The Queensland Government has officially proclaimed that the security of payment provisions under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) will commence on 17 December 2018, meaning that, as of that date:
No endorsement
- Payment claims will not need to be endorsed as being made under any legislation. Conceivably, under the new definition of payment claim, a letter, tax invoice or email that requests payment of a stated amount, may be a valid payment claim under the BIF Act, and therefore:
- claimants should ensure they do not unintentionally exhaust a reference date by issuing a document which is in fact a payment claim under the BIF Act; and
- principals need to be vigilant of failing to identify that an invoice or document that requests payment of an amount is a payment claim, and consequently failing to respond with a payment schedule (which, in addition to creating a liability to pay the claimed amount, is grounds for disciplinary action and could also result in fines of up to 100 penalty units, which currently equates to approximately $13,000).
Time for payment schedules reduced
- Payment schedules must be issued within the earlier of the period stated under the contract or 15 business days after the payment claim was given to the respondent. Where a respondent fails to issue a payment schedule or pay the claimed amount by the due date for payment, the claimant may make a judgement application or an adjudication application without notice, with no defence or cross-claim. Contractors and subcontractors must still be paid at 15 business days and 25 business days respectively.
No new reasons for withholding payment
- Respondents will no longer be permitted to raise new reasons for withholding payment at adjudication that were not included in the payment schedule (even for complex payment claims). Accordingly, if you are scheduling an amount that is less than the claimed amount, you should ensure that every reason for withholding payment is included in the payment schedule.
New offence for failing to pay adjudicated amount
- Where a respondent fails to pay to the claimant the adjudicated amount by the due date for payment, this is grounds for disciplinary action and can result in fines of up to 200 penalty units (which currently equates to approximately $26,000).
Conversion of security
- Amending the conversion of security clause in standard contracts:
- to allow security to be converted “immediately” following the provision of notice;
- to allow conversion for any amount “claimed to be” due; and
- to survive termination,
so that recourse to security is as broad as possible and not limited to claims certified by the superintendent, so as to minimise a right to an injunction.
Termination for convenience
- Ensuring that:
- a termination for convenience clause exists; and
- any termination for convenience clause survives termination.
This will allow a principal to terminate for any reason, including without fault and limit any future BIFSOPA claims.
This is particularly important in view of reforms to the Corporations Act 2001 (Cth) taking effect from 1 July 2018, which will render ineffective any clauses in a construction contract that allows a party to terminate in the event that the counterparty becomes insolvent, has a managing controller appointed, or goes into administration.
Keep in mind that BIFSOPA now legislates for a reference date to exist after any termination.
Adjudication Decisions
- Amending the contracts per paragraph 1 to ensure a principal can, in effect, immediately convert security after receiving an unfavourable adjudication decision. This strategy can negate an adverse adjudication decision. To do this, the principal will need to set-off monies owing from progress claims and keep the security alive.
Preconditions to Payment
- Obtain legal advice on the validity of any preconditions on the right to lodge a payment claim, or to reference dates arising (for example, the provision of a statutory declaration or other documentation required to assess the claim). Preconditions as to the validity of a claim under BCIPA will be normally be invalid.
Release at PC
- Requiring a signed deed of release as a precondition to a contractor achieving PC and FC, to prevent contractors from lodging an adjudication application after PC.
Time Bars
- Amend the contract so that the superintendent has the right to grant EOTs at the superintendent’s absolute discretion (whilst being under no obligation) so that an adjudicator or court cannot exercise discretion (of the superintendent) in favour of the contractor to award time-barred EOT claims.
Liquidated Damages
- Excluding the operation of the prevention principle, as an additional safeguard of the developer’s entitlement to liquidated damages. This means that if a contractor does not lodge an EOT on time and the superintendent rejects it, the developer can apply liquidated damages even if they have caused the delay.
Warranties
- Protect and define the parties’ rights (especially those belonging to Body Corporates, lessees and subsequent purchasers) and liabilities in relation to pure economic loss for latent defects, by requiring the contractor to provide a warranty in their favour at PC. This is important because subsequent purchasers and tenants are unlikely to be able to sue the builder in negligence for economic loss.
Claims after PC
- Amending the reference date clause in the contract so there are no reference dates between PC and FC and so no right to lodge an adjudication after PC, other than at FC.
Set off
- Amend the set off clause to:
- include amounts “claimed” to be due;
- include monies owing under other contracts between the parties; and
- to survive termination.
This gives a wider right to set off any “claimed” amounts which is not restricted to a developer’s claim certified by the superintendent or a single project.
Key contacts:
