On Monday, 1 September 2014 the report by the Transport, Housing and Local Government Committee (the Committee) examining the Building and Construction Industry Payments Amendment Bill 2014 (the Bill) was tabled in Parliament.
The Committee made 18 recommendations (many of which also arise from the recommendations of the Wallace Report) in its report, including that the Bill be passed subject to amendments and further investigations by the Minister.
The key recommendations made by the Committee include:
- the Bill be amended to remove the inclusion of both latent and time-related costs from the definition of complex claims
- the Minister implement Wallace Recommendations 10-15 concerning the inclusion of retention monies and securities in payment claims, the establishment of a Construction Retention Bond Scheme, the introduction of penalties for contractors and the empowerment of adjudicators to direct the release of securities, through amendments to the Building and Construction Industry Payments Act 2004 (the Act) and the Queensland Building and Construction Commission Act 1991 (the QBCC Act)
- the Bill be amended to replace "must" with "may" in proposed section 100(4) of the Act to provide the Supreme Court with a discretion to enforce part of a payment rather than a direction to do so
- the Bill state clearly how claims, schedules and adjudication applications which have already commenced are to be treated under the amended Act.
These recommendations are explored in greater detail below.
It is important to note that the report reaffirms Parliament's intention to remove the referral of adjudication applications to Authorised Nominating Authorities (ANA) and, instead, have those applications made to the Adjudication Registry established by the Act.
Definition of complex claims
The Bill introduces a dual model regime for "standard" and "complex" payment claims.
A "complex" payment claim is defined to mean a payment claim for an amount more than $750,000 (or a greater amount prescribed by regulation), a latent condition or time-related cost. For claims of this kind, the timeframes for a respondent to provide a payment schedule and to provide an adjudication response will be extended.
The report details that many submissions made to the Committee raised concerns about the complexity of distinguishing between complex and standard claims on the basis of latent conditions and time related cost. In particular, it was submitted that the inclusion of the term "a time-related cost" in the definition of complex claims without itself, in turn, being defined would render many simple claims to be complex – for example, all claims based on time sheet days would be classified as being complex.
The Department of Housing and Public Works (the Department) has subsequently advised that it proposes to amend the definition so that complex claims will be defined as claims for an amount more than $750,000 (or a greater amount prescribed by regulation) but will not include the requirement for costs associated with latent conditions or time related costs.
Release of securities and retention monies
The Committee commented that amendments to the Act needed to be made in order to secure retentions and securities to ensure that they were properly used and released in a timely way.
The Committee agreed with a number of recommendations (Recommendations 10-15) in the Wallace Report concerning these matters, and recommended in its report that they be adopted in either the Bill or in future amendments to the Act. Those recommendations include:
- a Construction Retention Bond Scheme should be created to independently hold securities and monies held on retention
- if the Bond Scheme recommendation is not accepted, that the Act be amended to make it an offence for a contracting party to fail to return security, as directed by an adjudicator
- an additional offence be created where a contracting party does not advise a contracted party in writing upon reaching the contract milestone where the contracted party is entitled to claim for the release of retention monies and security
- the Act be amended to permit payment claims to include claims for the release of securities and the release of retention monies
- the Act be amended to empower adjudicators to direct the release of securities.
Court to severe part of adjudication decision affected by jurisdictional error
The Bill proposes to amend section 100 of the Act to provide that if, in any proceedings before a court in relation to any matter arising under a construction contract, the court finds that only part of an adjudicator's decision is affected by jurisdictional error, the court must do the following:
- identify the part affected by the error
- allow the part of the decision not affected by the error to remain binding on the parties to the proceeding.
It was submitted by the Queensland Law Society that this amendment would make it difficult for a reviewing court to accurately identify the parts of the decision affected by jurisdictional error and would likely introduce a new wave of argument and litigation.
The Department has subsequently advised that it proposes to amend the Bill to change "must" to "may" thereby confirming that the court has discretion to sever part of an adjudication decision affected by jurisdictional error. The proposed amendment to provide the court discretion in this regard was supported (and recommended) by the Committee in its report.
The transitional provisions in the Bill provide that adjudication applications which have already been made to an ANA will be decided under the terms of the unamended Act.
However, the Bill does not deal with how payment claims made before the commencement date (but not yet progressed to payment schedules or adjudication applications) are to be treated.
While the Queensland Government advised that the amendments would only apply to construction contracts entered into after the commencement date, this is not supported by the transitional provisions.
Accordingly, as it stands, the proposed amendments would apply to all construction contracts, not just those entered into after the commencement date of the Bill.
The Committee noted that the transitional provisions of the Bill are not clear enough and recommended that the Bill should clearly state how claims, schedules and adjudication applications which have already commenced are to be treated under the amended Act.
We will keep you updated as to the developments on this issue.
What happens next?
We expect the Queensland Government will prepare a response to the report by the Committee shortly.
We also expect that, given Parliament is sitting next week, the commencement date of the Bill will be in or around October 2014.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.