The below article from 21 October 2014 has been provided by Amy Munro and Stephanie Read, King & Wood Mallesons.
The Building and Construction Industry Payments Amendment Act 2014 (Qld) (Amending Act) was passed by Parliament on 11 September 2014 and amends the Building and Construction Industry Payments Act 2004 (Qld) (“BCIPA”). The amendments are likely to come into force sometime this year.
The new amendments will only apply to construction contracts entered into after the commencement of these amendments, so for the next few years both the old and the new regime will remain in force.
In December 2012, Mr Tim Mander MP the Minister for Housing and Public Works released a discussion paper seeking feedback from industry stakeholders, head contractors, subcontractors and suppliers concerning the scope and operation of BCIPA. Andrew Wallace (a barrister with industry experience) was appointed to undertake a review of the BCIPA system. He completed widespread stakeholder consultation in the preparation of his final report released in May 2013 (“Wallace Report”). The Wallace Report included 49 recommendations for the Government’s consideration. The report can be viewed here.
Following on from the Wallace Report, the Government worked collaboratively with other stakeholder agencies to review the recommendations to determine the key areas of reform. The Amending Act incorporates some of the recommendations for amendment suggested by the Wallace Report as well as amendments suggested by the Transport, Housing and Local Government Parliamentary Committee based on its review of the draft bill. The Parliamentary Committee’s report can be viewed here.
There are four key areas of amendments targeted by the Amending Act:
- Timeframes for Claimants and Respondents;
- Notice requirements before commencing court proceedings;
- Respondents are not limited to payment schedule responses for Complex Claims; and
- Appointment of adjudicators regulated by the QBCC and claimants may withdraw adjudication proceedings.
A common theme in the Amending Act is the division of complex claims from standard claims. The Act now specifically provides for a dual regime depending on whether the claimed amount is more than $750,000 (excluding GST). Where a claim is a complex claim, the Act provides longer time frames and more opportunities to respond to the claims than under the previous regime.
The key amendments to the timeframes under the Amending Act relate to complex claims and aim to achieve a more appropriate and fairer system. These amendments include increasing the time in which respondents have to serve adjudication responses and payment schedules depending on how complex the claim is.
Particularly, for complex claims:
- the time for a respondent to provide a payment schedule will increase from 10 to 15 business days (all other claims will remain at 10 business days);
- if the payment claim is served on the respondent 90 days after the reference date to which the claim relates, then the respondent does not need to serve a payment schedule until 30 business days after the claim is served;
- the time for a respondent to provide an adjudication response will increase from 5 business days to 15 business days;
- the adjudicator can grant up to an additional 15 days to provide an adjudication response for complex claims; and
for all claims:
- the time for a respondent to provide an adjudication response will increase from 5 business days to 10 business days;
- the time in which a payment claim can be made will be reduced to 6 months (instead of 12) after the work was carried out or the goods or services were supplied; and
- the definition of business days will exclude the 3 business days before Christmas until 10 business days after New Year’s Day to reflect industry shutdown.
A flowchart depicting the progress claim process (with the new dual regime for complex claims) is available here:
Click here to view the chart
Notice Requirements before commencing Court proceedings
Under the new provisions, if a claimant serves a payment claim on a respondent and the respondent fails to serve a payment schedule and pay the amount as required, the claimant must first give notice to the respondent of its intention to start court proceedings or apply for adjudication, and state that the respondent may serve a payment schedule on the claimant within 5 business day after receiving the notice.
In the previous regime claimants could commence court proceedings without notice if the respondent failed to serve a payment schedule and pay the amount claimed in the payment claim. The respondent now has a further opportunity to submit a payment schedule prior to the claimant’s rights to enforce a statutory debt enlivening. This will give the respondent greater visibility and forewarning than was otherwise available under the previous provisions.
Respondents are not limited to Payment Schedule responses for Complex Claims
This area of reform addresses the concern raised by stakeholders that a payment schedule must be compiled and served within a relatively short amount of time after receiving the payment claim even though payment claims may have been prepared over much longer periods of time. Under the previous regime, a respondent was only able to rely upon the reasons given in its payment schedule to defend against claims submitted under an adjudication application.
Now, where there is a complex claim which is captured by the Amending Act, respondents will be able to include all relevant reasons for withholding payment in its adjudication response whether or not these issues were raised in the payment schedule.
Appointment of adjudicators and the adjudication process
The key areas of reform in respect of the appointment of adjudicators and the adjudication process are:
- establishing a single Adjudication Registry within the Queensland Building and Construction Commission to administer the Act, monitor performance and appoint adjudicators – previously adjudicators were appointed by one of eight authorised nominating authorities and a contractor could elect which authority to serve in the absence of a contractual agreement to the contrary;
- the Adjudication Registry will maintain a list of current adjudicators and there is an increase in the benchmark for the skills and qualifications of adjudicators;
- if an adjudicator determines that he/she does not have jurisdiction to hear the dispute, he/she is still entitled to be paid for their time to conclude that he/she has no jurisdiction to adjudicate the application. This new regime dissuades adjudicators from determining they have jurisdiction when they don’t as previously adjudicators were not entitled to payment for concluding that he/she did not have jurisdiction;
- claimants may withdraw adjudication applications. The new regime now provides claimants with the ability to withdraw their adjudication applications. Previously there was no provision conferring this right which meant that parties wishing to withdraw proceedings did so on the basis of a good faith commercial understanding (rather than having a legal right to do so); and
- the Amending Act contemplates that an adjudication application is made in an approved form. This suggests that the QBCC will make available a standard adjudication application form for all claims.
Effect on contracts
The recovery of progress payment provisions under the current BCIPA system continue to apply to contracts entered into before the commencement of the Amending Act. However, the functions of the authorised nominating authorities which have been transferred to the registrar do not apply to those contracts. Contracts entered into after the commencement of the Amending Act will fall under the amended system.
Implications for the industry
Whilst these amendments go a long way in remedying some of the inherent deficiencies industry stakeholders have identified and experienced since BCIPA’s introduction in 2004, there are some obvious omissions which were not addressed in the Amending Act. One of the most obvious omissions from the Amending Act is the Wallace Report’s recommendations in relation to the regulation of adjudicators.
Principals and contractors are advised to revisit their standard form construction contracts and consider any implications on the payment clauses which were traditionally aligned with shorter time periods – this is particularly the case where the value of payment claims will exceed the $750,000 threshold.
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