The Building and Construction Industry Payments Act 2004 (Qld) ("BCIPA") does not only apply to builders and their subcontractors. It can apply to anyone who is a party to a contract for construction or the supply of related goods or services – which might include advisory services, fittings, labour, plant or materials used in construction. If you are a party to such a contract you need to have a working knowledge of the obligations imposed under BCIPA.
With its strict time limits and severe consequences, special care must be taken to ensure any payment claim or document served on you is responded to swiftly and correctly or you could be left with a judgment debt and no defence as to why payment should not be made.
What is it?
BCIPA allows participants involved in a construction payment dispute to have the dispute decided by a registered adjudicator as an alternative to the court process.
Who does BCIPA apply to?
BCIPA grants a person who undertakes construction work a statutory entitlement to recover progress payments in certain situations.
A construction contract is a contract for construction work or the supply of related goods or services. The contract can be written, oral, partly written and partly oral.
Meaning of 'Construction Work'
Construction Work includes the construction of buildings or structures, the installation in any building or structure of fittings, external or internal cleaning of buildings or structures, preparatory work or work performed to complete construction.
Meaning of 'related goods or services'
Related goods or services includes materials and components that will form part of any building or structure, plant or materials used in construction, the provision of labour to carry out construction and architectural, surveying, engineering, interior or exterior decoration and landscape advisory services.
Types of Contracts affected by BCIPA
Typically, contracts affected by BCIPA may include:
- Claims by contractors against principals/developers;
- Claims by subcontractors against contractors;
- Claims by plant and equipment hirers against subcontractors/contractors; and
- Claims by consultants against clients
Contracts which are excluded from the operation of BCIPA include:
- a contract which forms part of a loan agreement, guarantee or contract or insurance;
- domestic building contracts where the owner is a resident owner; and
- a contract where the amount to be paid is not calculated based on the value of work done.
Under the Act, a person entitled to a progress payment ("Claimant") may serve a payment claim on the party liable to pay the amount ("Respondent").
The effect of submitting a payment claim is that the Respondent must either:
- respond to the payment claim by providing a payment schedule, indicating the amount of the payment (if any) they propose to make within 10 business days from receipt of the claim; or
- pay the whole of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
If the Respondent fails to do either of the above, it is deemed liable to pay the claimed amount on the due date and the Claimant can institute proceedings to recover the amount.
When the Claimant serves an adjudication application, the Respondent(provided a payment schedule was served) must provide the adjudicator with a response to the application within 5 business days after receiving a copy of the application or 2 business days after receiving notice of an adjudicator's acceptance of the application. The response must be in writing and limit any submissions to the reasons for withholding payment.
If no payment schedule is served by the Respondent and the Claimant has sued under BCIPA, the Respondent is not entitled to:
- bring any counterclaim against the Claimant; or
- raise any defence in relation to matters arising under the construction contract.
The failure to serve a payment schedule in the correct form within 10 days clearly has very serious consequences for Respondents.
What is the adjudication process?
Once the adjudicator accepts the application, the adjudicator has 10 business days in which to decide:
- the amount of the progress payment;
- the date on which any amount is payable; and
- the rate of the interest payable
The decision will be given in writing and include reasons. The adjudicator also decides the proportion of the adjudication fees and expenses payable by each party.
Once the adjudication fees have been paid and if a decision is handed down in the Claimant's favour, the Respondent is required to pay the judgment amount within 5 business days from the date of service of the decision.
SUMMARY OF BCIPA TIMEFRAMES
- Payment Claim may be served only within the period worked out under the construction contract, or within 12 months after the construction work or supply of related goods and services were carried out or supplied, whichever is the later period.
- Respondent has 10 business days to serve a payment schedule
- Claimant has 10 business days to lodge and serve an adjudication application
- Respondent has either 5 business days or 2 business days after receiving notice of an adjudicator's acceptance of the application to give the adjudicator a response.
- Adjudicator makes its decision within 10 business days from the day it receives or was supposed to have received the response.
- Where decision is in the Claimant's favour, the Respondent has 5 business days to pay the judgment amount from the date of service of the decision.
Failure to adhere to the strict timeframes and requirements of BCIPA could mean that you are forced to pay the full amount on a payment claim without the opportunity of response, defence or appeal.
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.