Changes to the Building and Construction Industry Payments Act 2004 (QLD) (“BCIPA”) introduced by the Amending Act commenced on 15 December 2014. One of the key changes introduced by the Amending Act is the various timeframes associated with the submission of and responses to BCIPA payment claims. This article focuses on section 17A of the Amending Act which operates as a statutory time bar making a payment claim served out of time invalid under BCIPA.
As the section extinguishes a contractor’s right to bring a BCIPA claim, it is important for both contractors and principals to be aware of how and when it applies.
Essentially, the changes introduced to section 17A by the Amending Act are:
- reducing the time frame for a contractor to submit claims from 12 months to 6 months after related goods and services to which the claim relates were last supplied to; and
- introducing two separate tests for determining whether a right to submit a payment claim has expired depending on whether the payment claim relates to a final payment or a progress payment.
Section 17A – Time requirements for BCIPA claims
Section 17A replaces section 17(4) of the old BCIPA regime.
Section 17(4) required all payment claims to be served within the later of the period worked out under the construction contract, or the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.
Section 17(4) has been replaced with section 17A(2) which distinguishes between progress claims and final payment claims and provides (showing the amendments to section 17(4) in tracking):
“(2) Unless the payment claim relates to a final payment, a payment claim may be served only within the later of –
(a) the period, if any worked out under the relevant construction contract; or (b) the period of 6 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.”
The key change made to this provision is the reduction of the window of opportunity for submitting a payment claim from 12 months to 6 months following completion of the construction works.
The changes also provide for a separate legislative test for determining when a contractor’s right to submit a final payment claim under BCIPA expires. A new section 17A(3) has been introduced to specifically deal with final payment claims. It provides that:
"(3) If the payment claim relates to a final payment, the claim must be served within the later of the following –
(a) the period, if any, worked out under the relevant construction contract;
(b) 28 days after the end of the last defects liability period, if any, worked out under the relevant construction contract; (c) 6 months after the later of:
(i) completion of all construction work to be carried out under the relevant construction contract; or (ii) complete supply of related goods and services to be supplied under the relevant contract.”
It is worth noting that section 17A(3) expressly allows final payments to be submitted 28 days after the expiry of the defects liability period (regardless of whether the final payment claim is submitted earlier under the relevant construction contract). However, as the usual approach in most construction contracts is to provide for a final payment claim to be submitted at the end of the defects liability period, this change is unlikely to have a significant effect in practice.
The new definition of final payment claim is “a progress payment that is the final payment for construction work carried out…under a construction contract.” There is no requirement in this definition that the construction work claimed in a final payment has to be performed within a specified time frame and a final payment can be submitted for all work performed over the entirety of the construction period. Therefore, the contractor may submit a final payment claim that requires payment for works carried out by the contractor outside of the 6 month period.
This Amending Act does not therefore address the common complaints that were made about the old BCIPA regime which allowed a contractor to save up payment claims and then submit BCIPA claims for the entirety of the construction works at the end of the construction contract. A contractor is still able to do this under the new regime.
The Amending Act does provide some relief for principals, albeit limited, by extending the time frame for a principal to submit responses where the value of the claim exceeds $750,000. For example:
- the time for submitting a response to a payment claim has increased from 10 business days to 30 business days;
- the time for a respondent to provide an adjudication response has increased from 5 business days to 15 business days; and
- the adjudicator can grant up to an additional 15 business days to provide an adjudication response.
Calculating the 6 month time frame
This section of the article explores the application of section 17A in further detail and focusses on the interpretation and meaning of the following phrases:
- “6 months after the construction work to which the claim relates was last carried out” under section 17A(2)(b);
- “6 months after the later of the completion of all construction work” under section 17A(3)(c).
Section 17A(2)(b) – “to which the claim relates”
The first requirement of section 17(A)(2) is that a contractor can only submit a payment under section 17A(2)(b) for construction work ‘to which the claim relates’.
On its face it appears that this section means that the outstanding payments submitted in a payment claim cannot be more than 6 months old from the date the work was completed.
However, the case of Barclay Mowlem Construction Limited v Estate Property Holdings Pty Ltd NSWCA 393 is authority for the proposition that only some work must be carried out within the 6 month period in order for a BCIPA payment claim to be valid.
The case law seems to suggest that “construction work … to which the claim relates” in section 17A(2)(b) (the NSW equivalent is 13(4)(b)) is also the construction work for which payment is claimed in the claim; and accordingly, the requirement is that only some of that construction work need be carried out in the relevant six month period.
Hodgson JA, who gave the leading judgement in Barclay, held that one could not divide up the construction work, and at paragraph 19 said:
“ However, in my opinion ss 13-15 of the Act do not provide any basis for dividing up the construction work to which the claim relates into items which may be considered discrete, and asking in respect of each such item whether some work was carried out in the twelve month period. Section 13(2)(b) refers to “the amount” of the progress payment, s 14(4) refers to liability to pay “the claimed amount”, and s 15(4) refers to “the unpaid portion of the claimed amount”: these provisions weigh against the idea that separate consideration should be given to individual items that make up the claimed amount.”
Therefore, in Queensland a contractor may be able to include claims for payment of work carried out prior to (what is now) 6 months ago as long as one of its claims relates to work carried out within 6 months of the construction work being carried out.
Section 17A(2)(b) and section 17A(3)(c) – completion of construction work
Whether a contractor can make a valid progress payment claim under section 17A(2) or a final payment claim under 17(A)(3) turns on the meaning of when the construction work was ‘last carried out’ and ‘the completion of construction work’. Whilst section 17A(2) and section 17A(3) adopt slightly different wording to describe when the 6 month period expires, it is our view that the two phrases mean the same thing (particularly in light of the Barclay case discussed above).
There has been no judicial guidance provided on the meaning of the phrase “after the construction work to which the claim relates was last carried out” in Queensland and there has been only some limited consideration in New South Wales. The phase “6 months after the later of the completion of all construction work” is a new phrase introduced by the Amending Act.
It will be a question of fact as to when the last of the work was completed or carried out. The better view is that the construction work will be taken to have been completed at the time of taking over. However, if work has been carried out and paid for after taking over (ie as a post taking over variation) then it may be arguable that the completion of the construction work has occurred at a later date.
In the NSW Courts, works carried out during the defects liability period under the equivalent NSW provision are not counted in the 12 month period (which is now 6 months in Queensland). Therefore, even if a contractor provides labour (which falls under the definition of ‘related goods and services’ under section 11 of BCIPA) during the defects liability period, this work is not considered work under a contract for construction work. It is our view that this is the correct interpretation since the work performed by a Contractor during the defects liability period is rectification work for which the contractor is not entitled to be paid.
Even if the contractor cannot demonstrate that work was carried out within the last 6 months or that the payment claim relates to work carried out in the last 6 months, principals need to be aware that a contractor’s BCIPA claim is still not extinguished as the contractor has an express right under the new BCIPA regime to submit a BCIPA claim for final payment for this claim following the expiry of the defects liability period (since, as discussed above, the 6 month limit to work being carried out does not apply to final payment claims).