After a long period of stakeholder consultation, the Queensland Government has announced a series of amendments to the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act).
The amendment Act (estimated to take effect from early September 2014) aims to address “widespread dissatisfaction with the way adjudicators are appointed and what was felt to be unreasonable timeframes for responding to claims”. The amendments largely favour respondents, in that they attempt to balance the perceived “claimant-friendly” operation of the BCIP Act.
The new legislation will apply to all contracts, even those entered into prior to the commencement of the amendment Act.However, adjudication applications lodged, but not decided, when the amendment Act commences will still be decided under the existing BCIP Act.
Key changes to the BCIP Act
Appointment of adjudicators
The existing legislation permits claimants to apply for adjudication of payment claims to one of seven (commercially operated) Authorised Nominating Authorities (ANAs). On receipt of an adjudication application, the ANA nominates an adjudicator to decide the claim.
The amending legislation will establish an Adjudication Registry operating under the Queensland Building and Construction Commission to accept adjudication applications, maintain a list of ‘active’ adjudicators, and appoint adjudicators based on their skill, experience and areas of expertise. On commencement of the amendment Act, all ANAs will be deregistered.
The change in the way adjudicators are appointed was proposed, in part, due to feedback from respondent stakeholders about the perceived bias of ANAs. The Final Report refers to a “common perception” in the industry that ANAs (and their adjudicators) might be encouraged to favour claimants in their decision making to attract more business (i.e. more adjudication applications).
Time to submit payment claims
Payment claims will be required to be served within six months after the construction work to which the claim relates was last carried out (unless the contract allows a longer period). The BCIP Act presently allows claimants 12 months to make a claim.
Final payment claims may only be served within 28 days of the expiration of the defects liability period, six months of completing all construction work (or supplying all goods), or the period stated in contract (whichever is later).
Dual model – “standard” and “complex” payment claims
The amendment Act will introduce a dual model regime for “standard” and “complex” payment claims.
A “complex” payment claim is a claim for an amount exceeding $750,000, a latent condition, or time related cost. A payment claim which is not a complex payment claim is a standard payment claim.
A payment claim will need to state whether it is a standard or complex claim.
- a payment claim is not identified as either a standard or complex it will be invalid. There is no default position;
- a claimant incorrectly identifies a complex payment claim as a standard payment claim, the payment claim is taken to be a standard claim unless and until an adjudicator decides the payment claim has been incorrectly identified. If the payment claim is determined to be incorrectly identified, the adjudication application is taken to be withdrawn;
- a claimant incorrectly identifies a standard payment claim as a complex payment claim, the payment claim is taken to be a complex payment claim.
Two key matters arise from the proposed provisions:
(a) Time to prepare the payment schedule and adjudication response
Respondents are currently allowed two weeks to serve a payment schedule and one week to lodge an adjudication response, irrespective of the size or nature of the payment claim.
In circumstances where the claim requires a considerable factual analysis, or comprehensive legal or expert opinion, it can be difficult to prepare a thorough response within the time allowed. The BCIP Act does not currently provide a mechanism for extending the current strict timeframes, and failure to respond within time has adverse consequences for the respondent.
Pursuant to the amendment Act:
- A payment schedule in response to a complex payment claim will need to be served within three weeks of receipt of the claim. Payment schedules in response to standard payment claims must still be served within two weeks;
- An adjudication response will need to be lodged within two weeks (standard payment claim) or three weeks (complex payment claim) of service of the adjudication application. Respondents will be able to apply for an extension of time of up to three weeks to prepare the adjudication response if the payment claim is a complex payment claim.
(b) Providing new reasons for withholding payment
Respondents are presently prohibited from including in the adjudication response reasons for withholding payment which are not identified in the payment schedule. The amendment Act will remove that prohibition where the claim is a complex payment claim.
This significant change will eliminate the adverse consequences which flow from preparing an incomplete payment schedule under time pressure in response to complex claims. Respondents are often constrained in their ability to properly defend a claim at adjudication because a reason for withholding payment has not been adequately described in the payment schedule.
Claimants will be given three weeks to respond to any reasons for withholding payment included in an adjudication response that were not included in the payment schedule (and can also apply for an extension of up to three weeks, if an extension is necessary, due to the volume or complexity of the new reasons, to adequately reply).
Compulsory second chance payment schedules
The amending Act will require that claimants provide notice to respondents before commencing court proceedings to recover an unpaid portion of a claimed amount where no payment schedule is provided by the respondent, or there is an unpaid scheduled amount.
The notice must state that the respondent may serve a payment schedule on the claimant within five days after receiving the notice.
Where the Court finds that a part of an adjudicator’s decision is affected by jurisdictional error, the amendment Act purports to require a Court to identify the part affected by the error and allow the part of the decision not affected by the error to remain binding on the parties.
The Queensland Court of Appeal has previously held that an adjudication decision affected by jurisdictional error should be void in its entirety.
The definition of “business day” in the BCIP Act will be amended to include (in addition to public holidays and weekends) the three days prior to Christmas (22 to 24 December) and the period up to 10 January, reflecting industry shutdown during that time of year. This will prevent ambush claims on the eve of the holiday period when both clients (and their consultants) may be unavailable.
Requirement for payment claims to be endorsed as claims under BCIPA
Amendments to the NSW security of payment legislation, which came into effect on 21 April 2014, do not require contractors to endorse a payment claim as a claim being made under the NSW Act in order to enliven the procedure under the Act.
The amendment Act will not remove the requirement for an endorsement. Claimants will still need to mark their claims as being made under the BCIP Act to trigger the statutory process for the adjudication of claims.