In brief - Claimants and respondents impacted by BCIPA changes
Significant changes to the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) came into effect on 15 December 2014.
We examine three aspects of the amended BCIPA which perhaps require a rethink.
- There's no incentive to serve a payment schedule
Before the amendments, if a respondent failed to serve a payment schedule within 10 business days of receiving a payment claim, the respondent automatically became liable for the amount claimed, and the claimant could enter judgment against the respondent in the court on that basis alone.
BCIPA therefore required strict compliance with the time frames, and enabled claimants to recover payment quickly if its payment claims were not responded to.
All that has now changed.
Under the amended version of BCIPA, if a respondent fails to serve a payment schedule in time, before taking any action to recover payment, the claimant must give a notice to the respondent of its intention to do so, known as a "Section 20A Notice".
The respondent then has a further five business days to serve a payment schedule after receiving the Section 20A Notice. If it does, it avoids becoming automatically liable for the amount claimed and the claimant's rights are the same as if the respondent had served a payment schedule in the first place.
Payment recovery under construction contracts will be slower
While this may seem fair and reasonable at first glance, the problem is that a Section 20A Notice can only be given after the due date for payment.
Under most construction contracts, the due date for payment does not arise until at least three weeks after the payment claim is served (i.e. one week after the payment schedule is due), and for most subcontracts the due date is five weeks after the payment claim is served. Sometimes payment will not be due until 30 days after the end of the month in which the payment claim is served (i.e. up to 61 days after the payment claim).
The BCIPA amendments mean that if a respondent fails to serve a payment schedule within the initial 10 business day time limit, the claimant has to wait until the due date for payment (which could be many weeks), then serve a Section 20A Notice, and then allow the respondent a further five business days to serve a payment schedule. Only then can the claimant commence action to recover payment.
Interest will accrue on overdue amounts from the due date for payment, and the claimant may have rights of suspension or termination under the contract, but in most cases a respondent seeking to avoid or delay payment will simply be able to ignore a payment claim in the first instance, force the claimant to wait until the due date for payment arises, and then respond to the Section 20A Notice once it is served.
This is contrary to the spirit and intention of BCIPA which is to provide a fast-tracked system for recovering payment under construction contracts, and is an erosion of claimants' rights.
- It may be impossible to get the benefit of the extended time limits for responding to payment claims
One of the key aspects of the BCIPA amendments is that they extend the time limits for serving payment schedules in response to payment claims where the amount claimed is more than $750,000 excluding GST (known as "complex payment claims").
The amended BCIPA provides that payment schedules in response to complex payment claims must be served within the earlier of the time required under the contract (if any) or:
- 15 business days after the payment claim is served, if the payment claim is served within 90 days after the reference date to which the payment claim relates
- 30 business days after the payment claim is served, if the payment claim is served more than 90 days after the reference date to which the payment claim relates.
Previously, respondents had 10 business days to serve a payment schedule in response to a payment claim, regardless of how much was claimed.
However, these extended time limits will not apply unless the relevant construction contract either expressly allows for them, or does not specify a time by which payment claims must be responded to. This is because BCIPA says payment schedules must be served within the earlier of the time specified in the contract, or the extended time limits set out above.
Most contracts still require payment schedules or progress certificates to be served within 10 business days of a payment claim, in which case that shorter time limit will apply rather than the extended time limits provided by BCIPA.
Extended time limits provisions may conflict with the Queensland Building and Construction Commission Act
In most cases it will be necessary to include specific provisions in a contract to allow for the extended time limits. However, those provisions are likely to be void under the Queensland Building and Construction Commission Act (QBCC Act).
Under the QBCC Act, any provision in a commercial building contract is void to the extent that it provides for a due date for payment later than 15 business days after a payment claim is served. For construction management contracts and subcontracts, the maximum payment period is 25 business days.
This means that if a principal wishes to have 30 business days to respond to a complex payment claim which is served by more than 90 days after the reference date to which the claim relates (as provided for by BCIPA), the principal will need to include a clause to that effect in the contract.
However, under the QBCC Act, the due date for payment will always be no more than 15 business days after the date of the payment claim. By the time the principal serves its payment schedule at the end of the 30 business day period, payment has already become due and interest has started accruing, and the contractor may have rights of suspension and termination under the contract.
It is not clear how this conflict between BCIPA and the QBCC Act would be resolved by the courts, but it has the potential to cause significant issues.
- Claimants have been robbed of seven hours to prepare adjudication applications
Most of the time limits under BCIPA are measured in business days. It is generally accepted that a business day does not end until midnight, and documents can be served up until midnight on the last business day of the relevant time limit.
However, under the amended Building and Construction Industry Regulation 2004, adjudication applications must now be lodged between 8:00am and 5:00pm on a business day. The purpose of this new rule is entirely unclear, and it causes a not insignificant disadvantage to claimants.
Firstly, it means that claimants have seven less hours to prepare adjudication applications after a payment schedule is served. BCIPA provides that adjudication applications must be lodged within 10 business days after a payment claim is served, but the regulation reduces that to nine business days and 17 hours. Respondents still have 10 full business days to prepare their adjudication responses.
While seven hours may not seem like much, anyone who has prepared an adjudication application knows that the last few hours of the day are crucial for finalising documents and arranging service.
Furthermore, the new rule ignores the fact that the hours between 8:00am and 5:00pm are when many claimants are on site working, and having to prepare and lodge adjudication applications during business hours can be extremely disruptive.
Given that adjudication applications can be lodged online, the rule appears to be an unnecessary inconvenience to claimants.
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.