After months of uncertainty in the construction industry, it seems that the changes to the Building and Construction Industry Payments Act 2004 (BCIPA) are just around the corner.
The Building and Construction Industry Payments Amendment Bill 2014 (Bill) was introduced into Parliament on 21 May 2014 (Original Bill). In our June 2014 Construction & Infrastructure Update, we identified the key changes— and potential pitfalls—arising from the Original Bill.
The Bill was passed on 11 September 2014 in a modified form (Final Bill), following extensive feedback and the report of the Transport, Housing and Local Government Committee.
This update discusses some of the key changes from the Original Bill in the Final Bill.
Application of amendments to existing contracts
It was initially announced by the Minister that the BCIPA in its present form would continue to apply to contracts entered into before the amendments became law.
The Original Bill created controversy by purporting to apply the new regime to all contracts except where an adjudication application had already been made. We highlighted some practical concerns with this in our previous Update.
Thankfully, the Final Bill returns to the original announcement in this respect. Current contracts remain covered by the existing BCIPA regime, except that the functions of receiving applications and appointing adjudicators are shifted from ANAs to the adjudication registry (co-located with the Queensland Building and Construction Commission).
Payment claims and schedules
Payment claims will still be divided into ‘standard’ and ‘complex’ claims. However, the definition of complex claims has been simplified, so that only claims for more than $750,000 (exclusive of GST) are treated as complex.
Payment claims are no longer required to state whether they are standard or complex, and the corresponding adjudication procedures for mislabeled claims have also been dropped.
These are improvements as, under the Original Bill, any claim involving latent conditions and/or ‘time-related costs’ was required to be labeled by the claimant as a ‘complex’ claim, which would have provided fertile ground for disputes and jurisdictional challenges.
However, the extended time limits for payment schedules in relation to complex claims—15 business days for a claim within 90 days of the reference date; otherwise 30 business days—has been retained.
Although these extended timeframes are intended to benefit respondents, ironically they could also place respondents in an awkward position. Under the Queensland Building and Construction Commission Act 1991, the maximum lawful period for payment is only 15 business days under a commercial head contract and 25 business days under a commercial subcontract. Therefore, in some cases, payment of a claim could become due before the payment schedule is due.
Finally, the reduction in the time to make a payment claim (other than a final claim) from 12 months to 6 months after the work is last carried out has also been retained in the Final Bill.
Mandatory ‘second chance notices’
One of the most concerning provisions of the Original Bill for claimants was the requirement to give a ‘second chance notice’, allowing the respondent a further 5 business days to serve a payment schedule if they failed to do so initially. The claimant may only apply for judgment in a court or make an adjudication application once this additional period has elapsed.
The Final Bill clears up a number of drafting issues in the Original Bill, including requiring the second chance notice only where no schedule is served at all, but not where a schedule proposed payment of less than the claimed amount.
However, the amendments in the Final Bill still have the serious consequence that a claimant is time-barred from applying for either adjudication or judgment if they fail to serve the second chance notice within 20 business days of the due date for payment. Given the extended timeframes for payment schedules by respondents for complex claims (as noted above), this could leave a claimant with very little time to take action.
Furthermore, respondents now have the option of delaying their payment schedules until after the second chance notice is given as a matter of course. This will give respondents extra time in relation to every payment claim (whether standard or complex), as well as creating the potential that inattentive claimants will lose their rights to enforce their claims.
The Bill imposes no negative consequences on a respondent who waits until after a second chance notice to serve their payment schedule.
Powers of the Supreme Court
Another controversial provision of the Original Bill was the amendment to section 100 of the BCIPA to effectively override the recent decision in BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd  QCA 394 (BMA v BGC).
In BMA v BGC, the Queensland Court of Appeal held that the trial judge erred at law when he held that the Court had the discretionary power to order BGC to repay BMA the portion of the adjudicator’s decision affected by jurisdictional error—being only $4.34 million of the total $28.16 million adjudicated amount—as an alternative course of action to declaring the entire adjudication decision void. The Court of Appeal confirmed the ‘all or nothing’ consequences of a void decision when it held that BGC had no entitlement to any payment to any part of the adjudicated amount. The Court ordered BGC to repay the whole adjudicated amount with interest and costs.
Section 100 of BCIPA was amended by the Original Bill to empower and require the Court to identify the part of an adjudication decision affected by jurisdictional error, and permit the remainder of the decision to stand. This provision was considered confusing and potentially void.
However, the wording has been subtly (but importantly) changed in the Final Bill, so that the Court is not required to sever part of an adjudicator’s decision, but ‘may’ do so where possible and appropriate.