Security of payment in Queensland is aimed at facilitating fast payments for building and construction industry participants who have performed construction work or supplied related goods and services.
The relevant QLD legislation is the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (‘BIFA’). The BIFA proclaims its main purpose is to “help people working in the building and construction industry in being paid for the work they do.”
The BIFA came into force in 2018, repealing the previous Queensland security of payment legislation which had existed since 2004 (the Building and Construction Industry Payments Act – or, BCIPA). The BIFA has changed a number of aspects from its predecessor, and for better or worse, it is the now the law in Queensland.
In this article we’ll set out what the BIFA covers, how it can be used, and some tricks and traps along the way.
When will the BIFA apply?
With some minor exceptions, the BIFA applies if you have a contract, agreement or other arrangement (whether written or oral) under which one party undertakes to carry out construction work for, or supply related goods or services to, another party for construction work in Queensland. This leads to some obvious questions:
What is construction work?
The definition of ‘construction work’ is broad and includes the obvious such as the construction, alteration, repair or maintenance of buildings or structures, power lines, airport runaways, docks and harbours, railways, pipelines and sewers. It also includes the installation of, for example, air conditioning, lighting, ventilation and power supply.
Some less obvious examples of construction work include the installation of fire protection, security and communications systems and the erection, maintenance or dismantling of scaffolding.
What are related goods or services?
Related goods includes materials and components which form part of any building, structure or work arising from construction work. It also includes plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work, such as a generator or a crane.
Related services includes the provision of labour to carry out construction work, architectural, design, engineering, and surveying services relating to construction work.
How to get paid under the BIFA
So you’ve got a construction contract to which the BIFA applies— what does this mean in terms of getting paid or having to make payment?
Below is a breakdown of the steps that can be taken and the documents that will need to be prepared and given.
The first step in the payment process is for the person who has performed construction work, or supplied related goods or services, to submit a payment claim. This person (the claimant) will be entitled to make a payment claim from each reference date.
A reference date is usually a date worked out under the contract as the date on which a claim for payment may be made. Otherwise, if the contract does not provide this date, it will be the last day of each month while the contract is on foot. A reference date will also arise on the date the contract is terminated. The claimant cannot make more than 1 payment claim for each reference date under the contract.
What to include in a payment claim?
A payment claim:
- Must be in writing— hard copy or electronic copy;
- Must identify the construction work or related goods and services to which the claim relates— this should be as specific as possible;
- Must state the amount claimed;
- Must request payment of the claimed amount— a written document bearing the word ‘invoice’ satisfies this;
- Must be made to the person who is or may be liable to make the payment (the respondent)— typically the Principal or head contractor;
- May include an amount that was included in a previous payment claim;
- Will be a “standard” payment claim if the amount claimed is less than $750,000.00 ex GST, otherwise it will be a complex payment claim.
Timing of the payment claim
The payment claim should be given before the end of the longer of:
- the period worked out under the contract; or
- 6 months after the construction work to which the claim relates was last carried out or the goods and services to which the claim relates were last supplied.
- However, be aware that a different timeframe may apply to a final payment claim (most commonly made at the expiry of the defects liability period)
After being given a payment claim, the respondent can either (i) pay the claimed amount in full; (ii) pay only part of the payment claim; or (iii) provide a payment schedule.
If the respondent does not plan on paying the claimed amount in full, then, by far the best option for the respondent is to provide a payment schedule – that is, the response to the payment claim.
Providing a payment schedule keeps the payment process going, protects the respondent from being faced with some serious consequences and gives the opportunity to dispute the claimant’s entitlement to payment where necessary.
What to include in a payment schedule
- The payment schedule must:
- Be in writing;
- Identify the payment claim to which it responds;
- State the amount of payment, if any, the respondent proposes to make;
- If the amount proposed to be paid is less than the amount stated in the payment claim— state why the amount proposed to be paid is less, including the reasons for withholding any payment.
Timing of the payment schedule
- The respondent must give the payment schedule to the claimant within the earlier of:
- the period, if any, within which the respondent must give the payment schedule under the relevant construction contract; or
- 15 business days after the payment claim is given to the respondent.
Consequences of failing to provide a payment schedule
If the respondent does not give a payment schedule in time, the respondent may face penalties, disciplinary action and will be liable to pay the entire amount claimed by the due date. Failing to then pay this amount could result in:
- An adjudication application to which the respondent will be unable to provide an adjudication response;
- Summary judgment being sought by the claimant; and/or
- Suspension of the works under the Contract.
Because of the serious repercussions of not giving a payment schedule, unless the respondent pays the full claimed amount, it is best practice for the respondent to always give a payment schedule that contains sufficient reasons why payment is being withheld or reduced. If the respondent does this, then the claimant’s only real option to pursue the claimed amount is to proceed to adjudication.
An adjudication application for adjudication of a payment claim is made to the registrar who is appointed by the Queensland Building and Construction Commission.
An adjudication application can only be made if the respondent failed to pay an amount owed to the claimant by the due date for the payment or the amount stated in the payment schedule, given in response to the payment claim, is less than the amount stated in the payment claim.
What to include in an adjudication application
- An adjudication application:
- Must be in the approved form;
- Must identify the payment claim and payment schedule (if any) to which it relates;
- Must be accompanied by the fee prescribed by regulation for the application (depending on the size of the payment claim— currently can range from $57.35 to $5,737.60);
- May include the submissions relevant to the adjudication application the claimant chooses to include;
- If the adjudication application relates to a payment claim of less than $25,000, then the application must be less than 10 pages with margins of 2.54cm and must be in a font size of at least 10 point. It can also only be accompanied by certain documents;
- A copy must be provided to the respondent.
Timing for an adjudication application
The time to make an adjudication application is:
- for an application relating to a failure to give a payment schedule and pay the full amount stated in the payment claim—within 30 business days after the later of the following days—
- the day of the due date for the progress payment to which the claim relates; and
- the last day the respondent could have given the payment schedule;
- for an application relating to a failure to pay the full amount stated in the payment schedule—20 business days after the due date for the progress payment to which the claim relates;
- for an application relating to the amount stated in the payment schedule being less than the amount stated in the payment claim—30 business days after the claimant receives the payment schedule
- An application made after 5pm will be deemed to have been made the next business day.
Once an adjudication application is made, the registrar will provide it to an adjudicator who will communicate its acceptance to the parties.
The claimant will need to provide a copy of the adjudication application to the respondent, following which, the ball is then in the respondent’s court to provide an adjudication response.
The respondent can only give an adjudication response if it gave a payment schedule in response to the original payment claim.
What to include in an adjudication response
- The adjudication response:
- Must be in writing;
- Must identify the adjudication application to which it relates; and
- May include the submissions relevant to the response the respondent choose to include.
- However, the adjudication response must not include any new reasons for withholding payment that were not included in the respondent’s payment schedule.
Timing of the adjudication response
- If the adjudication response is in relation to a standard payment claim, the respondent must give the adjudicator the adjudication response within the later of:
- 10 business days after receiving a copy of the adjudication application; and
- 7 business days after receiving notice of the adjudicator’s acceptance of the adjudication application
- If the adjudication response relates to a complex payment claim (that is, over $750k), then these time frames are extended to the later of 15 or 12 business days respectively.
- Further, with a complex payment claim, the respondent may also apply to the adjudicator for an extension of time of up to 15 additional business days. Any application for an extension must be in writing, include the reasons for requiring the extension of time and be made within the original timeframe.
If an adjudication response is given to the adjudicator, a copy must also be given to the claimant within 2 business days. After this, for the most part, all the parties can do is sit tight and await the adjudicator to give its decision.
While coming to its decision, the adjudicator can ask for further written submissions from either party, may call conferences of the parties and may carry out an inspection of any matter to which the claim relates. The adjudicator will also decide their fees and the proportion that each party is liable to pay.
Time for an adjudication decision
- For a standard payment claim the adjudicator’s decision is due within 10 business days after:
- they receive the respondent’s adjudication response, or;
- if no response was given, the last day on which the respondent could have given the adjudicator a response.
- If the claim relates to a complex claim, the adjudicator will have 15 business days. However, the adjudicator may also seek to have the time to decide the adjudication decision extended by up to a 5 business days or an additional period agreed by the claimant.
What to do following the adjudication decision?
- Following the decision, the respondent must make the payment, if any, awarded within 5 business days (unless the adjudicator decides a later date for payment). Failing to do so can result in the incurring of penalties and disciplinary action. The claimant will also be able to enforce the decision as a judgment debt.
- The scope to dispute an adjudication decision is very limited, generally being restricted to jurisdictional issues— essentially issues indicating the adjudicator did not have the power to make the decision it did. This means that even if the adjudicator made a clear mistake, as long as the adjudicator made a decision that was within the scope of its power, this will not necessarily invalidate the decision, particularly since the adjudicator can amend any minor errors under the slip rule.
An important feature to be aware of for all parties who engage in the payment/adjudication process, is that an adjudication decision is an interim decision, meaning that it does not prevent the parties disputing over the same issues in court or under the dispute resolution process contained within the construction contract.
What else is in the BIFA
The BIFA also provides for the creation of project bank accounts and subcontractors’ charges, all provided for as a means to secure payment for construction industry participants.
If you would like to know more about project bank accounts, subcontractors’ charges, or discuss in greater detail how the payment/adjudication process works, please get in touch.