The fragility of the construction industry as it emerges from the impacts of covid makes it more important than ever to understand your statutory rights and obligations for payment in Queensland under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIFA).
The operation of BIFA provides various avenues to protect, obtain, and recover, payment for works completed (or goods/services supplied) under a construction contract, other than commencing proceedings. Over the next three weeks, this article series will provide a refresher on three of those avenues. Namely:
- Part 1: Progress Payments (which follows Lamont Project and Construction Lawyers’ “Getting Paid” article series);
- Part 2: Subcontractor’s Charge v Payment Withholding Request; and
- Part 3: Statutory Trusts.
Please note that whilst similar legislation has been enacted in all states and territories in Australia, the rights and obligations (and associated timeframes) may differ.
Right to Payment
BIFA provides parties with a statutory right to claim payment for works undertaken under a construction contract progressively over the duration of that contract, and provides a quick and inexpensive means of resolving a payment dispute. This statutory right to payment runs alongside the construction contract, and cannot be contracted out of.
A “progress payment” also includes:
- The final payment for construction work carried out or for related goods and services supplied under a construction contract (Work);
- A single or one-off payment for Work undertaken; and
- A payment that is based on an event or date, often referred to as a “milestone payment”.
Unless a date for making a claim for a progress payment (the “reference date”) is provided under the contract, a claim for payment for Work undertaken can be made on the last day of the month the Work was first undertaken, and the last day of each subsequent month (and where the contract is terminated, the date of termination).
The amount of a progress payment to which a party is entitled, is (unless the contract provides for a different method of calculation), calculated based on the value of Work undertaken having regard to, amongst others:
- The contract price for the Work;
- Other rates and prices stated in the contract;
- The estimated costs to replace the Work if it is found to be defective.
An entitlement to a progress payment is then claimed by a contractor (for example) by submitting a payment claim to the principal (for example) (Payment Claim). The process and requirements of making a Payment Claim (and responding by issuing a Payment Schedule) is discussed “Getting Paid” – Part 1.
Due Date for Payment
A progress payment under a construction contract becomes payable either on the date provided under the contract, or 10 business days after a payment claim has been made.
Where any of the following clauses exist in a construction contract (which are void pursuant to BIFA or the Queensland Building and Construction Commission Act 1991 (Qld)), a payment becomes payable 10 business days after a payment claim has been made:
- Any “pay when paid” provisions, which includes, for example, a clause which provides that party C (who must be paid by party B) will not be paid until Party B has been paid by Party A;
- Where a time for payment in a subcontract or construction management trade contract is later than 25 business days after the payment claim; and
- Where a time for payment in a commercial building contract is later than 15 business days after the payment claim.
Where a principal (for example) issues a Payment Schedule in response to a Payment Claim, but fails to make payment by the due date, the contractor (for example) may:
- Either recover the unpaid amount through the courts by commencing proceedings, or refer the matter to Adjudication under BIFA (which is further discussed in ”Getting Paid” – Part 2); and
- Give the principal written notice (which must state it is made under BIFA) of its intention to suspend undertaking the Work under the construction contract.
Lamont Project & Construction Lawyers
Our Team have the industry knowledge and experience to assist both Principals and Contractors in all major projects and payment disputes. If you would like to discuss any matters raised in the above article or the forthcoming series as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.
The contents of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Lili Hoelscher
Phone: (07) 3248 8500
Address: Suite 1, Level 1, 349 Coronation Drive, Milton Qld 4064
Postal Address: PO Box 1133, Milton Qld 4064