As noted in our last update, the amendments to the Building and Construction Industry Payments Act 2004 (Qld) (Act) came into effect on Monday, 15 December 2014, and apply to any new payment claim regardless of whether the contract was entered into before or after the amendments came into effect.
The amendments also apply, to some extent, to payment claims served prior to 15 December 2014. As to the precise extent to which they apply please see our update issued last week which outlined the transitional arrangements.
The purpose of this further update is to provide a refresher on the substantive amendments in advance of the start of 2015. Amongst other significant amendments, a new scheme in relation to the adjudication of "complex claims" has been introduced.
Additionally, amendments to the Building and Construction Industry Payments Regulation 2004 (Regulation) also came into force on 15 December 2014, which introduces prescribed fees that must accompany applications and specifies the time when applications will be deemed to have been made.
We will deal with the changes in the order that they arise in the context of a payment claim that progresses to adjudication. Starting with changes effecting the payment claim itself.
Time-frame for serving a payment claim
The limitation period for the service of a payment claim has changed.
Payment claims must now be served within the later of the date provided in the contract, or the period of 6 months after the construction work was carried out, or the related good and services were supplied. This replaces the 12 month period which was previously allowed.
Please note that to accommodate for the fact that, under current contracts, the 6 month period may have already passed, there is a transitional regime in place for the next 6 months which may provide claimants with some extra time. If you have any queries regarding the transitional regime then please review our last update or call us.
Time-frame for serving a payment schedule
In recognition that the "one size fits all" approach is not appropriate for large or complex claims, the existing statutory timeframes have been overhauled, and a "dual model regime" has now been implemented.
The amended Act introduces a distinction between "standard" payment claims, and "complex" payment claims. This issue first becomes relevant for respondents at the payment schedule stage.
Claims for an amount of $750,000 (exc. GST) or less are "standard payment claims" for which the time period within which to serve a payment schedule remains the same (i.e. a respondent has 10 business days to serve a payment schedule after the payment claim is served).
Claims for more than $750,000 (exc. GST) are "complex payment claims". For a complex payment claim, a respondent has a further 5 business days (so 15 business days in total) to serve a payment schedule or on an earlier date if specified in the contract. However, if the complex payment claim has been served more than 90 days after the reference date to which it relates, a respondent has 30 business days in which to serve a payment schedule.
In each case, however, the time-frame may be limited by the terms of your contract. This is a critical point to appreciate.
Most current contracts will contain a provision that provides that a progress certificate is to be provided within a certain amount of time. If the time provided in the contract is shorter than the 15 business days then, when a "complex claim" is received, the issuer of the progress certificate may consider only serving a progress certificate under the contract on the earlier date but waiting until the 15 business days has passed before serving a payment schedule under the amended Act. When doing so, it would need to be made clear that the progress certificate is not a payment schedule for the purposes of the Act.
In contracts where the progress certificate is deemed to be a payment schedule under the Act then the issuer of the progress certificate should operate on the basis that it is issuing the payment schedule at the same time that it is issuing the progress certificate. Accordingly, under these contracts, principals and main contractors will not be able to benefit from the extra 5 business days the amended Act provides for complex claims.
For all new contracts, a scheme which reflects the new dual regime should be incorporated.
Lodgement of an adjudication application
All adjudications must now be lodged with the QBCC Registrar. This can be via delivery to the QBCC's office in West End, by post or via the QBCC's online portal.
The time-frame in which the application is to be made has not been amended by the Act (i.e. it is still 10 business days from when the payment schedule is received). However, be aware that if you lodge the application after 5pm, it will be taken to be received the next business day.
When making an adjudication application, it now must be accompanied by a fee prescribed by the amended Regulation, which range from $50 to $5,000 depending on the claimed amount. Note that this is not the adjudicator's fees.
The application must also be in the approved form, as approved by the Commissioner under the Act. This form is generated via the QBCC's website.
Lodgement and service of an adjudication response
The amendments relating to complex claims have a major impact at the adjudication response stage.
Firstly, the amendments attempt to eliminate some of the unfairness created by "ambush claims" by removing the limitations around providing new reasons for withholding payment in the adjudication response.
The position under the unamended Act was that a respondent could not include reasons for withholding payment in its adjudication response that were not included in its payment schedule. That position remains for standard payment claims only. An adjudication response in respect of a complex claim can include any reasons whether raised in the payment schedule or not.
Secondly, the amendments recognise the volume of material and issues that often face respondents by extending the time-frames in which respondents must lodge their adjudication response.
For standard claims, respondents must lodge their adjudication response within the later of:
- 10 business days after receiving the application
- 7 business days after receiving notice of the adjudicator's acceptance.
For complex claims, respondents must lodge their adjudication response within the later of:
- 15 business days after receiving the application
- 12 business days after receiving notice of the adjudicator's acceptance.
Significantly, for complex claims respondents are now able to apply to the adjudicator for an extension of time of up to 15 additional business days. Such an application must be in writing, include reasons for requiring the extension of time, and be made within the later of:
- 5 business days after receiving the adjudication application
- 2 business days after receiving notice of the adjudicator's acceptance of the adjudication application.
All adjudication responses must be served on the claimant no more than 2 business days after it was given to the adjudicator. There is no corresponding requirement for the service of the adjudication application although the time for a respondent to lodge its adjudication response obviously only commences once the adjudication application is served.
Claimant's right of reply to new reasons in the adjudication response (complex claims only)
If a respondent has included new reasons in its adjudication response that were not included in its payment schedule, the claimant is entitled to lodge a reply to the new reasons only, within 15 business days after receiving the adjudication response.
However, like with the time-frame for the submission of an adjudication response, the claimant may apply for extension of time of up to 15 additional business days.
Crucially, unless the claimant lodges the reply within 5 business days of receiving the adjudication response, it must give the adjudicator notice of its intention to submit a reply.
This reply must be served on the respondent no more than 2 business days after it is given to the adjudicator.
The adjudication decision
Adjudicators now have an additional 5 business days to decide a complex claim. This is 15 business days in total after the adjudication response is served or, if the claimant has served a reply, 15 business days after the reply is submitted.
However, for complex claims, unless the parties agree in writing to give the adjudicator an extension of time, the adjudicator may grant him or herself an extra 5 business days to decide the application on top of the 15 business days. There is no provision requiring the adjudicator to give notice to the parties of their decision to extend their time to decide the application, but presumably such notice will be given.
The situation in relation to standard payment claims remains the same – the adjudicator has 10 business days to determine the application from the lodgement of the adjudication response. This may be extended by agreement in writing between the parties.
Challenging the adjudication decision
In response to the considerable volume of proceedings commenced in the Supreme Court in which orders are sought to have an adjudication decision declared void, the amended Act now provides that the adjudicated amount must be paid into court pending final resolution of the proceedings.
However, this provision only applies in circumstances where the adjudication decision has already been filed as a judgment debt.
This does not, therefore, apply where proceedings are commenced before the judgement debt is obtained and an order is sought restraining a claimant from obtaining the adjudication certificate (a necessary pre-requisite to obtaining the judgment debt). In those circumstances, a requirement to pay the adjudicated amount into court will be a matter for the court's discretion or to be agreed between the parties.
If the court ultimately determines that a portion of the decision is affected by jurisdictional error, the court may allow the unaffected portion to remain binding on the parties. It is thought that this will cause parties to think twice before seeking to have parts of the decision set aside.
The amendments are hugely significant. Those who fully comprehend them will be best placed to ensure they are not caught out by the changes.
If you have any questions about how the amendments apply to your current contracts and payment cycles then please do not hesitate to contact us.
Thank you for reading this and all of our updates this year. We take this opportunity to wish you a safe and restful holiday period and look forward to seeing you in 2015 at our seminar series.
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.