Are you properly responding to payment claims under the new Queensland legislation and case law?

Following the introduction of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIFSOPA), which replaced the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA), and recent case law, it is important for principals and head contractors to be aware of the changes to the requirements of:

1. what constitutes a “payment schedule”;
2. what reasons should be given for withholding payment;
3. the time limits within which a payment schedule is required to be given;
4. the due date for payment of a payment claim;
5. the consequences of failing to give a payment schedule;
6. the consequences of failing to pay the claimant; and
7. the notice to be given by the claimant before commencing proceedings in respect of a failure to:
8. give a payment schedule; or
9. make payment of a payment claim.

This is because a failure to comply with these requirements can result in drastic consequences, such as the claimant being entitled to judgment for the full amount of the claim.

What constitutes a payment schedule?

The purpose of a payment schedule is to allow the issues in dispute between the parties to be defined as clearly and as early as possible. The requirements to achieve this have changed recently as a result of the introduction of BIFSOPA and recent case law and can easily be summarised below:

What “reasons” are to be given for withholding payment?

Under the new BIFSOPA, the provision of adequate reasons for withholding payment in a payment schedule is critical. This is because if a payment claim proceeds to adjudication, the respondent is now precluded from raising new reasons in its adjudication response (see section 82(4) of BIFSOPA). Accordingly, payment schedules should seek to include (if applicable), the following information:

• the amount that is agreed (if any);
• the disputed amount (if any);
• the reasons for withholding payment (if any). These reasons can include:
• non-compliance with relevant clauses of the Contract, such as:
• time bars for submitting variation claim; or
• a failure to submit a notice of delay prior to claiming an EOT.
• jurisdictional issues, such as:
• failing to properly identify the works claimed – see the recent decision in KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178;
• failing to submit the payment claim in accordance with an active reference date; or
• the claim being made out of time (for example, being made more than 6 months after the works were last carried out).
• set offs for:
• liquidated damages; and/or
• defective or incomplete works.
• Any entitlement to security.

What is the time period for giving a payment schedule?

There are no longer different time periods for giving payment schedules for “standard” payment claims and “complex” payment claims. Now, under section 76 of the BIFSOPA, payment schedules must be given within whichever of the following periods ends first:

• the period under the Contract; or
• 15 business days after the payment schedule is given to the respondent.

A failure to do so may result in:

• a fine of $13,345.00 (100 penalty units) as a maximum for an individual; or
• a fine of $66,725.00 (500 penalty units) as a maximum for a corporation; and
• grounds for disciplinary action by the QBCC.

In light of the new penalties above, it is more important than ever for principals and head contractors to ensure they are aware of the relevant time frames to give a payment schedule. Note however, a respondent is not required to give the claimant a payment schedule if the full amount of the payment claim is made on or before the due date.

When is payment of a payment claim due?

The due date for payment under BCIPA and BIFSOPA are largely the same. Under section 73 of BIFSOPA, a payment claim will be come due either:

• if the contract provides for a due date, the time required by the contract; or
• 10 business days after the day a payment claim is made.

It is important to note however, that under a contract, the due date for payment of:

• subcontractors cannot be more than 25 business days; and
• contractors cannot be more than 15 business days,

otherwise provisions will be void under section 67U and 67W respectively of the QBCC Act.

What are the consequences of not giving a payment schedule?

There are no significant changes in obligations for principals and head contractors under BIFSOPA. If no payment schedule is given in response to a payment claim, the respondent remains liable to make payment of the full amount claimed in the payment claim (see section 19(2) of BCIPA and section 77(2) of BIFSOPA).

What are the consequences of failing to pay a claimant?

The consequences of failing to pay a claimant remain largely unchanged under BIFSOPA. If the respondent does not pay the amount owed to the claimant in full on or before the due date for payment, the claimant may, under section 78:

• recover the portion of the amount owed as a debt from a court; or
• apply for adjudication application; and
• serve a written notice of its intention to suspend the works.

Principals and head contractors should be aware that, pursuant to section 100 of BIFSOPA, if the claimant does commence proceedings it may be awarded judgment and the respondent is not entitled to:

• bring a counterclaim; or
• raise any defence.

The key difference to be aware of is that under BIFSOPA, the “amount owed” means:

• if the respondent did not respond to the payment claim – the amount claimed; or
• if the respondent did respond – the amount proposed to be paid.

Under BCIPA, the “claimed amount” was the amount claimed in the payment claim.

Notice to be given prior to commencing proceedings

Under section 99 of BIFSOPA, the claimant is no longer required to give a second chance notice to the respondent prior to commencing proceedings:

Takeaway

It is critical to be aware of the recent amendments to the requirements surrounding the giving of payment schedules and the payment of payment claims. This is because a failure to do so may result in:

1. being liable to the full amount of the payment claim; or
2. being a respondent to an adjudication application;
3. being a respondent in a court proceeding with no defence or counterclaim.

If you are principal or head contractor, and you are unsure how to respond to a recent payment claim you have received, do not hesitate to contact us for our detailed, bespoke advice.

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