New Security of Payment provisions effective mid-December 2018

The commencement on 17 December 2018 of the Security of Payment provisions of the Building Industry Fairness (Security of Payment) Act (BIFA) will instigate significant change for those involved in the electrical contracting industry in Queensland.

The changes (summarised below) apply to any payment claim or subcontractors charge issued after midnight on 17 December 2018.

  1. Payment Schedules are mandatory unless payment in full is made on time
    A person receiving a Payment Claim must deliver a Payment Schedule within the time period provided for in the contract or within 15 business days of receiving the payment claim, whichever is the longer. If you do not deliver a Payment Schedule on time, you are likely to have to pay the full amount claimed even if you object and, you could be fined by the QBCC (even though electrical contractors are not generally governed by the QBCC). If you do hold a QBCC licence (for example for air and mechanical work separate to your electrical licence), you could also face disciplinary proceedings by the QBCC.”
  2. Most invoices and progress claims will be capable of being Payment Claims
    An invoice or progress claim no longer must be endorsed with the “magic words” to make it a Payment Claim. Consequently, many invoices and progress claims which would not be Payment Claims under the Building and Construction Industry Payments Act (BCIPA), may be Payment Claims under the BIFA. Many of the requirements for a Payment Claim under BCIPA are unchanged; for example, a Payment Claim must relate to a particular “reference date”. There is one minor change, a Payment Claim under BIFA needs to be a request for payment, however this can be satisfied by calling it an invoice or having on it a statement such as, “Please attend to payment by [insert date]”.
  3. You have to give Payment Schedules just like your clients – including to suppliers
    Likewise, invoices from your suppliers and subcontractors which would not be Payment Claims under BCIPA could be Payment Claims under BIFA if they meet the statutory criteria.If you do not:
    – Pay such a Payment Claim in full; or
    – Respond with a fulsome Payment Schedule (noting all reasons for non-payment must now be included; regardless of the value of the Payment Claim),then you could be faced with an adjudication application or Court proceedings in which you have almost no viable arguments. If you are a Queensland electrical contractor and you also hold a QBCC licence for some other type of trade work, you need to ensure payment terms are still within the limitations imposed by the QBCC Act which for subcontracts, is no more than 25 business days after the progress claim or invoice is received.
  4. A claimant no longer has to give a second chance for a Payment Schedule
    There is a requirement to give a warning notice if a claimant intends to start proceedings in Court, but the new law does not provide an opportunity for the respondent to give a Payment Schedule. Once the time to give a Payment Schedule has expired, it is too late to give one.  There is no second chance any more.Consequently, you need to ensure all invoices and requests for payment are reviewed in a timely manner.
  5. Special rules for Complex claims (i.e. for over $750K) have been abolished
    If there is an adjudication application, there will be no capacity for respondents to include in their adjudication response reasons for non-payment which are not referred to in their Payment Schedule.
  6. Time for making adjudication applications has been extended
    Depending on the circumstances an applicant will have either 20 or 30 business days to file an application.
  7. Right to make claims after contract is terminated
    Historically, in Queensland, if a contract is terminated, no further “reference dates” accrue after termination. Generally, this means a party cannot make a Payment Claim after termination of a contract.This has been fixed by providing that a Payment Claim can be made after termination of the contract.
  8. Limits on documents in Adjudication Applications
    Regulations have been issued limiting the size of adjudication applications for amounts under $25,000.
  9. New statutory defects liability period
    Under the new Act, a contracting party must advise the contracted party when the defects liability period ends within 10 business days before it ends. If the contracting party does not give such notice, it could be fined.
  10. Penalty for failure to release retentions on time
    If someone fails to release retention monies, or security held after practical completion, on time, they can be fined up to $25,230.00.One note of caution is retention money or security will still, in some circumstances, be permitted to be held notwithstanding this e.g., where a party has an accrued right to utilise retention or security. The terms of the relevant contract will remain key in this regard.
  11. Subcontractor charges improvements
    Parties in the contractual chain were always obliged to provide the particulars of the correct contracting party but because there has been no penalty, it was often not provided. With a potential fine of $2,523.00, compliance is now very likely.

Next phase of Project Bank Accounts delayed

The next phase of Project Bank Accounts, introducing it to the private sector, has been delayed. This will give the Government time to consider any appropriate changes (identified on Government jobs) before implementing it more widely.

Visit McKays website to register for a Workshop to help you understand how to use the new Act to your advantage.

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