Getting Paid in the Building & Construction Industry – Are You Aware of the Changes?

Recently, both the Subcontractors Charges Act 1974 and the Building and Construction Industry Payments Act 2004 were repealed and replaced by the Building Industry Fairness (Security of Payment) Act 2017 (‘BIFA‘).

BIFA commenced on 1 January 2019.

BIFA’s role is to secure, and make easier, the recovery of payments by subcontractors from parties higher on the contractual chain in the building and construction industry. In fact, BIFA states that its express purpose is ‘to help people working in the building and construction industry in being paid for the work they do.’

Like the legislation it has replaced, BIFA governs payments under a construction contract, whereby one party undertakes to carry out construction work for, or to supply related goods and services to, another party.

Key parts of BIFA include:

Subcontract

A contract is a subcontract for another contract if:

  1. performance of the contract contributes to the performance of the other contract because the work, required to be carried out under the contract, will form all or part of the work required to be carried out under the other contract; and
  2. the contribution mentioned in paragraph (a) is not merely coincidence.

Parties to a subcontract are generally:

  1. the developer;
  2. a builder/contractor;
  3. the subcontractor engaged by the builder.

Obtaining Information About Parties

Under Part 3 of Chapter 4 of BIFA, a subcontractor may request information from the contractor, such as the name and address of the person who engaged the contractor, and the contractor must provide a written response within 10 business days after the request is made, and give notice to the person with whom the contractor has a contract.

If the contractor fails to respond in time, the contractor commits an offence.

Payment Claim

The first step to be paid is to make a payment claim.

A payment claim is a written request for payment which:

  1. identifies the works or goods and services for which the claim is made;
  2. states the amount owed; and
  3. requests payment.

A tax invoice may be a payment claim if it meets requirements.

Claims should be made on dates specified by the contract. If there is no written contract, or where a contract is silent on the matter, section 67 of BIFA sets out time periods in which a payment claim can be made.

A correct payment claim enables the claimant to access adjudication to settle the dispute if the claimant so chooses.

It is important that a Respondent to a payment claim respond by either paying in full or providing a payment schedule within the time the contract says a payment schedule must be given, or within 15 business days after receipt of a payment claim. Failure to do so is an offence and may attract a penalty.

If a payment schedule is not provided, the Respondent cannot dispute the amount claimed if the dispute proceeds to adjudication.

A payment schedule may be for a lower dollar amount than that shown in the payment claim and should outline all the reasons for withholding payment.

If a payment dispute occurs, the claimant may pursue its claim by way of adjudication, in QCAT, or the Courts, or by way of a subcontractor’s charge. Adjudication and a subcontractor’s charge cannot be used together.

Subcontractor’s Charge

A subcontractor’s charge secures payment in accordance with the subcontract of all money that is payable, or is to become payable.

A subcontractor’s charge will only attach if there is still money owing from the higher contractor to the contractor that owes money to the subcontractor.

The first step is to issue a Notice of Claim for a Charge. There are strict time limits for making a claim for a subcontractor’s charge.

When a subcontractor makes a claim for a charge, a notice of charge specifying the amount claimed for work and particulars of claim must be given to both the builder and the developer.  A qualified person must certify the claim.

A charge can be enforced in Court.

Summary

BIFA is now the “one-stop shop” for all legislation dealing with security of payment for parties to a construction contract.  It allows claimants to obtain information about other contracting parties and provides various pathways for obtaining payment. Respondents should not ignore payment claims as they may commit an offence. There are specific time limits for various steps and processes and it is important to undertake the processes correctly.

Claimants or respondents under BIFA should seek legal advice regarding BIFA before taking any action. This article is intended to only highlight some key points regarding BIFA, and does not address all the changes brought about by BIFA.

Contact Information

Direct Line: 07 4616 9836