After almost 10 years and approximately $3.7 billion1 worth of adjudication applications made, legislation enacting significant reform of the Building and Construction Industry Payments Act 2004 (Qld) was passed by the Queensland Parliament on 11 September 2014.
The genesis of this reform was a process of industry stakeholder consultation undertaken by the Department of Housing and Public Works in 2012-2013. A fact sheet outlining proposed amendments to the Act was released by the Department in April 2014 and the Building and Construction Industry Payments Act Amendment Bill 2014 was introduced in Parliament on 21 May 2014.
The proposed changes were intended to come into effect by 1 September 2014. Unsurprisingly, the proposed amendments to the Act generated significant interest and were the subject of an extended consultation period.
The focus of the reform was to address concerns raised by industry stakeholders, the most significant of which included challenges to the integrity of the adjudication process and perceived inequality in the timeframes for responding to applications made under the Act.
The Bill, as originally tabled, was said to address three key areas:
- the process for appointment of adjudicators;
- the skill level of adjudicators; and
- inequality in the timeframes for responding to claims.
Summary of amendments
After the extended consultation period, the Bill was passed, with amendments. The following key changes to the Act are the end result:
- Authorised Nominating Authorities will be abolished and their role taken over by the Adjudication Registrar, who is appointed by the Queensland Building and Construction Commission (QBCC).
- During a 6 month transitional period, the Registrar may require adjudicators seeking registration to complete mandatory transition training.
- In response to submissions received during the extended consultation period, the QBCC will have the power to make policy governing the administration of the Act by the Registrar.
- Adjudicators will be required to consider whether or not they have jurisdiction to decide an adjudication application.
- In the event that a court subsequently finds that an adjudicator has committed a jurisdictional error, the Court has the discretion to sever the portion of the adjudication decision affected by the error, meaning that the remainder of the decision will continue to bind the parties. The Bill originally proposed that the Court berequired to sever the unaffected portion of a decision, however, this was changed from a mandatory to discretionary power following consultation.
- A dual regime will be introduced to deal with “standard claims” and “complex claims”. A “complex claim” will be any claim for more than $750,000 (excluding GST). Following consultation, the proposal that “complex claims” include any claims for “delay-related costs” or latent condition claims has been scrapped.
- As expected, the following timeframes will be extended:
- the timeframe for service of a payment schedule in response to a complex claim will be at least 15 business days (remaining at 10 business days for a standard claim); and
- the timeframe for service of an adjudication response will be increased to at least 10 business days for a standard claim and 15 business days for a complex claim (increased from 5 business days for all claims),
- Respondents to a “complex claim” will have the ability to apply to the adjudicator for an extension of time to give the adjudication response.
- Provisions more closely mirroring industry practice for payment claims at the completion of a project will be introduced, relevantly:
- a prohibition on a payment claim, other than a “final claim”, being made more than 6 months after the work to which the claim relates was carried out (or any later period allowed in the contract); and
- a provision entitling claimants to make a “final claim” within the later of the time stated in the contract or 28 days after the end of the “defects liability period”. In response to a complex claim, a respondent will be entitled to raise reasons in its adjudication response that were not included in its payment schedule. Claimants will have a right of reply in those circumstances.
- If a respondent fails to deliver a payment schedule within the required timeframe, a claimant will no longer be entitled to immediately seek judgment for the claimed amount, but will be required to notify the respondent and allow it another opportunity to serve a payment schedule.
- The changes to the adjudication process and timeframes will not apply to construction contracts entered into before the commencement of the amendments. However, any adjudication application made after the commencement of the changes must be made to the Adjudication Registrar who will appoint an adjudicator to decide the application.
The amendments will come into effect on a day to be fixed by proclamation, however, the transitional arrangements mean that the Queensland construction industry will be operating under two regimes for a significant period of time to come.