Reform to the Building and Construction Industry Payments Act 2004 (Qld)

The passage of the Building and Construction Industry Amendment Bill 2014 (Qld) signals substantial reforms to the system in Queensland in which payment claims are made, progressed and adjudicated upon.  This article outlines the main areas of reform.

A decade has  passed since the Building and Construction Industry Payments Act 2004 (Qld) came into force,1 creating a system of payment claims and adjudications in the construction industry. The 2004 Act sought to promote the rapid resolution of progress payments disputes, reflecting the significance of cash flow as the lifeblood of the construction industry. 

Following review,2  the Queensland Parliament on 11 September 2014 passed the Building and Construction Industry Amendment Bill 2014 (Qld).  The 2014 amendments, upon assent, will enact a suite of substantive amendments to the 2004 Act designed to ameliorate some of the perceived unfairness arising under that Act.  The principal reforms are:

• the introduction of a dual classification system of “complex” and “standard” payment claims;
• to amend, with respect to complex claims, the timeframes applicable to claimants and respondents;
• to allow a respondent, in its adjudication response, to supplement reasons set out in its payment schedule; 
• to establish a single adjudication registry governing the appointment of adjudicators;
• requiring a claimant to give notice to a respondent prior to commencing court proceedings to recover a claimed amount or to apply for adjudication;
• to give the Supreme Court a discretion to sever part of an adjudication decision which is infected by jurisdictional error.

Amendment to Timeframes 

A central mechanism of the 2004 Act is the adjudication process in Part 2, Division 2.  That process enables a claimant (usually a contractor or subcontractor) and a respondent (usually a contractor or principal) to exchange notices (respectively, a payment claim and payment schedule) detailing the amount each party says is payable as a progress payment.  Where the parties cannot agree, the matter may go to adjudication to determine the amount payable as an interim progress payment.

The 2014 amendments will introduce a dual classification of “complex” and “standard” claims. 

A payment claim will be a “complex” claim where it is a claim for more than $750,000 (ex GST) (or a greater amount prescribed by regulation).  All other payment claims are “standard” payment claims.

Significantly, the time for a respondent to provide a payment schedule in response to a complex payment claim is to be extended to 15 business days (from 10 business days).  In respect of standard claims, a payment schedule must be served on the claimant within the earlier of:

• the time required, if any, by the relevant construction contract; or
• 10 business days after service of the payment claim.

The extension of time to respond to “complex” payment claims will likely be welcomed by all those tasked with responding to a payment claim in complicated matters.  However, practitioners will note that the determiner of a complex payment claim is its monetary amount, quite aside from the volume or complexity of facts or issues arising on the claim.

The 2014 amendments also alter the timeframes for making a payment claim.  Save where a relevant contract provides otherwise, the 2014 amendments reduce the time in which payment claims for progress payments may be made.  Such claims will now have to be served within the later of either:

• the period, if any, worked out under the relevant construction contract; or
• 6 months (reduced from 12 months) after the construction work to which the claim relate was last carried out, or the related goods and services to which the claim relates were last supplied. The time to serve a final payment claim will be the later of:
• the period, if any, worked out under the relevant construction contract;
• 28 days after the end of the last defects liability period, if any, worked out under the relevant construction contract; and
• 6 months after the end of the defects liability period under the contract, or 6 months after the constructions work was last carried out.

Adjudication Procedures

The amendments preserve, with some modification, a claimant’s options (as appropriate) between applying for adjudication and seeking judgment of a court for all or part of the sum claimed.

However, where a respondent fails to serve a payment schedule, the 2014 amendments require a claimant to give further warning of its intention to commence court proceedings to recover the claimed sum as a debt.  A claimant in those circumstances will be required to:

• notify the respondent of its intention to do so by notice in writing given within 20 business days immediately following the due date for payment; and
• allow the respondent a further 5 business days to serve a payment schedule before commencing any proceeding.

This requirement mirrors the existing notice requirement prior to the commencement of adjudication.

The amendments will also fundamentally change the way adjudicators are appointed.  The authorised nominating authorities (“ANAs”) presently charged with the appointment of an adjudicator are to be replaced by the registrar, who will be responsible for appointing adjudicators.

As such, from the date the amendments come into force, adjudication applications will be made to the registrar, who will be responsible for receiving and processing adjudication applications, as well as for the appointment of adjudicators. Applications made prior to the commencement of the amendments are, pursuant to the transitional provisions, to be dealt with under the 2004 Act prior to the 2014 amendments.  The registration of ANAs will otherwise end. 

The distinction between complex and standard payment claims will yield a further benefit to respondents to an adjudication application relating to a complex claim.  Pursuant to the amendments, respondents to such claims will be able to include matters in the adjudication response that were not raised in the payment schedule.  Previously, the scope of response to an adjudication application was limited to those matters which the respondent raised in its payment schedule.  This could cause difficulty in the face of large or complex payment claims, given the tight time frame (10 business days) previously allowed to prepare and serve a payment schedule. 

The position in respect of standard claims remains substantially unchanged.  Thus, if the adjudication claim is about a standard claim, the response cannot include any reasons for withholding payment that were not included in the payment schedule.

Where a respondent to a complex claim does go beyond the scope of matters raised in the payment schedule, the applicant will then be entitled to a further response.

Jurisdictional Error

An adjudication decision affected by jurisdictional error is of no legal consequence and may be declared void.   Presently, such jurisdictional error affects the entire decision notwithstanding that the error may relate to part only of the adjudicator’s decision.

The 2014 amendments seek to address this position by providing that, where the court finds that only part of an adjudicator’s decision is affected by jurisdictional error, the court may:

• identify the part affect by the error; and
• allow the unaffected part of the to remain binding on the parties.

The amendments await assent and will likely come into force in October or November this year.

Patrick Hay

BA/LLB(Hons), Barrister