Building and construction industry payments act reform - key changes - Construction & Planning

The Queensland Government has passed a series of amendments to the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act).

Amending legislation¹ was passed by Parliament on 11 September 2014. It aims to address "widespread dissatisfaction with the way adjudicators are appointed and what was felt to be unreasonable timeframes for responding to claims".² To achieve this objective the amendment Act:

reforms the process for the appointment of adjudicators;
introduces a dual model regime for "standard" and "complex" payment claims;
amends the timeframes for making and responding to "complex" payment claims and adjudication applications;
allows the inclusion of additional reasons (not included in the respondent's payment schedule) in an adjudication response for "complex" payment claims;
introduces a requirement for respondents to be afforded the opportunity to submit a "second chance" payment schedule; and
addresses decisions affected by jurisdictional error.

APPLICATION OF THE AMENDMENT ACT

The amendment Act will commence on a date to be set by Proclamation.

The amendments in relation to the process for recovering progress payments will only apply to contracts entered into after the commencement of the amendment Act.

Parties to construction contracts entered into before the commencement of the new legislation will continue to make their claims under the current BCIP Act (and current timeframes) except for changes relating to Authorised Nominating Authorities (ANAs) as outlined below.

KEY CHANGES TO THE BCIP ACT

Appointment of adjudicators

The existing legislation permits claimants apply for adjudication of payment claims to one of seven (commercially operated) ANAs. The ANA then nominates an adjudicator to decide the claim.

The amendment Act will establish an Adjudication Registry (operating under the Queensland Building and Construction Commission) which will be the sole body authorised to accept adjudication applications and appoint adjudicators.

On commencement of the amendment Act, all functions of the ANAs will be transferred to the Adjudication Registry.

Dual model - "standard" and "complex" payment claims

The amendment Act will introduce a dual model regime for "standard" and "complex" payment claims.

A "complex" payment claim is a claim for an amount more than $750,000 (excluding GST), or any greater amount prescribed by regulation.

A payment claim which is not a complex payment claim is a standard payment claim.

Different timeframes will apply for a respondent to lodge a payment schedule and adjudication response depending on whether they relate to a "standard" or "complex" payment claim.

TIME TO LODGE UNDER THE AMENDED ACT
DOCUMENT	"STANDARD" PAYMENT CLAIM	"COMPLEX" PAYMENT CLAIM
PAYMENT SCHEDULE	10 business days after receipt of payment claim	15 business days after receipt of payment claim³
ADJUDICATION APPLICATION	10 business days after receipt of payment schedule (no change)	10 business days after receipt of payment schedule (no change)
ADJUDICATION RESPONSE	10 business days after receipt of adjudication application	15 business days after receipt of adjudication application
EXTENSION FOR ADJUDICATION RESPONSE	N/A	May apply to the adjudicator for an extension of time of up to 15 business days

Providing new reasons for withholding payment

Respondents are presently prohibited from including in their adjudication response reasons for withholding payment which are not identified in their payment schedule.

The amendment Act will remove that prohibition where the claim is a "complex" payment claim.

This significant change will eliminate the adverse consequences which flow from preparing an incomplete payment schedule under time pressures to respond to a complex claim.

Compulsory second chance payment schedules

Where the respondent does not provide a payment schedule, or there is an unpaid scheduled amount, the amendment Act requires that a claimant provide notice to a respondent before:

lodging an adjudication application; or
commencing court proceedings to recover an unpaid portion of a claimed amount.

The notice must state that the respondent may serve a ("second chance") payment schedule on the claimant within five business days after receiving the notice.

Time to submit payment claims

Payment claims will be required to be served within 6 months after the construction work to which the claim relates was last carried out (unless the contract allows a longer period). The BCIP Act presently allows claimants 12 months to make a claim.

Final payment claims may only be served within 28 days of the expiration of the defects liability period, six months of completing all construction work (or supplying all goods), or the period stated in contract (whichever is later).

Jurisdictional error

Previously, an adjudication decision affected by jurisdictional error was considered void in its entirety.⁴

The amendment Act provides the Court with a discretion to identify and sever the part of a decision affected by jurisdictional error while allowing the unaffected part to remain binding on the parties.

Shutdown periods

The definition of "business day" in the BCIP Act will be amended to exclude (in addition to public holidays and weekends) the three days prior to Christmas (22 to 24 December) and the period up to 10 January, reflecting industry shutdown during that time of year. This will prevent ambush claims on the eve of the holiday period when both clients (and their consultants) may be unavailable.

NO REQUIREMENT FOR PAYMENT CLAIMS TO BE ENDORSED AS CLAIMS UNDER BCIPA

Recent amendments to the NSW security of payment legislation⁵ do not require contractors to endorse a payment claim as a claim being made under the NSW Act in order to enliven the procedure under the Act.

The amendment Act will not remove the requirement for an endorsement in Queensland. Claimants still need to mark their claims as being made under the BCIP Act to trigger the statutory process under the BCIP Act.

Footnotes

¹Building and Construction Industry Payments Amendment Act 2014 (amendment Act). The amendment Act and explanatory notes are available here.

² Construction industry to become fairer, more transparent

³Unless the claim was served more than 90 days after the reference date, in which case the payment schedule must be served within 30 business days of the payment claim (section 18A(3)(b)(ii) of the Act). When this occurs, there is an apparent inconsistency between the time within which a respondent can provide a payment schedule (30 business days) and the time within which a respondent must pay the scheduled amount (which cannot be more than 15 business days after receipt of a payment claim, being the maximum time allowed under section 67W of the Queensland Building and Construction Industry Act 1991). It appears a respondent would be liable to pay any amount it intends to schedule before the date it is required to provide a payment schedule for that amount.

⁴BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd & Ors [2013] QCA 394.

⁵Building and Construction Industry Security of Payment Act 1999 (NSW).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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