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HG Alert: Thunderstruck: The Quickest Kill for Payment - Apr 2009

The implications of a recent Brisbane District Court decision in J Hutchinson Pty Ltd v Thunder Investments Pty Ltd reminds us of the draconian effect of timeframes under the Building and Construction Industry Payments Act 2004 (Qld).

The message of this case is clear – the consequences of failing to meet payment timeframes under the Act are dire, and construction industry participants should become very familiar with the payment timeframes stipulated in the Act.

The facts

Contractor, J Hutchinson Pty Ltd entered into an oral agreement with Thunder Investments Pty Ltd whereby Hutchinson was to construct a building in Toowoomba. On 12 February 2009, Hutchinson served a payment claim upon Thunder Investments by way of mail, facsimile and email. It was not the service of this payment claim that was in question, but the form of the payment claim that is required under the Act.

The Act provides that a payment claim should identify:

  • the construction work to which the payment claim relates;
  • the amount that the claimant is claiming to be payable; and
  • that it is made pursuant to the Act.

Hutchinson brought an action under the Act for recovery of the statutory debt owed to them under the payment claim. Thunder Investments argued against summary judgment, relying on three grounds:

  1. The time when the payment claim was made.
  2. That the payment claim was not valid because it failed to properly identify the construction work, or related goods and services to which the claim related.
  3. That Hutchinson was estopped from relying upon the absence of a payment schedule due to the course of dealing between the parties.

The decision

The bulk of the argument in this matter was that the payment claim was not valid. His Honour found that although the documents were ‘relatively terse’, they were sufficient to identify the construction work to which the payment claim related, in that they made specific reference to the project name, the project number, the amount claimed, and the fact that the payment claim was made pursuant to the Act. This was sufficient for His Honour to grant summary judgment to Hutchinson for the amount sought, being $217,000.

His Honour also noted in his reasoning for granting summary judgment, that in the event that Thunder Investments did wish to dispute its obligation to pay the amount claimed in the payment claim, it should have, within 10 days, resisted payment by responding with a payment schedule pursuant to s18 of the Act. Under this section, if the recipient proposes to pay anything less than the amount claimed, the amount that is proposed to be paid as well as reasons for the reduction in the amount should be included in the schedule.

Section 19 of the Act outlines the consequences for a principal of not delivering a payment schedule within the timeframe stipulated under the Act. Notably, the principal immediately becomes liable to pay the amount claimed, and the claimant is entitled to recover that amount as a statutory debt. Most significantly, in circumstances where the claimant brings proceedings, s19 (4) will prevent the respondent or principal from raising any defence in relation to matters arising under the construction contract.

Recommendation

This decision hammers home the dire consequences of failing to meet the rigid timeframes under the Act. The Act has become one of the most critical tools for construction industry participants to ensure that payment is made under a construction contract. The Hutchinson matter clearly demonstrates how easily and quickly a valid payment claim can be recovered under the Act.

Participants in the construction industry should ensure that they are well informed of the timeframes stipulated in the Act in relation to payment claims and payment schedules. Without a thorough knowledge of the Act, you run the risk of being ‘thunderstruck’ as was the case for Thunder Investments.