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BCIPA Payment Process

Payment claims for construction and related work under the Building and Construction Industry Payment Act 2004 (BCIPA)


BCIPA explained

With cash flow posing a regular issue for those in the building industry, the purpose of the Building and Construction Industry Payments Act 2004 (Qld) (“BCIPA”) is to ensure that persons carrying out construction work under a construction contract, or supplying related goods or services, are able to recover progress payments under those contracts.

The BCIPA offers a process for recovery of progress claims that is typically simpler and more efficient than litigation.

The procedure for resolving disputes under the BCIPA can broadly be separated into the following four categories:

1. Issue of Payment Claim;
2. Receipt of Payment Schedule;
3. Adjudication of the dispute; and
4. Recovery proceedings.

 

What type of work is covered by the BCIPA?

For a claimant to issue a payment claim, they must first have carried out construction work or supplied related goods or services under a construction contract in Queensland.

Construction work is broadly defined and not only includes the building, repair and demolition of buildings or structures, but also work carried out in relation to those buildings, for example the installation of heating, electricity and air conditioning services.

Related goods and services will also be subject to the BCIPA, including the supply of plant and equipment or materials for use in carrying out the construction work, as well as related services such as architectural, engineering and soil testing services.

Payment claim

A payment claim can only be submitted in respect of a reference date. A reference date is the date on which a payment claim can be made by the person who is purportedly owed money under a construction contract (“claimant”).

The relevant construction contract may specify how a reference date is to be calculated. If the construction contract is silent on the issue, the BCIPA deems the reference date to be the last day of the month in which the relevant work was first carried out or goods or services provided, and on the last day of each subsequent month.

For a payment claim to meet the requirements of the BCIPA, it must:

1. identify the construction work or related goods or services to which the claim relates;

2. state the amount of the payment claim; and

3. state that it is made under the BCIPA.

Previously, where the construction contract did not specify a date, a payment claim could be served up to twelve (12) months after the work was carried out or goods or services were supplied. However, recent amendments to the BCIPA have reduced that period to six (6) months. Where the payment claim is a final payment claim, the time to submit that claim will be the later of:

1. the period worked out under the relevant construction contract, if any;

2. 28 days after the end of the last defects liability period; or

3. six months after the work was completed or the goods or services were supplied.

Only one payment claim may be submitted in relation to any one reference date. Likewise, a single payment claim should not be submitted in respect of multiple construction contracts.

Payment schedule

On receipt of a payment claim, if the recipient of the payment claim (“respondent”) wishes to dispute some or all of the amounts claimed in the payment claim, they must serve a payment schedule on the claimant.

The time frame for service of a payment schedule is the earlier of either the time specified under the construction contract or:

1. for a payment claim of $750,000 or less, ten (10) business days after the payment claim was served; or

2. for a complex payment claim (a claim in excess of $750,000), either fifteen (15) or thirty (30) days after the payment claim was served, depending on how long the claim was served after the relevant reference date.

Previously the consequences were extremely severe for a respondent who failed to submit a payment schedule within the relevant period. A respondent who did not do so would not be entitled to raise any defence or counterclaim to recovery proceedings commenced by the claimant in respect of the progress claim. However, recent amendments to the BCIPA provide the respondent with a second opportunity to submit a payment schedule. Before a claimant may apply for adjudication or commence recovery proceedings, they must first give the respondent written notice of their intention to do so and provide the respondent with a further five (5) business days to submit a payment schedule. This effectively provides the respondent with a second chance (albeit with a very short response time) to submit a payment schedule. This notice by the claimant must be made within twenty (20) business days after the payment due date.

Adjudication

A claimant may apply for adjudication by filing an adjudication application:

1. where the respondent submits a payment schedule disputing payment, within 10 business days from receipt of the payment schedule;

2. where the respondent submits a payment schedule, but fails to pay the whole or part of the scheduled amount by the due date for payment, within 20 business days from the due date for payment;

3. where the respondent fails to submit a payment schedule (after being given the abovementioned second chance to do so), within 10 business days commencing at the end of the five (5) business day notice period.

On receipt of the adjudication application and any response submitted by the respondent, the adjudicator will determine the application and issue their decision stating the amount, if any, that the respondent is to pay to the claimant. If the respondent fails to pay the adjudicated amount, the claimant may request that an adjudication certificate be issued.

Recovery proceedings

On obtaining an adjudication certificate, the claimant may file the certificate in the relevant Court where it will take effect as a judgment.

Where a respondent fails to submit a payment schedule on receipt of a payment claim, and fails to do so again after receiving notice of the claimant’s intention to take recovery action, the claimant may commence proceedings against the respondent for the full amount claimed. In these circumstances, the respondent is not permitted to raise any defence or counterclaim against the claimant, and any defence would be limited to challenging the validity of the payment claim. A defence on other grounds would be susceptible to an application for summary judgment.

Once judgment has been obtained, the claimant may exercise the usual enforcement options available under the Court rules.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 23 May 16

QLD Building Amendments

 Alert: Recent amendments to building licensing and regulation in Queensland 

Subcontractor liability for defective building work

With the recent release of the ‘Accountability for Subcontractor Defects Policy’ by the Queensland Building and Construction Commission (“QBCC”), the consequences of defective building work have become much more serious for subcontractors.

Previously, whilst the QBCC did have the power under the Queensland Building and Construction Commission Act 1991 (“QBCC Act”) to direct subcontractors to rectify defective work, the QBCC would typically only issue such directions and take enforcement action against principal contractors. The new policy provides that where the defective work is found to be caused by a subcontractor, the QBCC will pursue them before looking to the principal subcontractor.

The new policy takes effect from 1 June 2015.

Permitted individual applications

Under the QBCC Act, the holder of a QBCC licence will become automatically categorised as an ‘excluded individual’ if they:

  1. become bankrupt or take advantage of bankruptcy laws; or
  2. were a director, secretary or influential person of a company at the time of, or within a year after, a provisional liquidator, liquidator, administrator or controller was appointed to the company, or the company is otherwise wound up.

This would result in the licensee being disqualified from holding a QBCC licence for a period of five (5) years. A second disqualification results in a lifetime ban.

Despite what would appear to be a distinct lack of consultation with the industry considering the significant impact they will have, further amendments to the QBCC Act have now come into force that will have the effect of removing a licensee’s entitlement to apply to become a permitted individual.

Previously under the QBCC Act, the holder of a QBCC licence who became categorised as an ‘excluded individual’ could apply to the QBCC to be categorised as a ‘permitted individual’. On triggering one of the relevant events, licensees would automatically be classed as an ‘excluded individual’.

These amendments have removed a licensee’s ability to make a permitted individual application. This will have a significant impact on persons who may have previously, in their particular circumstances, been successful in applying for classification as a permitted individual and therefore been able to maintain their licence and livelihood.

Other relevant amendments include:

  1. the initial disqualification period for individual licensees has been reduced from five (5) years to three (3) years; and
  2. whilst previously any company being placed into liquidation or administration would be sufficient to trigger a ‘relevant event’, it will now be necessary for the company in question to have directly or indirectly carried out building work or building work services. This will mean that a licence holder will not be disqualified from holding a QBCC licence where a company of which they are an officeholder or influential person is placed into liquidation, administration or is otherwise wound up, and that company is not involved in the building industry.

These amendments took effect on 1 July 2015.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Key words: Commercial Litigation, Building & Construction, QBCC, Queensland Building and Construction Commission, Defective work, Excluded individuals
 

Posted in: Commercial Litigation News at 02 March 16