How can I secure a faster method of cash flow within construction?
Contractual Issues with Payment Claims
Cash flow is one of the biggest problems facing the building and construction industry, which is why the Building and Construction Industry Payments Act 2004 (Qld)(BCIPA) was introduced as means of expediting the debt collection process in the industry.
In an attempt to make the process fairer and more efficient, some big changes are coming to BCIPA in the very near future, and as such it is vital that you understand the requirements and time frames when serving or responding to a BCIPA payment claim.
What is a Payment Claim?
If you are in the building and construction industry, a Payment Claim is a document that can be served on the other party that describes the construction works or related goods and services performed under a contract and the amount owing. The number of payment claims that you can issue will be determined by your contract, or if it is not dealt with in your contract, a maximum of one a month may be issued.
Benefits
The reason that Payment Claims are so useful for someone seeking payment is that they provide a much faster and cost efficient avenue to reclaim the debt. If a Payment Claim is not adequately responded to within the specified time period, you may be able make an application straight to the court for judgment and successfully side step the potentially expensive back-and-forth of the litigation process.
Alternatively, if a Payment Claim is validly disputed by the provision of a Payment Schedule, or if no Payment Schedule has been received and the debt remains outstanding, then an external adjudicator can be appointed to resolve the matter. The idea behind this is that an adjudicator will have industry specific knowledge, be cheaper than proceeding to litigation, and more time efficient.
Draw-backs
There are very strict requirements in regards to the contents of a Payment Claim to ensure that it is valid. If these requirements are not complied with and the document is not served in the relevant time period then you will not be able to proceed straight to an Application. There is no scope for error with a BCIPA Application, so if you are unsure about the form and timing of your Payment claims, give us a call.
Changes and effects
There are a number of key changes to BCIPA that will be coming into effect in September this year. Strict compliance is essential to a successful BCIPA Application, so it is important that you become familiar with the aspects of the system that will be tweaked once the amendments take effect.
Changes to Adjudicators
- An ‘Adjudicators Registry’ will be established that will monitor and appoint adjudicators and provide information about their skills and areas of expertise. The establishment of the Registry will make it a lot easier to find and appoint the best adjudicator for the job.
Changes to time frames
- The time that you have to make a payment claim is being reduced from 12 months to 6 months from the date that the works have been completed, however, you can agree on a different time period in your contract. If no time period is agreed in the contract, then the 6 month period will apply.
- If you are sending out the final payment claim, the time to serve the payment claim will be whichever of the following comes later: the period agreed in the contract, 6 months from the completion of the works, or 28 days from the end of the defects liability (under the contract).
Complex Payment Claims and Standard Payment Claims
- The amendments now split payment claims into two categories – complex and standard. Different time periods will apply depending upon what type of payment claim you have issued.
- A complex payment claim is one that is either for a payment greater than $750,000.00, a latent condition under the contract, or a time-related cost under the contract. All other payment claims will be standard.
- If your payment claim is a complex one, the other party now has 15 business days to respond rather than 10. The time period to respond will be extended to 30 business days if the payment claim was served more than 91 days after the date agreed in the contract.
- The other party will also have extra time to provide their adjudication response, with time increased to either 10 business days for standard payment claims or 15 business days for complex payment claims.
How we can help
If you have a problem getting someone to pay on time, please contact us as soon as possible so we can ensure that your payment claims have been correctly served and help you with any proceedings under BCIPA.
Jeremy Streten
Solicitor
