Jun

26

Building and Construction Industry Payments Act

Posted by

Background and Overview

On 1st October 2004, the Building & Construction Industry Payments Act 2004 (“BCIPA”) came into effect.

The object of the Act is to ensure speedy recovery of progress payments for work carried out under a Construction Contract, or for related goods and services under a Construction Contract.

The BCIPA will affect Construction Contracts entered into after 1 October 2004 for work performed in Queensland.

The Act follows legislation in both New South Wales and Victoria and has also taken into account Court decisions from those States.

In New South Wales alone between 3 March 2003 and 31 May 2004, the total amount of claims adjudicated under their legislation amounted to $230,882,607.00.

The Act provides for an interim (not a final) determination of claims for progress payments that are either disputed or not paid. It is obvious this will assist the cash flow of contractors and sub-contractors

 

Application of the Act

The Act applies to all “Construction Contracts” entered into after 1 October 2004.

The Act does not apply to Construction Contracts:

  1. that form part of a Loan Agreement, Guarantee or Insurance Contract;
  2. that are for domestic buildings, except owner/builders or domestic builders who are registered builders;
  3. that are for Contracts where the amount payable is calculated other than by reference to the value of work carried out of the value of goods and services supplied;
  4. that are for contracts entered into with employees;
  5. that are for works carried out or goods and services supplied, outside of Queensland.

 

Construction work includes:

  1. buildings and structures, road works etc;
  2. installations into buildings, such as air conditioning, lighting etc;
  3. site clearance, earth moving, foundations, scaffolding etc;
  4. cleaning, painting and decorating;
  5. building work under the Queensland Building Services Authority Act.

 

Construction Contracts also refer to related goods and services which include:

  1. materials and plant used in construction work;
  2. labour;
  3. architectural, design, survey or quantity surveying works;
  4. engineering, decoration, landscape advisory services;
  5. soil testing services.

 

Parties are unable to contract out of the Act, therefore the Act will apply in all relevant Construction Contracts.

As outlined above, the Act only intends to provide an interim decision on what is payable at a particular time. It cannot be utilised to decide what amount is ultimately payable between the parties and therefore does not affect either party’s rights under the Contract, or at law, to obtain a final determination from a Court as to what is ultimately payable from one party to the other.

 

Claim – Adjudication Process

 

Progress Payments

The Act sets up time frames in which a Claimant must make a claim. Claims must refer to “Reference Dates” which, is:

  1. the date on which a claim for a progress payment made be made under the relevant Construction Contract;
  2. if there is no such date, the last day of the month during which construction work first commenced and the last day of the month thereafter.

 

Payment Claim

If a Claimant wishes to make a claim under the Act, it must provide to the other party (“the Respondent”) a Payment Claim, which must be in writing and:

  1. identify the construction work or related goods and services to which the claim relates;
  2. state the amount of the Progress Payment claimed; and
  3. state that the claim is made under the Building & Construction Industry Payments Act 2004.

There are a number of technical matters which arise from the content and service of the Payment Claim. Prior to a Payment Claim being made, it is strongly recommended that the Claimant consult with its legal advisor.

 

Payment Schedule

Within 10 business days after a Payment claim is served, the Respondent must either:

  1. pay the amount claimed; or
  2. serve a Payment Schedule on the Claimant.

The Payment Schedule is a very important document as it must:

  1. identify the Payment Claim to which it relates;
  2. indicate the amount that the Respondent proposes to pay (“the Scheduled Amount”); and
  3. if the Scheduled Amount is less than the amount claimed, specify reasons as to why the amount is different to that claimed.

 

It is very important that full particulars of the reasons for non-payment are outlined in the Payment Schedule as the Respondent is unable to rely on any further reasons if the matter proceeds to adjudication.

If the Respondent does not serve a Payment Schedule in time and fails to pay the claim by the due date, the Claimant can recover the whole amount of the claim as a debt in Court or make an Adjudication Application under the Act. The Claimant is also entitled to suspend works.

It is very important that if any contractor receives a Payment Claim that they immediately consult their legal advisor to ensure that their rights are adequately protected and that a Payment Schedule is served in the correct manner and within the correct time period.

 

Adjudication Application

A Claimant can apply for an Adjudication Application where:

  1. no payment has been made after service of a Payment Claim;
  2. no Payment Schedule is received;
  3. the Schedule Amount outlined in the Payment Schedule is less than the Payment Claim;
  4. the Schedule Amount is not paid, or only partially paid.

 

The Adjudication Application must be made within very strict time limits. There is a range of time limits applicable depending on the individual circumstances.

The content of the Adjudication Application must satisfy the requirements of the Act and must contain submissions that the Claimant intends to rely upon with respect to its Application.

An Application Fee must be paid to the Authorised Nominating Authority and the Adjudication Application must be served on the Respondent. There are specific rules relating to correct service. Again, any potential Claimant should seek legal advice to ensure that all appropriate provisions of the Act are followed.

After the Adjudication Application is served, the Respondent must serve an Adjudication Response, generally within the later of:

  1. 5 business days after being served; or
  2. 2 business days after it receives notice of the Adjudicator’s acceptance of the Application.

The Adjudication Response must also comply with the requirements of the Act. An Adjudication Response can only be given if the Respondent served a Payment Schedule within the prescribed time, and it cannot add any further reasons for disputing the payment that were not previously identified in the Payment Schedule.

 

Adjudication

The Adjudication is a “rough and ready” process to assess an entitlement to progress claims. The Adjudicator can only rely upon limited information that is contained within the documentation provided (i.e. Construction Contract, Payment Claim, Payment Schedule, Adjudication Application, Adjudication Response).

There is no formal hearing, however the Adjudicator can inspect works, call a conference or request further submissions from the parties on limited issues.

The Adjudicator must make a decision within 10 business days of receiving the Adjudication Application.

 

Enforcement of, and Challenging, Adjudications

If an Adjudicator makes a decision that an amount of money is required to be paid by a Respondent to the Claimant, that amount must be paid within either 5 business days after the Adjudicator’s decision is served on the Respondent, or a later date if decided by the Adjudicator.

If the Respondent fails to pay the whole or any part of the Adjudicated Amount, the Claimant can request the Authorised Nominating Authority to issue an Adjudication Certificate.

The Adjudication Certificate can then be filed in Court as a Judgment for the debt outstanding.

In limited circumstances, the Adjudicator’s decision can be challenged in a Court of law. It is however important to remember that the Adjudicator’s decision is an interim determination only. The parties rights to obtain a final determination of the amount outstanding in a Court are not inhibited by the introduction of this legislation.

 

Conclusion

The introduction of the Building & Construction Industry Payments Act 2004 heralds a new regime for the payment of monies within the building and construction industry in Queensland.

In times to come, it will represent a significant cultural change in the way that payments are claimed and paid. The legislation provides for a tougher payment regime and for quicker resolution of disputes.

It is very important that if you are to make a Payment Claim, or receive a Payment Claim that you urgently seek legal advice. There are a number of requirements under the Act that are not addressed within this general summary that must be complied with. Legal advice should be sought in that regard.

Byron Cannon, Director of  Ferguson Cannon is qualified and experienced to assist any client who may find themselves within the jurisdiction of the Building & Construction Industry Payments Act 2004.  Byron acts for many clients in the Building industry including Builders, suppliers, subcontractors and consumers.

Tags: , , , , ,

Category: Business & Corporate Services, Construction Law, Contract Law, Conveyancing, Fact Finders, General, Property Development

Comments are closed.