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Focus: Amendments to BCIPA regime passed in Queensland

18 September 2014

In brief: The Queensland Parliament has passed amendments to the state's security of payment legislation that aim to address concerns raised by the construction industry about unfairness in the payment claim and adjudication process. Managing Associate Nicholas Ng (view CV), Associate Laura Nagy and Lawyer Timothy Leschke report on the key changes and the implications for the industry.

How does it affect you?

  • Depending on the value of the claim and when the construction contract was entered into, both potential claimants and potential respondents need to be aware that different timeframes will apply to payment claims made under the Building and Construction Industry Payments Act 2004 (Qld) (the BCIPA).
  • The amendments mean it is crucial to seek proper legal advice in relation to any claim, to ensure the applicable timescales are identified and met, particularly with respect to the transitional arrangements.
  • When drafting and negotiating construction and related goods or services contracts, regard should be had to the possible effect of the new timescales on the times for things to occur under the contract (including certification of payment and payment itself).
  • Participants in the construction industry should ensure they are familiar with:
    • the new process for the appointment of adjudicators, to be administered centrally through the Queensland Building and Construction Commission (QBCC) and the now limited roles of Authorised Nominating Authorities (ANAs); and
    • the transitional arrangements to ensure that they do not mistakenly miss the timeframes for submission of payment claims or schedules for construction contracts that are already on foot or entered into before the amendments commence.

What do the reforms to BCIPA involve?

The key reforms to the BCIPA regime are:

  • a separate set of timescales to apply to 'complex' payment claims (being any claim that exceeds $750,000). The respondent will have:
    • 15 business days to provide a payment schedule (or 30 business days if the claim is served more than 91 days after the reference date in the contract); and
    • 15 business days to provide an adjudication response (which can be increased by the adjudicator by up to a further 15 business days).

  • In respect of all other claims (called 'simple' payment claims), the respondent will now have 10 business days to provide an adjudication response (an increase from the current five business days), but will still have only 10 business days in which to provide a payment schedule.

  • If a respondent has failed to provide a payment schedule in accordance with BCIPA (and has not paid the claimed amount), a claimant cannot take enforcement action to recover (or to refer adjudication) under BCIPA until they have given the respondent a notice of their intention to take such action, and the respondent will have five business days from that notice to serve a payment schedule.
  • The time for serving a payment claim following the date upon which the construction work was last carried out, or the related goods or services were provided, will be reduced from 12 to six months (or such longer period as is provided for in the contract).
  • In respect of claims for final progress payments (which now includes the recovery of security or retentions), the claim will have to be served within 28 days after the expiry of the defects liability period (or later if provided for in the contract) or, if neither is applicable, within six months of the date work was last carried out.
  • Respondents to 'complex' payment claims will be entitled to raise new reasons for non-payment in their adjudication responses, despite those issues not having been raised in the respondent's original payment schedule (although the claimant will have an additional right of reply).
  • The QBCC will establish an Adjudication Registry, which will maintain a list of 'active adjudicators' and will have the power to appoint adjudicators to adjudicate claims. There will also be more stringent skills and qualifications requirements for adjudicators, including continuing professional development.
  • To correspond with the shutdown of businesses in the industry during the festive period, the period from three business days before Christmas up to 10 business days after New Year's Day will not be counted as business days for the purpose of the BCIPA.
  • Construction contracts entered into before the commencement of the amendments will remain under the current BCIPA regime, with the exception that adjudication applications are made to the QBCC rather than ANAs. Contracts entered into from commencement onwards will be completely subject to the new BCIPA regime.

The commencement date for the reforms is yet to be confirmed, but it is likely to be in October/November 2014.

Background to the reforms

The reforms to BCIPA, which were originally intended to commence on 1 September 2014, passed through Parliament on 11 September 2014. Allens has had an ongoing involvement in, and previously reported on, the progress of the reforms.

Changes to the reforms initially proposed in the Draft Bill

In our earlier Focus: Important changes to BCIPA in Queensland, Allens set out the proposed reforms and their impact based on the Draft Bill. However, Parliament passed the reforms with amendments to the Draft Bill based on the report of the Committee. The further amendments materially included, in summary:

  • 'complex payment claims' are now defined only by reference to the $750,000 monetary threshold; the reference to latent conditions or time-related cost claims initially proposed in the Draft Bill has been removed;
  • with the removal of latent conditions and time-related cost claims from the definition of complex payment claims, the need for a claimant to identify whether the payment claim is simple or complex has also been removed. In the Draft Bill, the claimant ran the risk of having any adjudication application withdrawn if an adjudicator decided that the payment claim was incorrectly identified as a standard payment claim, but this no longer applies; and
  • it is now clear that construction contracts entered into before the commencement of the amendments will remain under the unamended BCIPA regime, with the exception that adjudication applications are made to the QBCC rather than ANAs. New contracts entered into from the commencement onwards will be subject to the new BCIPA regime.

Changes recommended by the Committee, but not adopted

Although Parliament adopted some of the recommendations of the Committee, it did not implement a number of other recommendations as part of the current amendments to the BCIPA. These recommendations included:

  • developing an alternative model for the appointment of adjudicators to matters where the Queensland Government is a party to remove the potential for real or perceived conflicts of interest; and
  • providing that retention monies (and other forms of security) should be held under a 'Construction Retention Bond Scheme' and that such security could be the subject of payment claims (under which an adjudicator could direct the release of security). This would seek to ensure that retentions and securities are released in a timely manner and not improperly used by contracting parties.

While these recommendations have not been included in the amended BCIPA, it is likely that there will be further consultation with respect to them. This may result in further amendments at a later date and we will continue to report on any changes in this area.

Commentary

After a lengthy period and extensive consultation, the changes to the BCIPA have passed through Parliament and are likely to commence in October or November 2014 (although the precise commencement date is still to be confirmed).

The amended regime purports to achieve greater balance between the interests of all parties, but, in doing so, adds a layer of complexity that the construction industry needs to be aware of.

For construction contracts already on foot and entered into before the amendments commence, the construction industry should be aware that the timeframes in the unamended BCIPA will continue to apply in respect of claims going forward. Participants who confuse the timeframes for the transitional arrangements will potentially lose the ability to serve payment claims or payment schedules, and this could have serious consequences.

It will also be necessary for participants, in conjunction with their legal advisers, to review their contracts to consider what changes will be required to bring them in line with the amended BCIPA.

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