Getting paid in the construction industry

In the Security of Payment Act (also colloquially known as the “BIFA”), the “security of payment” generally refers to a building contractor’s right to receive payments as they fall due under a contract. All states and territories have similar legislation.

The Security of Payment Act grants a building contractor an entitlement to progress payments, regardless of whether or not a contract provides for them. It also sets out the procedures for payment claims, the adjudication of disputed claims, and the recovery of payments, for construction work.

“Construction work” under a contract includes:

• the construction, alteration, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or other structures (such as walls, roadworks, powerlines, aircraft runways, harbours, railways, waterways, sewers and industrial plant);
• the installation of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems;
• the cleaning of buildings, structures and works as part of construction work;
• any operation necessary to complete the above work (such as site clearing, excavation, the laying of foundations, and the use of scaffolding); and/or
• painting or decorating.

Payment claims

A progress payment under a construction contract becomes payable on the date stated under the contract, or otherwise 10 business days after the day a “payment claim” is made.

A payment claim is a written request for payment for construction work (or related goods and services) which:

• identifies the construction work (or goods and services);
• states the amount of the payment; and
• requests that the amount be paid.

A claim for a progress payment must be made before the end of the contract period, or within six months of the work being done or the related goods and services being provided (whichever is the longest period).

A claim for a final payment must be made before the end of the period calculated in accordance with the construction contract, 28 days after the end of the last defects liability period for the construction contract, or within six months of the work being done or the related goods and services being provided (whichever is the longest period).

A claim must have a supporting statement with it that declares all subcontractors have been paid, or states the details of any subcontractors who have not been paid.

Payment schedules

If the amount claimed will not be paid in full on or before the due date, a payment schedule must be supplied to the claimant. A payment schedule is a written document that:

• identifies the payment claim;
• states the amount that will be paid; and
• provides reasons the amount may be less than the amount claimed.

The payment schedule must be provided within 15 business days of receiving a payment claim, or earlier if required under the contract. A maximum penalty of 100 penalty units ($13,785, at the time of publication) applies if the schedule is not supplied within the required time.

If the amount is not paid, the claimant can either recover the money by taking court action, or by applying to have the claim adjudicated.

Adjudication

Adjudication is a fast and cost-effective alternative to going to court. It is conducted by the Queensland Building and Construction Commission (QBCC) and is available to any claimant who has either not been paid, or who has received a payment schedule for an amount less than the amount claimed.

An application must be made to the QBCC within:

• 30 business days of the payment’s due date or the last day given to issue a payment schedule (whichever is later);
• 20 business days of a failure to pay the full amount under a payment schedule; or
• 30 business days of receiving a payment schedule for an amount less than the amount claimed.

A respondent has up to 15 business days to respond to a claim (depending on the complexity of the claim). Following this, an adjudicator will assess the payment claim and may request submissions from the parties or call a conference of the parties (with no lawyers present). The adjudicator will then decide if the respondent is required to pay and, if so, how much (the adjudicated amount). The adjudicator must make their decision within 10 business days (or 15 business days if the matter is complex), from the date they receive the respondent’s response.

The adjudication amount must be paid within five business days from the day the respondent receives the adjudicator’s decision, or within a longer timeframe (as decided by the adjudicator). A respondent is liable of up to a maximum of 200 penalty units ($27,570, at the time of publication) for non-payment. If the amount is not paid, the claimant can take further action, including:

Suspending work or the supply of related goods and services

The claimant must give the respondent at least two business days’ notice of the suspension, and may continue the suspension for three business days after receiving a payment. The respondent is liable for any losses or expenses incurred by the claimant during the suspension period.

Applying to a court for a judgment debt

The claimant must give the respondent a “warning notice” within 30 business days of the payment’s due date outlining the intention to take court action. After issuing the notice, the claimant cannot start the court proceedings for at least five business days. The adjudication certificate, with an affidavit stating that all (or part) of the adjudicated amount has not been paid, may be filed.

Making a payment withholding request to a higher party in the contractual chain

If the respondent fails to pay the adjudicated amount, the claimant can require a higher party to retain the adjudicated amount from a payment owed to the respondent, by making a “payment withholding request”. The claimaint’s request must be given to both the respondent and the higher party (at the same time).

Lodging a statutory claim over the property where the work was done

If the claimant is a head contractor, and the respondent or their relative owns the property where the work was done, the claimant may request a charge in the form of a security interest over the property. The claimant will need to lodge the adjudication certificate (as well as a statutory declaration describing the property and stating that the adjudicated amount has not been paid) with Titles Queensland. The charge lasts 24 months, unless (for example) the claimant applies to extend it, the respondent pays, or a court dismisses enforcement proceedings.

Subcontractors’ charges

The Security of Payment Act also allows a subcontractor to recover outstanding payments from an entity higher in the contractual chain than the contractor, via a “subcontractor’s charge”. Money owed to the contractor can be held while the claim is being decided by a court, and subsequently directed to the subcontractor once a decision is made.

A notice of claim must be lodged within three months of the work being completed. The contractor must be given a copy of the notice and must respond to the subcontractor (as well as the person listed in the notice) within 10 business days. The contractor must accept liability to pay the amount claimed, accept liability to pay part of an amount and dispute the rest, or dispute the claim.

If the contractor accepts liability to pay all or part of the amount claimed, the higher entity must pay that amount to the subcontractor. The subcontractor has a right to apply to a court for a judgment debt if such a payment is not made.

How Gibbs Wright Litigation Lawyers can help

Our lawyers have experience in both payment disputes as well as helping you get paid in the building and construction industry. We can offer legal assistance with navigating each step the Security of Payment Act process. Whether you are making a claim or responding to one, call us for a consultation about your legal options.