 4A QBCC Act regulates contracts under which building work is carried out in the following way:

  • the contractor may ask for any direction to be given in writing and is not required to comply with the direction until it is given in writing (section 67I(3)));
  • there is a statutory right to suspend the works in circumstances where the principal has failed to comply with an order of a court or tribunal, or the principal has failed to pay an amount required to be paid under the contract (section 67O(2)(b));
  • a penalty rate of interest is payable on progress payments not made by their due dates (section 67P);
  • a clause in a subcontract, management trade contract or commercial building contract that provides for payment of progress payments more than 25 business days or 15 business days respectively is void (sections 67U and 67W);
  • limits are placed on the amount of security that can be required to be given under a building contract (section 67K); and
  • notice is required to be given before security can be called for amounts owing under the contract (section 67J(1)).

See Chapter 7 – Legislation affecting security.

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Subcontractors' Charges Act 1974

(Qld) (SC Act)



When does the legislation apply | What rights does the legislation confer on contractors | What must a principal do when faced with a claim | What are the contractor's rights if not paid - how does a contractor enforce its rights


When does the legislation apply?



The SC Act applies in circumstances where building, construction and civil work carried out on land in Queensland is performed by a subcontractor.

Subcontractors must choose whether to proceed under the SC Act or the Qld Act. They cannot proceed under both Acts at the same time. The Qld Act states that if a notice of claim of charge is given under the SC Act, no action (adjudication or court proceedings) under the Qld Act may be started.


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What rights does the legislation confer on contractors?



The legislation allows a subcontractor to claim a charge on money payable or any security given under a contract between a principal and a contractor where the subcontractor has a contract for the performance of work on land with that contractor.

The charge can secure payment of money that is payable to the subcontractor for work performed by it under the subcontract (section 5).

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What must a principal do when faced with a claim?



A principal (referred to in the legislation as an employer) may at any stage pay into court the amount claimed in the notice of claim of charge (section 11(5)). This payment discharges the principal from any further liability for the amount paid and of the costs of any proceeding for the amount paid. If the principal considers that it is prejudicially affected by a claim of charge it can apply to the court for an order that the claim be cancelled or modified (section 21).

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What are the subcontractor's rights if not paid – how does a subcontractor enforce its rights



If a subcontractor provides a valid notice of claim of charge for the money owed under the subcontract, and payment is not made to the subcontractor, the subcontractor is able to commence proceedings in a court to enforce the claim of charge. Any proceedings must be commenced within:

  • where a claim of charge is in respect of retention money only, 4 months; or
  • in all other cases, 1 month,

after the notice of claim of charge has been given (section 15).

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Updated 15 October 2015