In April 2014, the Queensland Government announced a package of reforms to the Building and Construction Industry Payments Act (BCIPA), drawing on the Final Report of the Review of the Discussion Paper – Payment dispute resolution in the Queensland building and construction industry (the Wallace Report) (see here for more details).

On 21 May 2014, the Building and Construction Industry Payments Amendment Bill 2014 (the Bill) was introduced to Parliament. The Bill has been referred to the relevant Parliamentary Committee, but no suggestion has been made that the proposed commencement date of 1 September 2014 will not be achieved. Industry participants should accordingly plan for a September commencement unless and until the Government advises otherwise.

A summary of the key recommendations and significant additional reforms can be found below. However, the main purpose of this article is to highlight that the timing of the Bill becoming law, and the transitional provisions, could result in a claimant entirely losing its right to make what is currently a perfectly valid BCIPA claim.

Commencement of amendments: potential pitfalls

The Queensland Government’s April Media Release (the Announcement) announced that the amended BCIPA would only apply to contracts entered into after the commencement of the amendments, with the current provisions continuing to apply to all existing contracts.

However, the Bill radically departs from the Announcement, instead providing that the existing provisions will only apply to adjudication applications already made to ANAs before commencement, but otherwise the new provisions will apply to all contracts, claims, and adjudications, regardless of when the contract was signed.

So, does this matter?

The answer is yes, particularly because the Bill provides that the time frame for making a claim after work stops is reduced from 12 months to 6 months.

Thus, contractors who finished projects more than 6 months ago, and who currently believe (based on the current terms of BCIPA and the common law) that they have up to 12 months to submit their final payment claim, may be at risk if the Bill in its current form becomes law.

Contractors in these circumstances may lose their right to submit their final Payment Claim under BCIPA, and be required to use the courts to recover moneys that are be owed to them, at a significantly higher cost in terms of money and time.

A contractor’s accrued right to claim may be lost (subject to the contract providing otherwise) where more than six months has elapsed since work was last performed, and the claim is not the ‘final claim’. The right to a ‘final claim’ may be lost if more than 28 days have elapsed since the end of the defects liability period.

Significant additional reforms

Crucially, further significant changes are also included in the Bill, which were not foreshadowed in the Announcement, and which may be of concern to claimants and respondents alike.

Second chance notices become mandatory

Before commencing proceedings to recover the uncontested amount of a payment claim as a debt, a ‘second chance notice’ must now be given to a respondent within 20 business days after the due date for payment, allowing a further 5 business days to serve a payment schedule. This applies even where a payment schedule was served, but only part of the claim was contested.

Potential (and perhaps unintended) consequences of this include:

  • an accrued right to recover the uncontested amount of a claim in a court may become subject to the obligation to give a second chance notice, even where a payment schedule has been submitted, conceding the claimed amount in part;
  • an accrued right to recover in court may even be extinguished entirely, where more than 20 business days have elapsed and thus the second chance notice cannot be given;
  • it is possible to have two payment schedules for the same claim, following a second chance notice.

Legislation purports to overturn BM Alliance v BGC

In BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2013] QCA 394, the Court of Appeal overturned the decision of Justice Applegarth, declining to declare void an adjudication decision affected in part by jurisdictional error, upon the claimant’s undertaking to repay the amount overpaid due to the error.

Section 100 of BCIPA is amended by the Bill to empower and require a court to identify the part of an adjudication decision affected by jurisdictional error, and permit the remainder of the decision to stand.

Adjudicators’ decisions on fees

Adjudicators are provided with a broad range of discretionary factors to take into account in deciding which party pays the fees for an adjudication. In practice, this appears to foreshadow a departure from the position where a wholly successful party would ordinarily avoid fees.

Key recommendations of the Wallace Report implemented

As noted above, the remainder of the key provisions of the Bill are substantially as previously announced:

  • payment claims are divided into Complex Claims (claims for more than $750,000 or involving latent conditions and/ or time-related costs) and Standard Claims (all other claims);
  • however, a final claim may be made within 28 days of the expiry of the defects liability period;
  • respondents are allowed 30 business days to serve a schedule for a final claim served more than three months after the reference date;
  • respondents are allowed 10 business days to respond to an adjudication application for Standard Claims and 15 business days for Complex Claims; 
  • respondents are allowed to raise grounds in an adjudication response regarding a Complex Claim which were not raised in the payment schedule;
  • note also that pre-1 September payment claims will not have been identified as Complex or Standard, leading to procedural difficulties in adjudications and potential denials of procedural fairness;
  • a Christmas ‘black-out’ period is imposed, so that time does not run between 22 December and 10 January;
  • ANAs will cease to allocate adjudications, and their roles will be centralised in the adjudication registry (co- located with the Queensland Building and Construction Commission).

What this means for you

For claimants, the significance of the Bill is clear: any potential payment claims under consideration should be expedited so that a recovery action or adjudication application can be underway before 1 September.

For respondents, the significance is equally clear: claimants will be looking to take advantage of the last days of the current claimant-friendly regime, and the benefits of a negotiated approach to resolution of disputes to avoid the machinery of BCIPA have never been more attractive.

This may lead to a deluge of adjudication applications around the end of August, which would also cause logistical problems for ANAs at a time when they are meant to be winding down their operations.