Who is entitled to make Payment Claims under the Act and to whom?
If a person has undertaken to carry out construction work or supply related goods and services under a construction contract, that person is entitled to receive and recover progress payments under the contract.
A person who is entitled to a progress payment (the Claimant) may serve a payment claim on the person under the construction contract who is liable to make payment (the Respondent).
Claimants entitled to lodge payment claims against Respondents may include but is not limited to:
- Contractors claiming against clients/developers;
- Contractors claiming against owner-builders;
- Subcontractors claiming against contractors;
- Suppliers claiming against clients;
- Plant and equipment hirers claiming against clients; or
- Consultants claiming against clients.
A homeowner is excluded from the application of the Act where the construction contract is for carrying out domestic building work to the extent the contract relates to a building or part of a building where the homeowner resides or intends to reside.
An owner builder who is a home owner however, is liable under the Act and needs to be aware of their obligations under the Act as a respondent.
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What can be claimed for under the Act?
A Claimant may serve a payment claim on a Respondent for such things as but not limited to:
- Construction work undertaken;
- The supply of construction materials;
- The lease of plant or equipment;
- The provision of consulting services;
- Interest on overdue progress payments;
- Any losses or expenses incurred by the Claimant should the Respondent choose to remove from the contract any part of the work or supply, while the Claimant is exercising their rights under the Act to suspend construction work pending payment;
- Any cash security or retention monies held under the construction contract;
- At the end of the contract, a claim under the Act can be made for final payment.
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How does a Claimant make a Payment Claim under the Act?
The Claimant must prepare in writing and serve a Payment Claim addressed to the Respondents last known business address (not a PO Box), which includes the following information and wording:
- Clearly identify or describe the construction work or related goods and services to which the progress payment relates;
- State the amount of the progress payment which is due;
- And must contain words to the effect of:
"This is a payment claim made under the "Building and Construction Industry Payments Act 2004 (Qld)"
A Payment Claim can be your normal Tax Invoice or Statement as long as it includes the above information.
There is nothing preventing the Claimant from supplying other information to support the claim, such as:
- Statements detailing the extent of the work completed;
- Completion certificates;
- Delivery dockets;
- Photographs; and
- Any other applicable contract documentation requirements.
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When can a Payment Claim be made?
Payment claims may be served only within the period worked out under the construction contract, or within 12 months after the construction work or supply of related goods and services were last carried out or supplied, whichever is the later period.
Only one payment claim can be served in respect to each reference date under the construction contract. However, if a previous payment claim has been made, without reference to the Act written on the claim, that amount can be included in the later payment claim.
The reference date under the construction contract is the date upon which a claim for a progress payment may be made for the carrying out of construction work or supply of related goods and services.
If the construction contract does not provide for a reference date, the reference date is then determined to be the last day of the named month in which the construction work or related goods and services were first carried out or supplied, and the last day of each subsequent month.
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What are the Respondent's obligations when served with a Payment Claim?
If a Respondent wishes to dispute a payment claim served on them under the Act by a Claimant, the Respondent has a limited number of days within which to respond to the Claimant by serving them with a Payment Schedule.
This time limit is either 10 business days after the Payment Claim is served, or as per the time required by the relevant construction contract, whichever is the earlier period.
It is important for both Claimants and Respondents to keep accurate records in respect to recording dates of delivery and receipt of these documents, in the event the matter proceeds to Adjudication or legal proceedings.
Once served with a Payment Claim, the Respondent becomes liable to pay the entire claimed amount to the Claimant on the due date for the progress payment, unless the Respondent serves a Payment Schedule within the time limit.
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What should the Payment Schedule contain?
The Respondent must prepare in writing a Payment Schedule addressed to the Claimant, which includes the following information:
- Clearly identify the Payment Claim to which the Payment Schedule has been prepared in response to;
- State the scheduled amount of the payment, if any, that the Respondent proposes to make to the Claimant;
- If the scheduled amount stated is less than the claimed amount (the amount stated in the Payment Claim as due for payment), the Payment Schedule must clearly state why it is less.
- If the reason for the scheduled amount being less is because the Respondent is withholding payment for any reason, these reasons must also be clearly explained in the Payment Schedule.
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What are the options for the Claimant if the Scheduled Amount (Payment Schedule) is less than the Claimed Amount (Payment Claim)?
If the Respondent serves a Payment Schedule on the Claimant within the 10 business day limit, however, the scheduled amount is less than the claimed amount the Claimant has the option of applying for adjudication of the matter if they disagree with the reasons stated by Respondent for denying payment.
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What are the options for the Claimant if a Payment Schedule is served, however, the Respondent fails to pay either whole or any part of the scheduled amount?
If the Respondent serves a Payment Schedule on the Claimant within the time limit, however, fails to pay either the whole or any part the scheduled amount on or before the due date for payment, the Claimant has the choice of:
- Applying for adjudication; or
- Suspending construction work or the supply of related goods or services until paid; or
- Seeking to recover the unpaid portion as a statutory debt created under the Act (liquidated claim) in a court of competent jurisdiction; or
- Applying for adjudication and suspending construction work or the supply of related goods or services; or
- Suspending construction work or the supply of related goods or services and seek to recover the unpaid portion as a statutory debt created under the Act (liquidated claim) in a court of competent jurisdiction.
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What are the options for the Claimant if the Respondent neither serves a Payment Schedule, nor pays either whole or any part of the claimed amount on or before the due date for payment?
Should the Respondent fail to serve a Payment Schedule on the Claimant and also fail to pay either the whole or any part of the claimed amount on or before the due date for payment, the Claimant has the choice of:
- Applying for 'Optional' adjudication; or
- Suspending construction work or the supply of related goods or services until paid; or
- Seeking to recover the unpaid portion as a statutory debt created under the Act (liquidated claim) in a court of competent jurisdiction; or
- Applying for 'Optional' adjudication and suspending construction work or the supply of related goods or services; or
- Suspending construction work or the supply of related goods or services and seek to recover the unpaid portion as a statutory debt created under the Act (liquidated claim) in a court of competent jurisdiction.
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Is 'Adjudication' or 'Optional Adjudication' different?
Not in terms of the adjudication process. The term 'optional adjudication' does not appear in the Act, and it is only used by the Agency to describe an optional course of action available to Claimants in such circumstances.
The fact that a Respondent fails to pay the whole amount claimed by the due date after having previously failed to provide a payment schedule, is one of two instances under the Act where a Claimant can sue in a court of competent jurisdiction to recover the amount (liquidated claim). In other words the Act creates a statutory debt that the Claimant can sue upon.
As an alternative to suing for the amount in question under the Act (liquidated claim), the Act in these same set of circumstances provides the Claimant with an opportunity to apply for 'optional adjudication' of the dispute in an endeavour to take advantage of a unique and extra fast avenue to recover an adjudicated amount that is also a 'statutory debt'.
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Why would a Claimant be attracted to perusing the 'optional adjudication' course as opposed to the 'liquidated claim' option?
A Claimant armed with a decision by an adjudicator in a payment dispute where the Respondent has failed to pay the adjudicated amount by the time specified, can request the ANA that appointed the adjudicator to issue them with an 'Adjudication Certificate' that in essence confirms the adjudicator's decision.
In these circumstances, the Claimant files with the clerk of a court of competent jurisdiction the 'Adjudication Certificate' and an Affidavit confirming that they have not been paid.
WITHOUT A HEARING OR ANY NEED FOR THE CLAIMANT TO ATTEND, THE COURT WILL ENTER JUDGMENT AGAINST THE RESPONDENT FOR THE ADJUDICATED AMOUNT.
This procedure is certainly much more simplified than the 'liquidated claim' statutory debt process outlined below. However, by opting into 'optional adjudication' process the Claimant risks obtaining an outcome of a lesser amount then they would have been entitled to pursue under other alternative.
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What are the Claimant's rights for enforcing their payment rights under the Act via the 'liquidated claim' option?
The Act creates a statutory debt a Claimant can sue upon in two specific instances via the 'liquidated claim' option, namely when the respondent fails to pay either:
- The whole amount claimed by the due date for payment, where the Respondent failed to serve a payment schedule within time;
- The scheduled amount by the due date for payment.
Each court of competent jurisdiction has a special "speedy" process for handling statutory debts of this nature. In these cases the court is not required to assess damages, but is compelled to decide whether the Respondent has failed to pay the amount determined under the Act.
If the Respondent elects not to dispute the claim, the Claimant in the ordinary course of events would expect to be able to obtain a default judgment after 28 days and then be in a position to commence proceedings to enforce payment of the judgment.
The Act significantly limits the grounds on which a Respondent can dispute the claim. For example the respondent cannot bring any cross claims or any defence in relation to matters arising under the contract.
Possible defences that the Respondent could raise in which to dispute the claim would principally be of a technical nature. For example, there was no "construction contract" between the parties, the respondent was not served a payment claim under the Act, and the respondent served a payment schedule under the Act etc.
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What are the Claimant's rights for suspending construction work?
Under the Act a Claimant has the statutory right to suspend construction work or the supply of related goods or services in the three specific circumstances where a statutory debt created under the Act has not been paid. When a Claimant exercises their statutory rights in this regard, the Respondent cannot sue the Claimant for alleged liquidated damages due to this action.
The three circumstances where a statutory debt is created under the Act are when the Respondent fails to pay either:
- The whole amount claimed by the due date for payment, where the Respondent failed to serve a payment schedule within time;
- The scheduled amount by the due date for payment;
- The adjudicated amount within 5 days after the due date for payment or by such later date as the adjudicator determines.
A Claimant must give a Respondent 2 business days warning of their intention to suspend.
Once a Claimant has been paid, they must resume work within 3 business days.
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Why does a subcontractor have to choose between lodging an adjudication application and lodging a notice of claim of charge under the Subcontractor's Charges Act 1974?
For the past 30 years, subcontractors have enjoyed the benefits provided for under the Subcontractor Charges Act 1974. Under this piece of legislation, a subcontractor can create a statutory charge over monies payable to his or her contractor or superior contractor, and thereby secure the payment of monies owed by that person to the subcontractor, without having previously obtained a court judgment for the alleged debt.
The Act introduces an alternative statutory remedy which subcontractors may opt to employ. However, there is nothing in the Act preventing a subcontractor from utilising the Subcontractor Charges Act 1974. Therefore, subcontractors are perfectly entitled to rely on the Subcontractor Charges Act 1974 as they always have done.
In essence these two statutory instruments cater for the needs of subcontractors in vastly different ways. The Subcontractor Charges Act 1974 facilitates a process whereby monies are frozen pending final contractual resolution of a payment dispute through the courts, which in many instances can be a lengthy and costly exercise. The Act provides subcontractors with a very different alternative, namely the rapid interim resolution of a payment dispute at a reasonable cost.
The Act however, requires subcontractors to choose between lodging either a notice of claim of charge under the Subcontractor Charges Act 1974 or an adjudication application in relation to a payment dispute.
If a subcontractor could rely on both these legislative initiatives at the same time in relation to the same or any portion of construction work or related goods or services, it would be possible for a subcontractor to prevent the flow of monies from the principal to the contractor (by notice of claim of subcontractors' charge), but at the same time the builder could be obliged to comply with an adjudication decision to pay the subcontractor an amount of money. In effect the contractor would be "hit" twice for the same work.
At the end of an adjudication process, if not satisfied, a subcontractor can lodge a notice of claim of a subcontractors' charge and secure any outstanding monies, or else reactivate the adjudication process at the time of the next progress payment. These are alternative methods of approach.
An adjudication decision has the status of a competent court of jurisdiction, which if necessary can result in a judgment debt being issued for the amount in question. A judgment debt provides grounds for a subcontractor, successful in obtaining an adjudication decision in their favour, to commence bankruptcy proceedings against a defaulting individual contractor or wind up proceedings against a defaulting corporate contractor.
A 'rogue' subcontractor, of which thankfully there are very few, who is not interested in being paid for work done but absolutely committed to destroying a contractor by forcing them into some form of insolvency may be attracted to attempt to achieve such an outcome, by essentially misusing these legislative initiatives.
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