The effect of the amendments to the Subcontractors' Charges Act 1974 (Qld) (Act) were recently considered by the Court of Appeal of the Supreme Court of Queensland in the case of Abigroup Contractors Pty Ltd v Multiplex Constructions Pty Ltd & Ors. The Act had been amended to expand the circumstances in which a subcontractor may secure a charge in respect of money payable for work performed under a subcontract. Those amendments were made in response to a series of decisions, beginning with Riteway Constructions, to the effect that contract requirements for the certification of a payment claim, or resolution of a dispute about a related issue, must have been complied with before the subcontractor could claim a charge under the Act.
In May 2001, the Department of Works entered into a contract with Multiplex Constructions Pty Ltd and Watpac Australia Pty Ltd for the redevelopment of Lang Park. Multiplex then entered into a subcontract with Abigroup Contractors Pty Ltd for certain works. On 1 April 2003, Abigroup gave notice under the Act claiming a charge for about $1.6 million on money payable by the Department to the Multiplex and Watpac. Another notice was served by Abigroup on 2 May 2003 for $1,735,548.10.
The charges were for money claimed by Abigroup for work allegedly carried out under the subcontract. The money was either part of the subcontract sum that had not been certified in full or related to variations that had not been assessed or paid in full. Multiplex and Watpac had been successful in obtaining a court order cancelling the charges but Abigroup appealed the cancellation to the Court of Appeal.
Section 5(2) of the Act provides that the charge of a subcontractor secures payment of all money that is payable or is to become payable under the subcontract.
Importantly section 5(6), a new provision in the Act, provides that money 'that is or is to become payable' includes money which is payable under a provision of the subcontract still to be complied with. The Act provides two examples of such provisions. The first is a provision establishing the procedure for certification. The second is a provision establishing a procedure for the resolution of a dispute. Both examples expressly relate to the amount, quality or value of work that has been performed.
The Court of Appeal noted that the effect of the amendments to the Act was to abrogate the earlier judicial decisions such as Riteway, which had narrowed the operation of the Act. Accordingly, Abigroup's charges would be valid, even though the relevant work had not been certified, assessed or paid in full, if the subcontract satisfied the requirements of the amended section 5 of the Act.
The subcontract incorporated the Australian Standard subcontract conditions known as AS 2545-1993, with some amendments. Abigroup argued that the subcontract contained a provision 'still to be complied with', being a provision establishing a procedure for resolving a dispute about the amount or value of the work performed by Abigroup under the subcontract.
The Court conducted a detailed analysis of clauses 42 and 47 of the subcontract and was satisfied that it contained a provision establishing a procedure for resolving disputes about the amount or value of work performed by Abigroup. Further, that procedure had yet to be complied with. As a result, money that was to become payable to Abigroup pursuant to that provision (if complied with) was found to be capable of supporting a charge under section 5(2) of the Act. Abigroup was therefore successful in its appeal and the Court set aside the cancellation of the charges.
The drafters of the amendments to the legislation have attempted to strike a balance between protecting the cash flow of subcontractors and protecting contractors against expansive claims for charges. However, the ambit of the Act now clearly extends to claims for money for work carried out under a subcontract in circumstances where the quality or value of the work is still in dispute, or still to be certified in accordance with the subcontract. The Court expressed some disquiet about the widening of the scope of claims capable of supporting a charge. The Court's concern is that these provisions may be abused by unscrupulous contractors claiming charges based on exaggerated claims for payment. However, the Court also recognised that some protection against this risk has been built into the Act by the provisions requiring a claim for a charge to be supported by the certification by a qualified person, as well as a statutory declaration.
This article provides a summary only of the subject matter covered, without the assumption of a duty of care by Freehills or Freehills Carter Smith Beadle. The summary is not intended to be nor should it be relied upon as a substitute for legal or other professional advice.
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