A recent decision of the Queensland Court of Appeal has reinforced the ability of the Security of Payment Act to help those having cash flow problems caused by slow paying builders..

Under the Building and Construction Industry Payments Act a person who claims they are entitled to payment under a construction contract can deliver a payment claim. The person who receives the payment claim but says they are not liable to pay all or part of the amount claimed can respond with a payment schedule setting out why they are not prepared to pay.

A claimant who is dissatisfied with the payment schedule (or doesn’t get one) can have the dispute decided by an Adjudicator. The decision of an Adjudicator in favour of claimant can be enforced in a Court as if it were a judgment.

Like all progress payments under a contract, a payment made after an adjudication is only a payment on account. The Adjudicator’s decision is not binding on a Court.

This means that the person who makes payment as ordered by an Adjudicator is entitled to recover the payment from the claimant if they can convince a Court that it was in fact not payable under the contract.

Recently, the Queensland Court of Appeal had to decide whether a person who makes a payment under the Security of Payment Act can sue immediately to get their money back or has to wait until the end of the contract.

The case involved extensive renovations at the well-known Brisbane restaurant Gambaro’s. The builder had delivered a payment claim and been successful in an adjudication application. Gambaro’s had paid the amount ordered by the Adjudicator and immediately sued to get the money back on the basis that the Adjudicator’s understanding of the contract was wrong.

The builder argued that Gambaro’s had to wait until the end of the contract before suing. The Court of Appeal agreed with the builder.

This means that trade contractors who are successful under the Security of Payment Act cannot be sued for money they are paid as a result of adjudication until the end of the contract e.g. when a final certificate is issued.

This result is in our opinion, entirely consistent with the underlying purpose of the Security of Payment Act which is to ensure cash flow to contractors.

In our experience Court actions to recover payments made under the Security of Payment Act are rare. This decision is likely to make them even more rare.

Contractors who are struggling with cash flow issues caused by slow paying builders should contact McKays for advice on their rights under the Security of Payment Act.