22 November 2018

Changes to security of payment regime under the BIF Act

This article was written by Sophie Sweeney, Prudence Lupton and Kayla Causer.

Further to our previous updates (from March and June 2018), the changes to the Queensland security of payment regime introduced by the Building Industry Fairness (Security of Payment) Act 2017 (“BIF Act”) will commence on 17 December 2018. Here’s what you need to know.

Commencement of next tranche of amendments under the BIF Act

On 8 November 2018, the Queensland government fixed 17 December 2018[1] as the commencement date for the next tranche of amendments under the BIF Act. Accordingly, on 17 December 2018:

  • the Building and Construction Industry Payments Act 2004 (Qld) (“BCIP Act”) will be repealed and replaced by Chapter 3 of the BIF Act; and
  • the Subcontractors’ Charges Act 1974 (Qld) will be repealed and replaced by Chapter 4 of the BIF Act.

The government has introduced new regulations which also commence on 17 December 2018. The regulations deal with conflicts of interest for adjudicators, maximum fees and expenses for particular adjudication applications, procedures for processing adjudication applications and limitations on submissions and accompanying documents for particular adjudication applications.

Changes to security of payment regime

The amendments under the BIF Act apply to all contractors and suppliers engaged to perform ‘construction work’ or provide ‘related goods or services’ under any ‘construction contract’ (all defined broadly). 

Importantly, the changes introduced by the BIF Act apply to all construction contracts whether entered into before or after the commencement of these provisions.[2] However, this is subject to an exclusion for “unfinished matters”, to which the provisions under the repealed BCIP Act will continue to apply.[3] The “unfinished matters” section applies if:

  • a payment claim has been issued before the commencement of the new BIF Act provisions; and 
  • there are “unfinished matters” in respect of that payment claim – these include the issue of a payment schedule, the consequences of not paying the claimed amount, making an adjudication application, the adjudication of the payment claim under the repealed provisions (including the giving of an adjudication response, the adjudication procedures, the adjudicator’s decision or the consequences of not paying the claimant the adjudicated amount).

Set out below is a summary of the key changes to the existing security of payment regime under the BIF Act.

Security of payment provision 

Previous position under BCIP Act

New position under BCIP Act

Requirements for endorsement

To satisfy the definition of ‘payment claim’ under BCIPA, the contractor was required to endorse the payment claim (i.e. state that the claim was made under the BCIP Act).[4] 

There is no requirement for a payment claim to state that it is made under the BIF Act.[5]

Consequence of amendment: Any claim for payment (including any invoice) will potentially be a payment claim and should be treated as such by the principal.

Second chance for disputed payments

Under the BCIP Act, where the principal failed to respond to a payment claim by serving a payment schedule within the required timeframe, prior to commencing proceedings to recover the amount claimed the contractor was required to give the principal notice that it had 5 business days to serve the relevant payment schedule.[6]

A disputed payment claim may be immediately enforced in a Court when no responding payment schedule has been served prior to the end of the response period. Claimants do not need to provide respondents with prior notice and a second chance to provide a payment schedule.[7]

Consequence of amendment: Principals must ensure that all possible locations at which payment claims may be served are identified and regularly checked to avoid missing the date for issue of a payment schedule and thereby incurring liability to pay the claimed amount.

Penalties – requirement to issue payment schedule

 Not applicable under the BCIP Act.

 Penalties have been introduced where the principal does not provide a payment schedule in response to a payment claim. The principal may be liable to pay 100 penalty units, which currently equates to $12,615, as well as face disciplinary action under the Queensland Building and Construction Commission Act 1991 (Qld) (“QBCC Act”).[8]

The principal will also be liable to penalties where adjudicated amounts are not paid to contractors within the require timeframes.

Note that penalties have been introduced in relation to various other sections of the BIF Act including in relation to establishing and maintaining project bank accounts (also introduced under the BIF Act).

Consequence of amendment: Strict compliance is necessary to avoid penalty.

‘New reasons’ in adjudication

Where adjudication of a payment claim was sought in respect of a ‘complex payment claim’, under the BCIP Act, the principal was permitted to include in its adjudication response reasons for withholding payment that may not have been included in the payment schedule served on the contractor.[9] 

 Adjudication responses which relate to complex claims cannot include any new reasons for withholding payment that were not included in the payment schedule.[10]

Consequence of amendment: This means that the adjudicator will be limited to considering the reasons for withholding payment that were set out in the payment schedule. All reasons for withholding payment will need to be included in the payment schedule or an adjudicator will be unable to consider them.

Timing for submitting adjudication application where application relates to failure to give payment schedule and pay the full amount stated in payment claim

The adjudication application was due 10 business days after the date the respondent was to serve the payment schedule.[11]

 The adjudication application is now due 30 business days after the later of the following:
(A) the day of the due date for the progress payment to which the claim relates; or
(B) the last day the respondent could have given the payment schedule.[12]

 Timing for submitting adjudication application where application relates to a failure to pay the full amount stated in the payment schedule

The adjudication application was due 20 business days after the due date for payment.[13]

The adjudication application is now due 20 business days after the due date for the progress payment to which the claim relates.[14]

Timing for submitting adjudication application where application relates to  the amount stated in the payment schedule being less than the amount stated in the payment claim

Where an adjudication was sought due to the scheduled amount being less than the claimed amount, the adjudication application was due 10 business days after the claimant receives the payment schedule.[15]

The adjudication application is now due 30 business days after the claimant receives the payment schedule.[16]

Definition of “reference date” – final reference date on termination

Reference date, under a construction contract, means -

(a) a date stated under the contract as the date on which a claim for a progress payment may be made; or

(b) if the contract does not provide a date -
   (i) the last day of the named month in which the work was first carried out, or the related goods and services were first supplied; and
   (ii) the last day of each later named month.
Reference date has the same meaning as under BCIPA except that the BIF Act goes further to state that if a construction contract is terminated and the contract does not provide for, or purports to prevent, a reference date surviving beyond termination, the final reference date for the contract is the date the contract is terminated.[17]

Consequence of amendment: If the contract does not provide for a reference date on termination, the date of termination will be deemed the final reference date. This seeks to rectify some issues faced by claimants who enter into short term contracts with limited reference dates.

Regulation – limitations on submissions and accompanying documents for particular adjudication applications

 Not applicable under the BCIP Act.

Section 17 of the Regulation prescribes limitations on submissions (including the length and format of submissions) and accompanying documents for:

(a) adjudication applications relating to payment claims for progress payments of not more than $25,000; and

(b) adjudication responses to adjudication applications mentioned in paragraph (a).

Please let us know if you require more detailed information or advice regarding any of the above amendments to the security of payment regime in Queensland, or would like an overview of the other changes to construction law under the BIF Act (including amendments to the SCA, the QBCC Act or the introduction of project bank accounts).  



 

[1] Building Industry Fairness (Security of Payment) and Other Legislation Amendment Regulation 2018 (Qld) which amends the Building Industry Fairness (Security of Payment) Regulation 2018 (Qld).

[2] Section 61(1)(c) of the BIF Act.

[3] Section 205 of the BIF Act.

[4] Section 17(2)(c) of the BCIP Act.

[5] Section 68 of the BIF Act.

[6] Section 20A of the BCIP Act.

[7] Section 77 of the BIF Act.

[8] Section 76 of the BIF Act.

[9] Section 24(5) of the BCIP Act.

[10] Section 82 of the BIF Act.

[11] Section 21(3)(c)(iii) of the BCIP Act.

[12] Section 79(2)(b)(i) of the BIF Act.

[13] Section 21(3)(c)(ii) of the BCIP Act.

[14] Section 79(2)(b)(ii) of the BIF Act.

[15] Section 21(3)(c)(i) of the BCIP Act

[16] Section 79(2)(b)(iii) of the BIF Act.

[17] Section 67 of the BIF Act.

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