Summary

The Queensland government has made changes to the Building and Construction Industry Payments Act 2004 (Qld) (Act) which commenced yesterday. It significantly change the way in which parties to construction contracts in Queensland enforce their rights to payment.

The changes affect the time frames for making and responding to payment claims under the Act, the information that can be included in an adjudication response, and the adjudication process itself.

The changes to the payment claim process apply only to all contracts entered into after 15 December 2014, however all contracts are affected by the functions of the authorised nominating authorities being transferred to the registrar. Principals, developers and contractors who undertake construction work in Queensland should review their construction contracts and processes to ensure that they are compliant with the changes.

In this eBulletin we summarise the key changes and how they will affect principals, developers and contractors undertaking construction work in Queensland.

Background

The Queensland parliament has recently passed the Building and Construction Industry Payments Amendment Bill 2014 (Qld) (Amending Act), which significantly changes the Building and Construction Industry Payments Act 2004 (Qld) (Act).

The Amending Act, which commenced on 15 December 2014, is based on 49 recommendations contained in a review of the discussion paper Payment dispute resolution in the Queensland building and construction industry, released by the Minister for Housing and Public Works in December 2012.

The Amending Act applies to construction contracts entered into after 15 December 2014 for work undertaken in Queensland. The key changes include:

  • introducing a dual model regime for addressing standard and complex claims, including distinct timeframes;
  • amending the time limits for making and responding to payment claims;
  • introducing a shut-down period over the Christmas/New Year period to reflect industry practice;
  • requiring a claimant to give the respondent notice of an intention to begin legal proceedings to recover any unpaid claim; and
  • allowing further information to be included by the respondent in an adjudication response.

For payment claims served prior to 15 December 2014, parties should refer to the transitional provisions within the Health and Other Legislation Amendment Act 2014 (Qld).

The Amending Act also establishes a single adjudication registry with the Queensland Building and Construction Commission to monitor performance and appoint adjudicators. This now applies to all adjudications, regardless of the date of the construction contract.

Dual model regime to handle complex claim

There are now different timeframes for responding to payment claims that relate to 'complex claims' as distinct from 'simple claims'.

'Complex' claims are defined as:

  • a claim for more than $750,000; or
  • a claim for a latent condition; or
  • a claim for a time-related cost.

A standard claim is defined as a payment claim that is not a complex payment claim.

Importantly, any payment claim will have to identify whether it is a standard or complex payment claim.

Any claim incorrectly identified as a standard, rather than complex, claim will be taken to be a standard payment claim until an adjudicator decides the payment claim has been incorrectly identified.

Changing timeframes

A claimant now has less time within which to lodge a payment claim, namely six months after the construction work was last carried out or the period worked out under the contract, whichever is later, instead of the previous 12 month period.

The time for a respondent to provide a payment schedule for a complex claim will be extended to 15 business days (previously 10 business days). This becomes 30 business days if the payment claim is served more than 90 days after the date in the construction contract on which a claim may be made.

Under the changes, respondents will now have more time within which to consider and respond to adjudication applications. A respondent will have to provide an adjudication response within 10 business days (previously five business days) for a standard claim, or 15 business days for a complex claim.

To reflect industry shut-down practice, 'business day' will now be defined to exclude the three business days before Christmas and the 10 business days after New Year's Day, which essentially means additional time to respond to claims made at that time of the year.

Notification before initiating proceeding

Claimants and respondents alike should be aware that there is now a requirement for a claimant to provide the respondent with notice prior to initiating Court proceedings to recover amounts in a payment claim.

Notice will have to be provided within 20 business days after the due date for payment, notifying the respondent of the claimant's intention to begin legal proceedings. The notice will also be required to advise the respondent that they may serve the claimant with a payment schedule within five business days of receiving the notice.

Complex claims and the adjudication response

A respondent to a complex claim may include in its adjudication response, all relevant reasons for withholding payment, despite those matters not being raised in the respondent's payment schedule.

Where additional reasons for withholding payment are included in an adjudication response, these can be taken into account by the adjudicator when deciding who should pay the costs of the adjudication.

Establishment of an adjudication registry to appoint adjudicators

There is now a single adjudication registry within the Queensland Building and Construction Commission to monitor performance and appoint adjudicators.

This change is aimed at removing the perception of conflicts of interest and reducing adjudication fees. It applies to all adjudications regardless of the date of the construction contract.