Project Contract Mini-series Part One

 

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.  

For Part One of this series, we will be covering Supporting Statements and Failing To Pay. 

For parts two and three in this series, we will be covering Withholding Payments and A Charge Over Property respectively, which will be published on our blog soon! So, please keep your eyes open for parts two and three of our series.

With all that said, please continue reading below for part one in our three-part series.

What Are The Changes To The Progress Payments Process?

Here is a brief overview of the changes we will explain in our three-part mini-series:

  • Supporting Statements – when a head contractor provides a payment claim to their principal, they must provide a supporting statement that states that all of their subcontractors have been paid. If payment has not been made, they must explain their reasons for non-payment.
  • Failing to pay – it is now an offence for a respondent not to pay a scheduled amount or an adjudicated amount.
  • Withholding payment – when an adjudicated amount has not been paid, a claimant can lodge a payment withholding request against a higher party in the contractual chain, which may even be a financier.
  • A charge over property – when an adjudicated amount has not been paid, a head contractor can also lodge a statutory charge over the property on which the construction work or supply of related goods and services occurred, if it is owned by the respondent or a related entity. 

 

Project Contract Mini-series Part One

Supporting Statements

Head contractors now need to provide a supporting statement with every payment claim for construction work or the supply of construction-related goods and services. This applies to all construction contracts where subcontractors are engaged.

The supporting statement needs to declare that all subcontractors have been paid the amounts they are owed or list all subcontractors who have not been paid in full, and give the reasons why. Failing to provide a supporting statement or providing false or misleading information in the supporting statement is an offence.

Responding To Payment Claims – Payment Schedules 

In the Building Industry Fairness (Security of Payment) Act 2017, a contractor who claims to be entitled to a progress payment is called a claimant. The person or company under the contract who is, or maybe liable, to make the payment is called a respondent.

Under the Building Industry Fairness Act, a respondent must provide a payment schedule if they do not intend to pay the full claimed amount. A payment schedule is a written response to a payment claim, which:

  • tells a contractor the amount they’ll be paid (the scheduled amount)
  • provides reasons why the amount may be less than the amount claimed.

Failing to pay the scheduled amount by the due date is now an offence and a maximum of 100 penalty units may apply.

 

Project Contract Mini-series Part One

Strict Time Limits To Pay Adjudicated Amounts  

The Building Industry Fairness Act requires a respondent to pay an adjudicated amount within 5 business days after the adjudication decision is given, or another time decided by the adjudicator. A maximum of 200 penalty units applies for failing to pay.

The respondent must also notify the registrar within 5 business days after making the payment, and provide the registrar with evidence that the payment was made. A maximum of 20 penalty units may apply for failing to notify the registrar. 

The QBCC can take disciplinary action against a respondent that is a licensee if they do not comply.

Stay tuned for our next article in this mini-series next week that will explain Withholding Payment rights when adjudicated amounts are not paid.

If you can’t wait for part two 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@mba-lawyers.com.au who can help you today.