Written by Peter Waller – Special Counsel – QLS Accredited Specialist – Commercial Litigation
Improving the progress payments process is the aim of several changes to the Building Industry Fairness (Security of Payment) Act 2017 late last year. Contractors and owners/principals each have new rights and obligations to encourage payments.
As part of these changes, we have created a three-part mini-series explaining four areas that cover these important changes. The four areas we will cover include the following:
- Supporting Statements
- Failing To Pay
- Withholding Payment
- A Charge Over Property.
In Part One of this series, we covered Supporting Statements and Failing To Pay.
This week, we are presenting part two covering Withholding Payments, and next week we will cover A Charge Over Property in part three. So, please keep your eyes open for part three of our series.
With all that said, please continue reading below for part two in our three-part series.
Payment Withholding Request Process
If a respondent (the person or company under the contract who is or may be liable to make the payment) does not pay an adjudicated amount, they may get fined, face prosecution or be subject to other disciplinary action.
The Building Industry Fairness (Security of Payment) Act 2017 now also allows a claimant (a contractor who claims to be entitled to a progress payment) to make a payment withholding request to a higher party in the contractual chain. The higher party is the party in the contractual chain directly above the respondent. For example:
- a subcontractor may give a request to the principal contractor;
- a head contractor may give a request to the financier of the principal.
A payment withholding request is an option for securing payment if an adjudicated amount (amount decided by an adjudicator as owing) is not paid by the due date. It requires the higher party to withhold the requested amount from money that would otherwise be payable to the respondent. This can be withheld over more than one payment claim, including from final payment claims and retention amounts.
There is no obligation to retain more than what the higher party owes the respondent. Higher parties complying with a payment withholding request are legally protected from recovery action by respondents for the withheld amounts.
Failure To Comply With Payment Withholding Requests
However, there are serious consequences for higher parties who fail to comply with payment withholding requests. A higher party that fails to retain the amount becomes jointly and severally liable with the respondent for paying the adjudicated amount.
The payment withholding request will no longer apply once the respondent pays the adjudicated amount. Once the respondent has paid the claimant, the higher party can release the withheld amount to the respondent.
If the respondent pays the adjudicated amount the claimant must notify the higher party of the amount that you’ve been paid within 5 business days. Failing to do so is an offence and may attract a penalty.
Stay tuned for our next, and final, article in this mini-series next week that will explain cover A Charge Over Property.
If you can’t wait for part three of this series and need assistance right now with progress payments, please call our construction law expert Peter Waller on (07) 5539 9688 or email peter.waller@mba-lawyers.com.au.