The much anticipated amendments to the Building and Construction Industry Payments Act 2004 (Act) came into effect on Monday, 15 December 2014.
The amendments contain some critical differences to those planned as part of the original amendment bill. Most significantly, the amendments now apply to any new payment claim regardless of whether the contract was entered into before or after the amendments came into effect.
Principals, head contractors and subcontractors alike must understand the impact of the amendments immediately because they apply as of 15 December 2014 to all contracts for construction work being carried out in Queensland.
This will reduce the problem of dual systems for new and existing contracts that would have existed under the amendments originally planned. But there is no longer the "settling in period" which would have occurred had the changes only applied to contracts entered into post the amendments coming into effect.
The purpose of this update is to explain the transitional arrangements which are obviously immediately relevant to the makers and receivers of payment claims under contracts in the lead up to Christmas.
What is the impact on payment claims currently being processed or about to be served?
If the payment claim was served on or after 15 December 2014, the amended Act will apply in its entirety. This includes a payment claim that includes a claim for work done prior to 15 December 2014.
If the payment claim was served before 15 December 2014 and there are Outstanding Matters (e.g. a payment schedule is still to be served or the payment claim is to be adjudicated), then a transitional version of the Act will apply to those matters. The transitional version is essentially the unamended Act but with certain specific parts of the amended Act incorporated as detailed below.
Any entitlement, obligation or matter that arises under the Act that is yet to be complete or has yet to expire, may be an Outstanding Matter to which the transitional version of the Act (being a mixture of the unamended and the amended Act) will apply.
Essentially, the effect of the transitional version is that the unamended Act will apply to Outstanding Matters arising in respect of a payment claim served before 15 December 2014, save for the provisions in the amended Act relating to:
- the transfer of functions from ANAs (which under the unamended Act received adjudication applications and nominated adjudicators) to the Adjudication Registrar at the QBCC (who under the amended Act will receive adjudication applications and appoint adjudicators);
- the court's entitlement to sever any part of an adjudication decision infected by jurisdictional error; and
- the extended definition of a "business day" (including the period between 22 December and 10 January not being defined as a business day).
Given the time of year, the change to the definition of business day and the way that it affects claims already served is particularly relevant.
By way of example, if a Claimant receives an adjudication decision in its favour today then the Respondent will have until 15 January 2015 to pay by virtue of the extended definition of business day in the new Act (that is, 5 business days with the first one being on 19 December and the last four being from Monday, 12 January to Thursday, 15 January).
However, other provisions in the amended Act such as those relating to complex claims and a respondent's entitlement to raise new reasons for withholding payment in the adjudication response, do not apply to claims served before 15 December 2014.
Other points to note regarding the transition
The revised transitional provisions have clarified a number of other issues that were anticipated to arise upon commencement of the amendments. Those issues and the answers provided by the new transitional provisions include the following:
- Dissolution of ANAs upon commencement of the amended Act
If, as at 15 December 2014, an adjudication application has been lodged with an ANA but no adjudicator has been appointed, the ANA is still required to refer the application to an eligible adjudicator (as it would have done under the unamended Act) as soon as practicable.
- Deadline for serving a payment claim
The Act provides that a payment claim must be served within the later of the period worked out under the contract (if any), or the period of:
- 12 months (unamended Act); or
- 6 months (amended Act),
after the construction work to which the claim relates was last carried out.
As at 15 December 2014, the 6 month deadline may have already passed for some claimants under existing contracts. However, to cure this disadvantage, the amended Act provides that for existing contracts, claimants are entitled to serve claims within the earlier of 12 months of when the work was last carried out, or 6 months after commencement of the Act (i.e. 15 June 2014).
The transitional arrangements are necessary but potentially confusing. If you have any questions about how the transitional arrangements apply to your current contracts and payment cycles then please do not hesitate to contact us.
A refresher on the substantive changes introduced by the amended Act will be provided before Christmas.
This update has focussed on the transitional arrangements and how the amended Act applies to contracts entered into, and payment claims made, prior to the commencement of the amendments. We have previously provided an update that contained information regarding the planned substantive amendments to the Act. These amendments have now largely been incorporated into the amended Act. Prior to Christmas we will provide a refresher on these substantive amendments which, amongst other significant amendments, introduce a new scheme in relation to the adjudication of complex claims.
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.