Building and Construction

Here are some tips to prevent common problems arising, resulting in an unsuccessful adjudication application under the Security of Payment Legislation. Ensure that your payment claim is served on and from the reference date. A payment claim served the day before a reference date or where there is no reference date will be invalid and will prevent a successful adjudication application. Make sure that your payment claim and application for adjudication is served in accordance with the method for service of documents provided for in the subcontract. Can you serve documents under BCIPA electronically by email or drop box? Yes you can, although subcontractors should ensure that the subcontract provides for service of documents by email and preferred electronic means. If your subcontract is silent on the method of service of documents electronically the safest method of service is by delivery by courier to the place of business of the contractor specified in the subcontract, so that service can be easily proven by independent evidence. Ensure that time limits under the BCIPA are complied with. A failure to comply with time limits associated with the making and service of an adjudication application will render the application invalid. You must serve the second chance notice for a contractor to serve a payment schedule before proceeding to make an adjudication application. If you do not serve the second chance notice strictly in accordance with the time limits in BCIPA the adjudication application will be invalid. Your adjudication application must be made in writing. You must serve your adjudication application in writing and it must be an exact copy of the application that is filed with the QBBC. If you fail to give the respondent contractor an exact copy of the adjudication application, by omitting to provide the respondent with all of the documents, your application is likely to be invalid and any decision made in your favour liable to be set aside for jurisdictional error. Never serve a payment claim or an adjudication application on a USB stick as it does not constitute writing and will invalidate an adjudication application. What should you include in an adjudication application?  Evidence in the form of witness statements from those persons who can verify the work done in the payment claim and who can verify the factual matters to dispute points raised in the payment schedule. Relevant documents and written communications should be referred to and attached to the witness statements where necessary. If applicable, expert reports should be included as well. This is particularly so if the respondent contractor is asserting that work is defective. Written submissions should also be included in the application summarising the evidence provided in the witness statements in support of the payment claim, responding to the points in the payment schedule and addressing contractual and legal points to be made. Variation claims are invariably disputed by a contractor in an adjudication. Subcontractors should ensure that the obligations to give notice and obtain the written consent of the contractor prior to undertaking the variation work are complied with as required by the subcontract. If these subcontract requirements are not complied with a respondent contractor will raise such non compliance to dispute a payment claim in an adjudication application. A good practise is to confirm any discussions on the construction site relating to variations between relevant representatives in email communications. The email communications can be attached to a witness statement and relied up in an adjudication application if necessary. Contemporaneous notes and written communications can assist greatly to prove the nature and extent of variations done at the direction of a contractor in an adjudication application. Delay and liquidated damages are, in nearly all adjudication applications, raised by a respondent contractor to try and defeat a subcontractor’s claim for payment. In our next bulletin we will provide you with ways to assist subcontractors in successfully overcoming delay and liquidated damages claims in adjudication. If you require further information please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au.

The High Court recently handed down judgment in Maxcon Constructions Pty Ltd -v- Vadasz. Relevantly, the construction contract between the parties provided that the retention sum was to be released upon the issue of a certificate of occupancy under the Development Act 1993 (SA). The High Court held that this provision constituted a “pay when paid” provision within the South Australian Security of Payment Legislation, because the issue of a certificate of occupancy was contingent upon Maxcon completing the building works under the head contract. The Building and Construction Industry Payments Act 2004 (Qld) has the same provision as the South Australian Legislation which renders “pay when paid” provisions of no effect. This decision will have significant implications for head contractors relying on retention sums as security.  Subcontractors may be able to challenge the effect of retention clauses in construction contracts in an adjudication application where a contractor is refusing to release security under the construction contract. The Building Industry Fairness (Security of Payment) Act 2017 (BIFSPA) has been passed by the State Government.  Chapter 3 of BIFSPA relating to Progress payments will commence from 1 July 2018.  Chapter 3 provides the framework and processes for payment claims, payment schedules and adjudication applications.  BIFSPA also has a provision that renders “pay when paid” provisions of no effect. For further enquiries and assistance please contact Justin Mathews of our office on (07) 5574 0111 or email justinm@qbmlaw.com.au.

What benefit does the recent decision of the High Court of Australia of Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd have for subcontractors under the Security of Payment Legislation? Our partner Justin Mathews – an accredited specialist in commercial litigation and leader of our building and construction litigation team – explains. The decision makes it clear that an adjudication determination cannot be challenged by a contractor for a non-jurisdictional error of law on the face of the record.  This significantly narrows the available grounds for challenge to adjudication determinations.  If an adjudicator incorrectly applies a contractual provision, mistakenly applies a legal principle or makes an incorrect finding of fact relating to the contract dispute in reaching a determination, the determination is no longer at risk of being set aside. It is now accepted that the quick nature of the processes under the Legislation anticipates that such errors may be made by adjudicators.  The decision reinforces the underlying philosophy of the Security of Payment Legislation to provide subcontractors with a fast and inexpensive forum to compel payment from contractors for work done under a construction contract. For enquiries and assistance with respect to the making of an adjudication application please contact Justin Mathews of our office on 07 5574 0111 or email justinm@qbmlaw.com.au.

There is finally some good news for Gold Coast subcontractors. The Building Industry Fairness (Security of Payment) Act 2017 (“BIFSPA”) has been passed by state government but as at 1 February, 2018 it has not commenced.  Upon commencement, it will have major reforms to the building and construction industry in Queensland.  The BIFSPA provides for new procedures for payment claims that will be more favourable than the previous legislation for Queensland and Gold Coast subcontractors.  Our partner Justin Mathews, a Gold Coast lawyer holding specialist accreditation in commercial litigation explains why. The BIFSPA applies to payment claims made after its commencement so that existing construction contracts will to that extent be subject to the Act.  A payment claim must be given within 6 months of completion of the work unless the relevant construction contract provides otherwise.  Under the BIFSPA a reference date arises upon termination of a construction contract that entitles a claimant to submit a payment claim to recover work done up to and upon termination of the contract.  This represents a significant change for the benefit of subcontractors who previously have suffered a loss of rights when contracts are terminated by contractors, often for dubious reasons. As you might be familiar with, payment schedules are responses to payment claims, and often will be the first sign of a developing problem between a subcontractor and a contractor.  Under the BIFSPA, a payment schedule must be submitted no later than 25 business days after the day the payment claim is given or earlier if stated in the relevant construction contract. What happens if you don’t receive a payment schedule under BIFSPA?  The amount in the payment claim is payable by the due date for the relevant progress payment.  The amount can be recovered either through a court or upon adjudication.  The claimant does not have to give notice to the respondent giving the respondent a second chance to submit a payment schedule.  If proceeding through a court, a claimant must give a 5 business day’s warning notice of the intention to commence proceedings and the notice must be given within 20 business days of the due date for the progress payment.  The claimant can then commence proceedings and apply for judgment.  The respondent cannot defend the claim or raise a counterclaim with respect to matters arising under the construction contract.  If the claimant elects to proceed to make an adjudication application it must be lodged within 30 business days after the later of the due date for the relevant progress claim or the last day when the respondent could give the payment schedule.  Penalties and disciplinary action apply for a failure to provide a payment schedule in response to a payment claim. What happens if you receive a payment schedule under BIFSA?  The claimant may apply for adjudication.  Time limits apply.  An application for adjudication must be lodged within 30 business days after the claimant receives the payment schedule.  Strict time limits apply for respondents to submit an adjudication response.  A respondent cannot raise a point in the adjudication response that is not in the payment schedule.  The BIFSPA provides for short time frames for adjudication decisions to be made. Justin is a Gold Coast lawyer who has represented numerous contractors in litigation and adjudication under the Security of Payment legislation in Queensland and New South Wales.  For all enquiries in respect of making systems, invoices, and payment schedules compliant with the new requirements of BIFSPA please contact Justin Mathews of our office on 07 5574 0111, or email justinm@qbmlaw.com.au.