Your contractor endorses his payment claims as payment claims under BCIPA.[1] He says he will not pursue any disputed amount under BCIPA. What should you do and what are the risks?

Recent amendments to the NSW security of payment legislation[2] means that in NSW, contractors will no longer be required to endorse a payment claim as being made under the NSW Act. Every payment claim received (and response issued) by a principal will be subject to the strict mechanisms and time periods of the NSW Act.

While there is no such amendment in the proposed reforms to the equivalent Queensland legislation, similar issues can still arise if (as some contractors do) a contractor endorses all of his payment claims as claims under BCIPA a matter of course.

For a summary of the proposed BCIPA reforms[3] (including the different treatment of standard payment claims and complex payment claims), please see BCIP Act reform - Key changes.

Payment claims in Queensland

If a payment claim is endorsed as being made under BCIPA, a principal must respond to the claim (by issuing a payment schedule) within 10 business days for standard payment claims or 15 business days for complex payment claims, including reasons for certifying an amount less than the amount claimed by the Contractor.

Currently, if a disputed claim is referred to adjudication, a principal may only rely on arguments raised in its payment schedule.

What if a contractor states it will not pursue a payment claim under BCIPA?

Often, a contractor will endorse every payment claim as one made under BCIPA as a matter of course, regardless of whether or not it intends to pursue a disputed claim under the BCIPA process.

An interesting question arises where a contractor states it will not pursue a payment claim under BCIPA where the claim is endorsed as one under that Act.

What happens if the principal, relying on that statement, does not provide a payment schedule (or only provides a very limited payment schedule) within the statutory time period and the contractor subsequently elects to refer the disputed payment claim to adjudication under BCIPA?

Can a principal prevent a contractor from pursuing a BCIPA claim in these circumstances?

We suggest that the answer is “no”.

BCIPA contains a very clear “no contracting out” provision.[4] Any express agreement that attempts to limit BCIPA’s operation is not enforceable.

It seems unlikely therefore that a court will intervene based on a contractor’s statement (even if relied upon) to deprive the contractor of its right to pursue a claim under BCIPA, when it cannot give up that right freely under contract for valuable consideration.

What options does a principal have?

A principal is afforded a “second chance” to provide a payment schedule, but the principal has a shorter timeframe to prepare its payment schedule.[5]

However, providing a comprehensive payment schedule within BCIPA’s strict timeframes is an expensive and resource-intensive process.

Responding to complex payment claims

Under the proposed amendments to BCIPA, submissions in a subsequent adjudication for a complex payment claim[6] will no longer be restricted to arguments raised by the principal in its payment schedule.

Responding to standard payment claims – risks remain

Importantly, however, respondents to ‘standard’ payment claims still cannot include arguments in adjudication submissions if those reasons were not included in the payment schedule. When responding to standard payment claims, it will therefore still be necessary to provide a comprehensive payment schedule.