Queensland's security of payment reforms to take effect on 17 December 2018 

On 8 November 2018, the Queensland Government announced that the security of payment provisions of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) will take effect and replace the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) on 17 December 2018.

Key changes

While the BIF Act passed through Parliament in late 2017, the security of payment provisions (Chapter 3) take effect from 17 December 2018. These changes apply to both new contracts and contracts on foot as at that date.

While the terminology and fundamental concepts of the BIF Act reflect the BCIPA concepts the industry is familiar with, the changes are significant and may have severe consequences for those not equipped for the changes.

Payment claims

Under the BIF Act, payment claims will no longer need to be endorsed as payment claims made pursuant to an Act.

From 17 December 2018, documents which identify the construction work and the amount claimed will satisfy the requirements to be a payment claim.

That is, a simple ‘invoice’ will now likely constitute a payment claim provided it identifies the work claimed and it is issued on or from the time for claiming payment under the contract (or at the times required by the Act if the contract does not provide such times for claiming payment).

Payment schedules

The period for issuing a payment schedule is also changing. Under the BIF Act a respondent must issue a payment schedule within the earlier of:

• The expiry of the response period under the contract (if any); or
• 15 business days after the payment claim is given to the respondent.

Consequences for not issuing a payment schedule in time

Failure to issue a payment schedule in time will result in the respondent:

• Being liable to pay the amount claimed on the due date for the progress payment; and
• Being liable to a penalty of up to 100 penalty units and open to disciplinary action under the Queensland Building and Construction Commission Act 1991 (Qld) if the amount of the payment claim is not paid in full by the due date for payment.

The 2014 amendments to BCIPA provided the parties with a second chance to issue a payment schedule. There is no second chance mechanism under the BIF Act. If a payment schedule is not issued in time the claimant will have the choice of:

• Commencing proceedings in the relevant court after providing the respondent with notice. The respondent is not entitled to raise any defence or setoff to that claim with its only option being to establish that the payment claim was not valid; or
• Lodging an adjudication application to which the respondent will not be entitled to deliver an adjudication response.

Additionally, the claimant will be entitled to suspend work after providing 2 business days’ notice until 3 business days after the date payment is received in full.

The consequences for not issuing a payment schedule in time are severe. It is critical that payment schedules are issued within time that set out all reasons for not paying the amount claimed by a payment claim within the relevant period.

No further reasons after payment schedule

The BIF Act requires a respondent to raise all reasons for not paying the amount claimed in a payment claim in the payment schedule (regardless of whether the adjudication response relates to a standard or complex payment claim). No longer will respondents have the opportunity to introduce new reasons for non-payment in the adjudication response.

Payment claims issued before 17 December 2018

The provisions of BCIPA will continue to apply to payment claims (and the steps that follow) issued before 17 December 2018. However, all payment claims issued after this date will be governed by the BIF Act.

All industry participants must familiarise themselves with these changes and adapt processes to ensure that claims are made and responded to in accordance with the new requirements.

If you require any further information in relation to the Building Industry Fairness (Security of Payment) Act 2017 (Qld), please contact HWL Ebsworth Lawyers.

This article was written by Colin Harris, Partner, Stephanie Hedger, Associate and Wil Alam, Law Graduate.