HG Alert: Recent Trends in the Building and Construction Industry Payments Act - Jan 2007

Building and Construction Industry Payments Act 2004: Overview and Recent Trends

Object of the Building and Construction Industry Payments Act.

The Act has now been in force in Queensland for more than two years. Implemented to improve payment in the building and construction industry, the Act is a useful tool for claimants to recover payment for outstanding claims.

The Act's principal objective is to ensure that if a person undertakes construction work under a construction contract or supplies related goods and services under a construction contract, that person is able to receive and recover progress payments.

What this means is that workers in the construction industry who otherwise might encounter difficulties in obtaining payment for work performed, might be entitled to enliven the rapid payment and subsequent adjudication process contemplated by the Act.

What Can Be Claimed?

A person entitled to receive progress payments for ‘construction work’ and ‘related goods and services’ performed under a construction contract is entitled to submit a statutory payment claim setting out the amount that the claimant says is due and owing.

‘Construction work’ is defined broadly (broader than the traditional definition of ‘building work’ contained in the Queensland Building Services Authority Act 1991) and includes amongst other things, site clearing, site restoration, painting and decorative services, testing of soils and cleaning of buildings, structures and works.

Similarly, the meaning of ‘related goods and services’ comprises a wide range of claimable items including:

  1. The supply of goods which comprise building materials and components arising from construction work and plant and equipment (whether supplied for sale, hire or otherwise) for use in connection with the carrying out of construction work; and
  2. The supply of services which comprise labour supply, architectural, design, surveying and quantity surveying, engineering, interior and exterior decoration, landscape services and soil testing services relating to construction work.

There are some restrictions as to the type of contracts to which the Act applies (for example, the Act does not apply to contracts for domestic building work). However, regardless of these restrictions the Act encompasses a wide range of contracts that were traditionally not thought to be construction contracts.  Architectural services, consulting services, earthmoving works to name a few are examples of types of ‘construction work’ or ‘related goods and services’ where claimants have successfully recovered progress payments under the Act.

The wide reaching application of the Act is reinforced by the anti-avoidance provision in the Act that prohibits contracting out. In other words, any provision of a contract which is contrary to the Act is void.

Recovery Procedure

In brief, a claimant wishing to enliven the provisions of the Act must follow the time frames and processes set out in the Act by issuing a statutory payment claim.

A respondent that receives a payment claim should take immediate action and either pay the amount due or issue a payment schedule setting out the amount (if any) the respondent proposes to pay or setting out the reasons why the respondent says the claimant is not entitled to payment.

Failure to respond to a payment claim by not submitting a payment schedule within the time frames required by the Act is fatal to a respondent's case. If this occurs, a claimant may then proceed to recover the amount of the payment claim by way of summary judgment in any court of competent jurisdiction, and a respondent is not entitled to raise any defence to the action.

Alternatively, a claimant can follow the procedures in the Act to proceed to adjudication if a payment schedule is not received or if a payment schedule is received that a claimant is not satisfied with.  In summary, from a claimant's point of view, we recommend that a claimant seek legal advice to ensure that their payment claims are valid in terms of the Act and that a claimant is aware of critical time frames to enforce their claim. Likewise, from a respondent's point of view, a respondent should be able to recognise when they have been served with a payment claim and take appropriate steps within the time frames provided by the Act to defend their position (in the event that payment is not forthcoming and the respondent disputes the amount claimed).

Recent Statistics

At the close of 2006, the Building and Construction Agency (the agency established under the Act to assist the Adjudication Registry) published statistics in its December report which summarises the year in review for adjudications. Bear in mind that these statistics relate to those matters which proceeded to adjudication and do not reflect the amount of payments made as a result of payment claims which did not result in adjudication (See Table 1).

Decided Matter Statistics

Table 1 demonstrates that of 175 adjudication decisions released in 2006, claimants appear to be receiving favourable decisions. In adjudications involving a large quantum in dispute, the claimant's success rate is significantly lower (claims in excess of $250,000). However, this is not to say that claimants in the larger claim bracket did not receive at least a partial success rate with respect to their claims as the above table only demonstrates the percentage of claimants receiving the full claimed amount.

Adjudicator's Fees

Pursuant to the Act, a claimant and respondent are liable to pay the adjudicator's fees in equal proportions, or in the proportions determined by the adjudicator. Typically, the unsuccessful party will be liable to pay the adjudicator's fees and as Chart 1 demonstrates, where the payment of total fees has been awarded, the respondent has in most cases (75.7%) been required to pay the adjudicator's fees.

Challenging an Adjudicator's Decision: Judicial Review

At present, the Act is subject to the Judicial Review Act 1991 (the JR Act). There are however, moves in the construction industry to close the avenue of review under the JR Act in order to uphold the interim nature of adjudication decisions.

Until parliament legislates to close the avenue of review under the JR Act, aggrieved recipients of adjudication decisions may apply for a review provided that the application is made pursuant to the grounds of review set out in the JR Act. The leading authority on judicial review in Queensland as it relates to the Act is the 2005 case of JJ McDonald & Sons Engineering Pty Ltd v. Neil Gall & Ors. Dutney J held that the adjudication decision in that case was made under an enactment and properly subject to judicial review.

At least for the present, judicial review remains a mechanism for aggrieved persons wishing to challenge an adjudication decision.  If you require further information, please contact any member of our building and construction team using the details below.

Please click the Download PDF button to download Table 1 and Chart 1 referred to in this article.