Adjudication 101 – Making a Payment Claim

Construction Litigation

If you have ever experienced delays in payments from your principal, the good news is that there is now an easier and more efficient way to secure your contractual entitlements.

The Building Industry Fairness (Security of Payment) Act 2017 (Qld) (‘BIFA’) came into force in 2018 for this very purpose – to provide a swift cash-flow solution to head contractors and sub-contractors alike through the process of adjudication. We’ve a longer article going into full detail about security of payment in Queensland, but in this article we’re going to get practical about the process.

Sounds great, how do I get started?

In this article we’ll step you through the initial process of how to get the ball rolling once payments stop, or more precisely, how to make a payment claim under the BIFA.

Who is eligible to make a payment claim?

For the BIFA to apply, you need to have a contract or agreement by which one party undertakes to carry out construction work, or related goods or services, for another party in Queensland. For example, this means that the BIFA could cover the following situation:

  • you have a written contract for the construction of a new pub at Dayboro;
  • you commence the project at the start of January and pour the concrete foundations for the pub by the end of the month;
  • generally, you will be able to submit a payment claim for the concreting works at the end of January.

Further, in Queensland, if you are carrying out “building work” as defined under the Queensland Building and Construction Commission Act 1991 (Qld) you must ensure that you have the requisite license to perform the works under the contract. (See here for more information on that topic).

When can I make a claim?

You can only issue a payment claim on or from a “reference date”.

A reference date is a date, normally agreed upon by you and your principal or by you and your head contractor. If the contract does not provide a reference date, the BIFA provides that the date will be the last day of the month. A reference date is a date from which you can request a progress payment to be made by issuing a payment claim.

For example, you agreed with your principal that payment claims for a contract are to be submitted on the 25th day of the month. If you completed 100% of the earthworks by 1 July, you would then use the 25 July reference date to claim for these works by submitting a payment claim. While you could submit a payment claim on 25 July to claim for the earthworks, you cannot:

  • submit a payment claim for 100% of the earthworks at an earlier date;
  • claim for works that were completed after 25 July; or
  • submit more than one payment claim from each reference date – if you forget to claim the earthworks in your 25 July payment claim, you will have to wait until 25 August.

What Time Limits are there on Payment Claims?

Unless your contract provides otherwise, reference dates will continue to arise until:

  • 6 months after the construction work to which the claim relates was carried out. In other works, the payment claim must include some works that were performed in the last 6 months;
  • for final payment claims, the claim must be submitted within the longer of either:
    • 28 days following the last defects liability period; or
    • 6 months after the completion of all construction work or supplying related goods and services under the contract.
  • the contract is terminated, in which case a final reference date will arise on the date of termination.

Requirements of a payment claim

A payment claim may take many forms. In essence is it a written document requesting payment for construction work or the supply of related goods or services. To constitute a ‘payment claim’ the document must at least:

  • identify the construction work or related goods or services (recipients of payment claims commonly allege that payment claims are void due to a failure to identify the works);
  • state the amount claimed;
  • request payment of the amount paid; and
  • if you are the head contractor, you must also provide a supporting statement declaring that all subcontractors have been paid, or if they have not been paid, a statement explaining why this is the case. A failure to provide this supporting statement may result in a penalty.

Further, it is also necessary to properly serve any payment claim, which should be done in accordance with the contract or on the registered office of the head contractor or principal.

Avoiding common traps

To ensure you make and respond appropriately to a payment claim ensure you do the following:

When making a payment claim:

  • Check the payment terms set out in your contract – look for reference dates
  • Lodge a new payment claim for any amount owing on or after its reference date
  • Submit your payment claim within the BIFA’s maximum time frames
  • Ensure your payment claim includes the essential details outlined above, including a supporting statement (if required)

When receiving a payment claim:

  • Be aware that a payment claim may arrive in many forms, including a tax invoice, table of claims, demand, piece of correspondence or email.
  • Never ignore a payment claim, either:
    • pay the full amount claimed within the time required (this differs depending on whether you are a subcontractor or head contractor); or
    • provide a payment schedule and pay the amount stipulated therein (if any) within 15 days of receiving the payment claim.

In short …

Making a payment claim is the first step in the process of adjudication. It is essential that you comply with the formal requirements of the BIFA, to ensure you receive the payments you deserve.

If you’re lucky the process will end here, and your claimed amount will be paid in full. If not, don’t worry – coming soon we’ll show you what to do next.

Batch Mewing acknolwedge the contributions of our law clerk Kate Ahdfeldt in helping prepare this article.

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