Security of Payment- BIF Act Changes

security of payment

In late 2017, the Queensland Government enacted the Building Industry Fairness (Security of Payment) Act 2017 (“the BIF Act”). The BIF Act brings significant changes to the security of payment regime for the Queensland building and construction industry.


The Building Industry Fairness (Security of Payment) Act, incorporates the provisions of the Building and Construction Industry Payments Act 2004 (‘BCIP Act’) in Chapter 3 and the provisions of the Subcontractors’ Charges Act 1974 in Chapter 4. Although the BIF Act preserves the meaning and effect of the former legislation and most sections survive in their entirety, there are some important changes that every building industry stakeholder must be aware of.

Security of Progress Payments

Once in operation, the new security of payment provisions contained in Chapter 3 of the BIF Act will apply irrespective of the date of the building contract and there will be no transitional period from the BCIP Act.

1. Payment claim format:

The BIF Act no longer requires payment claims to carry an endorsement that the claim is made under the legislation, instead any written document that contains the following information will be considered a payment claim under the BIF (Building Industry Fairness) Act:

  • identify the construction work or related goods and services to which the progress payment relates; and
  • state the amount (the claimed amount) of the progress payment that the claimant claims is payable by the respondent; and
  • request payment of the claimed amount.

A document bearing the word ‘invoice’ is taken to satisfy the requirement for requesting payment of the claimed amount.

2. Reference dates:

The BIF Act introduces a statutory reference date which may arise after the termination of a contract. This is a significant change to the current provisions in the BCIP Act.

3. BIF Act Payment schedule:

Submission of a payment schedule is now mandatory if a respondent does not intend on paying the full amount of the claim.

The time for submitting a payment schedule has also been extended to the earlier of:

a. the period stated in the contract for submitting a payment schedule or paying the claimed amount; or

b. 25 business days after the payment claim is given.

4. Adjudication Applications:

The BIF Act has altered the time frames within which an adjudication application must be made.  These time frames are relevantly:

a. for an application relating to a failure to give a payment schedule and pay the full amount of the payment claim – 30 business days after the later of the due date for payment or the last day for receipt of the payment schedule;

b. for an application relating to failure to pay the full amount stated in the payment schedule – 20 business days after the due date for the progress payment; and

c. for an application relating to a payment schedule where the amount is less than the amount in the payment claim – 30 business days after receipt of the payment schedule.

The BIF Act has also removed the requirement for “second chance notices” to be provided before proceeding to adjudication.  However, these provisions remain for applicants who seek to enter judgment for failure to provide a payment schedule.

5. Adjudication Responses:

The time for responding to an adjudication application remains unchanged and respondents are no longer able to raise new reasons for withholding payment which were not included in a payment schedule.

Practical considerations:

The changes introduced in Chapter 3 of the BIF Act are primarily focused on protecting the rights of subcontractors and suppliers.  Accordingly, precaution needs to be taken to ensure all progress claims are treated as valid claims made under the BIF Act and processes are implemented to respond where full payment is not intended.

Developers and contractors should consider amendments to any building contracts which are expected to progress through the change over from BCIP Act to BIF Act to ensure compliant transition to the new security of payment regime.

Subcontractors’ Charges

The key changes to the subcontractors’ charges once in operation under Chapter 4 of the BIF Act will be:

1. Definition of work:

The definition of work under the BIF Act has been amended to remove any reference to the work being done or commenced upon land.  The definition also introduces a specific inclusion for demolition, removal or relocation works.

2. Project bank accounts:

Contractors will have no entitlement to charge any monies held in a project bank account. This means that the subcontractors’ charges provisions will not apply to any work which forms part of a project subject to a project bank account regime.

3. Accompanying statutory declarations:

The requirement for statutory declaration to be provided in support of a notice of claim of charge by the claimant has been removed.  However, the requirements for the amounts claimed to be certified by a qualified person remain. Strict compliance with the form of notices under the subcontractors’ charges provisions also remain and caution must be exercised by the claimants to ensure that they do not waive their rights by misreading the relevant requirements.

4. Contractor’s response:

The time provided for a contractor to respond to a notice of claim of charge has been changed from 14 days to 10 business days.

Practical considerations

The broadening of the definition of “work” under the BIF Act has been extended to encompass subcontractors previously excluded by the SCA.

It is also imperative for subcontractors to be aware that charges will not provide them with any entitlement to recover monies held in a project bank account.

If you require further advice on the implications of the new security of payment legislation, please contact us or visited our dedicated Construction site for more information on your rights and obligations.

The above information is intended only as general information and should not be interpreted or relied upon for legal advice.

Q&A: Using Caveats Over Real Property in Debt Collection

Using Caveats Over Real Property in Debt Collection FAQs

Common questions and answers for using caveats over real property in debt collection…


What is a caveat?

A caveat is a formal notice lodged on real property, which stops any person (including the registered proprietor) from dealing with the real property.

Who may lodge a caveat?

Any person claiming an estate or interest in land.

Does Judgment give me a caveatable Interest?


What is necessary to establish an Interest?

An actual interest in the property itself (some relation between the debt and the property).

It is not intended to provide an exhaustive list, but some common examples may include:

  • Equitable mortgagee or chargee
  • Purchaser under a contract of purchase
  • A husband or wife or partner (defacto)
  • Lessee
  • Beneficiary under a trust
  • A victim of fraud

What is an Equitable Chargee?

Where the debtor agrees to charge their real and personal property with the payment of a debt, the creditor becomes an “equitable chargee”; “equitable” in this sense meaning “unregistered”.

For example:
“The guarantor charges as beneficial owner and trustee of every trust all the guarantor’s land (including land acquired in the future) in favour of Bunnings to secure the payment of the moneys and the performance and observance of the guarantor’s covenance under this deed.”

(See Bunnings Building Supplies Pty Ltd -v- Blue Diamond Homes Pty Ltd [2004] QSC 54)

Note: Check the credit application and any guarantee documents.
If you are unsure whether or not your client is an equitable chargee, ask your friendly solicitor.

What is the procedure for lodging a caveat?

  • Confirm the existence of the debt
  • Confirm the caveatable interest (check the charging clause)
  • Lodge caveat (your friendly solicitor does this)
  • Notify other interested parties (Registrar does this)
  • Within 3 months of registration, commence legal proceedings (Supreme Court)

What if I don’t issue legal proceedings?

The caveat will lapse after 3 months. You may only caveat once.

Why use a caveat instead of a writ?

Caveat may be lodged immediately the debt becomes owing, whereas a writ requires a judgment.

Other matters to note about caveats

  • Be careful and always seek advice on whether there is an equitable interest
  • Conduct searches to ensure there is equity in the property
  • There are obvious costs risks if you get it wrong (Supreme Court)
  • A charging clause (and therefore a caveat) will not give priority over registered mortgages and perhaps future liquidators. A specific charge should be drafted for this.

Consent Caveats


What is a consent caveat?

The registered proprietor may agree to the lodgement of a caveat on the property, despite no pre-existing caveatable interest. A consent caveat will remain on the title even after the 3 month expiry period.

Debtor owes $10,000.00 and agrees to pay it back at $2,000.00 per month.
Creditor agrees, but wants security.
The Parties may agree that, instead of a registered mortgage, a consent caveat will be lodged.
A settlement agreement may be executed, charging the property and the consent caveat lodged.

What is the effect of the Consent Caveat?

Debtor may not transfer or re-finance the property without paying the debt or obtaining the creditor’s consent.

If you have additional questions about caveats over real property in debt collection, we can help.

4 steps to applying for a trade mark

Intellectual Property Lawyers

When starting a business many people simply register a business name and domain but fail to realise that this does not grant them the exclusive use of that name in Australia or protect any design they use in their business.

To obtain such protection you must register a trade mark with IP Australia. The four steps to registering a trade mark are:

  • Conduct preliminary research and choose your trade mark
  • Structure ownership and use of your trade mark
  • Determine which class of goods and services apply to your trade mark
  • Apply to register your trade mark

1. Conduct preliminary research, choose and design your trade mark

It is vital from the outset that you ensure the name or logo is chosen with a view to trade marking it. Often we find that businesses within an industry tend to use common names, descriptive words or identifiers which by themselves can adversely affect the ability of the business to trade mark its intellectual property. In deciding on a business name and logo we recommend that you:

  • engage in preliminary research and conduct Google searches on similar businesses;
  • Whois domain name searches to identify available urls; and
  • Australian trade mark database searches,
  • avoid using where possible common names used for the products or services you sell;
  • descriptive words and phrases by themselves;
  • geographical names;
  • words which sound similar to another business;
  • logos which are similar to other businesses;
  • common phrases, acronyms, single letters, and numerals;
  • common surnames;
  • liaise with both your logo designers (if applicable) and lawyers to ensure that the logo and name you choose is unique and capable of distinguishing itself from your competitors.

Rostron Carlyle Rojas Lawyers can assist you in this process by advising you on the likelihood of potential names and logos being registered as a trade mark and whether there are any potential conflicting trade marks or issues.

2. Structure ownership and use of your trade mark

Just as important as choosing the right name and logo is structuring the ownership and use of your trade mark. Unless the person or entity named in the trade mark application as the owner is the entity which will ultimately use the trade mark, it is important to ensure that documentation is put in place providing the user with a legal right of use.

Recent case law[1] has resulted in a trade mark owned by a director of a company being successfully opposed on the basis that whilst the trade mark was used by the company, the director as the owner did not use the trade mark. Importantly in that case there was no written licence agreement between the director and the company by which the company had a legal right of use of the trade mark, or even evidence of an intention on behalf of the director to enter into such an arrangement.

Rostron Carlyle Rojas generally advises having a trade mark and other valuable intellectual property owned by a separate holding company which then licenses that intellectual property for use by your trading entity or third parties, and is experienced in establishing and documenting such arrangements.

3. Determine which class of goods and services apply to your trade mark

The next step is to determine which class of goods or services apply to your trade mark. IP Australia uses a classification system which categorises goods and services into 45 different classes and it is important to note:

  • you must actually use or intend to use the trade mark in relation to the goods and services you specify;
  • IP Australia bases its fees on the number of classes claimed and these fees increase with every class you add;
  • whilst a wide description of the goods and services offers greater protection a wide description also increases the risks of the trade mark conflicting with pre-existing trade marks or being challenged on the basis of non-use;
  • whilst it is possible to narrow the description of the class of goods and services after a trade mark is registered it is not possible to widen that description; and
  • careful drafting of the description of the class of goods and services can avoid potential conflicts with other trade marks, costly objections by third parties and increase the likelihood of a trade mark being registered.

4. Apply to Register Your Trade Mark

Once the above steps are completed the application for the trade mark can be lodged with IP Australia. Generally, your trade mark application will be examined within 3-4 months after which IP Australia will either issue an acceptance notice or an adverse report. If accepted, the trade mark will be advertised to allow third parties to view the trade mark application and make objections. If there are no objections the trade mark will be registered at the earliest 7 ½ months after the application for the trade mark was lodged. It is possible that during the application process IP Australia may issue an adverse report or a third party may oppose the trade mark application. In both cases it is important that professional advice is obtained to determine your options and to ensure that the relevant deadlines are met in a timely fashion.

Rostron Carlyle Rojas Lawyers have successfully dealt with many issues that have arisen during the trade mark application process and can advise you of your options going forward.

If you need advice or assistance in respect of trade marking or protecting your intellectual property please contact us.

[1] Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd [2017] FCAFC 83.

Shareholder Disputes: Winding up or purchase of shares of a solvent trading company?

Shareholder Disputes

Case Study-Shareholder Disputes

In Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd & Ors [2018] QCA 48, a dispute had arisen between the shareholders of a company, Samgris Pty Ltd which was incorporated to undertake coal exploration in Queensland.

The minority shareholders in the company claimed that the affairs of the company had been conducted in a manner which was oppressive or unfairly prejudicial to, or unfairly discriminatory against, them as the minority and further or alternatively claimed that the company’s affairs had been conducted in a manner which was contrary to the interests of the members as a whole.

The relief sought was for an order for the winding up of the company under s461 of the Corporations Act 2001 (Cth), or, alternatively, that the majority shareholder purchase their shares at a price to be determined by the court once the court had decided that they should have that relief under s233 of the Corporations Act 2001 (Cth).

Here, the company was well and truly solvent. Its draft financial accounts for the year ended 31 December 2015 showed net assets of in excess of $18 million before having any regard to a disputed $33 million.

In the first instance, the trial judge (Bond J) held that the relationship between the appellant and the respondents, as the shareholders of the company should be characterised as a “quasi-partnership” or “a majority controlled business requiring mutual cooperation and a level of trust”. He found that the relationship between the parties had irretrievably broken down and that this had been caused by the majority shareholder’s conduct. He further held that the conduct had been oppressive and unfairly prejudicial to, or unfairly discriminatory against, the minority within the meaning of s232(e) and that the respondents had established an entitlement to a remedy also under s232(d) and ordered a winding up of the company.

He found that the company was a “quasi-partnership” and was:

“..not functioning, and cannot reasonably be expected in the future to, in the way intended and … There is no real prospect that the directors nominated by the two sides can work together sensibly to reach the necessary agreement to be able to conduct the company’s business in the future. In the circumstances of this case, in the absence of any other remedy, it would be just and equitable that Samgris should be wound up.”

In this instance, the majority shareholder appealed the decision of the trial judge, but the appeal was unanimously dismissed.

In this instance, the court of appeal also reflected that:

“the critical considerations are that not only would the valuation of the respondents’ shareholding be an extensive, expensive and time consuming process, but there is also a real uncertainty as to whether the appellant would be willing and able to pay the price which is ultimately determined.”

In the face of such uncertainty-the court could not impose a buy-out order, affirming the original decision to order a winding up.

This decision reaffirms the approach taken when a dispute between shareholders is to be characterised as a quasi- partnership and the appropriateness of a winding up order.

It further highlights that if a party involved in a shareholder dispute wishes a buy-out order to be made, then it needs to demonstrate not only the appropriate basis for such an order-but the financial capacity and willingness to meet such an order.

If you are involved in or wish to obtain advice on have any aspects of shareholder disputes, then please contact us.

Enforcing a judgment through bankruptcy proceedings

bankruptcy proceedings

Obtaining a judgment against your debtor does not mean you get paid immediately. The debtor may be unable or unwilling to satisfy the judgment debt for a variety of reasons. He or she may be having financial difficulties, other debts, or may be ignorant or careless of the circumstances.

Bankruptcy Proceedings – an outline of the process

One of the options available for enforcing a judgment against a debtor is bankruptcy proceedings.

This process is quicker than other enforcement methods and you will have more control over the process as a creditor.

The disadvantage of this alternative is that there may be other secured creditors, who rank ahead of you, and thus full payment of the debt may not be received.

To initiate the proceedings, a bankruptcy notice needs to be lodged in a proper form with the Insolvency and Trustee Service of Australia (“ITSA”). The current filing fee is $440.00.

Following personal service of the bankruptcy notice on the debtor, he or she will have 21 days, in which to comply with the notice by paying the full amount of the debt or entering into a repayment arrangement, on terms satisfactory to you.


If the debtor fails to comply with the bankruptcy notice, he or she are deemed to have committed an act of bankruptcy. Pursuant to the provisions of the Bankruptcy Act 1966 (Cth) at the time of non-compliance with the bankruptcy notice:

  • the debtor must be present in Australia or have sufficient connection with Australia, and
  • the debt must be over $5,000 (two or more creditors may combine their aggregate debts).

Provided the above criteria are satisfied you may be able to file for a creditor’s petition for the debtor to be declared bankrupt.

A creditor’s petition must be filed in the Federal Magistrates Court within six months of the act of bankruptcy. A court date will be allocated for hearing of the petition. Once the creditor’s petition is served on the debtor, and provided it is uncontested, a sequestration order may be made against his or her estate, vesting all of the bankrupt’s property in the appointed trustee.

The trustee collects information about the bankrupt’s assets and liabilities. Any creditors who wish to claim in the estate must lodge a proof of debt with the trustee. Any secured creditors will rank above any unsecured creditors, the latter being paid proportionately out of the pool of funds available from the bankrupt’s estate. The petitioning creditor’s costs of obtaining a sequestration order are usually taxed and paid out of the bankrupt’s estate as a priority.

Bankruptcy proceedings can be complex and strict requirements as to form as well as limitation periods apply. We can assist you with legal advice and support with your proceeding whether you are a creditor or a debtor.

Are you considering bankruptcy proceedings against your debtors? Perhaps a prior debt repayment arrangement has been dishonoured? Need to lodge a proof of debt? Confused about your options as a debtor? We can assist you with any of your questions relating to bankruptcy and insolvency.  Contact us today.

Building Industry Fairness (Security of Payment) Act 2017 – Major changes for the Queensland building and construction sector are here

building industry fairness

On 10 November 2017, the Building Industry Fairness (Security of Payment) Act 2017 received royal assent.

Although the key provisions of the Act do not come into force until a date to be proclaimed by the Queensland Government, it is anticipated that the major reform to the operations of the Queensland building and construction industry will take effect from early 2018.

The controversial changes were enacted following a six-months consultation with the industry stakeholders and an intensive advertising campaign focusing primarily on the project bank accounts as a mechanism for a ‘fair’ recovery of payments for the tradie subcontractors. 1

The Act consolidates the current Queensland security of payment legislation2 and introduces some important amendments to the Queensland Building and Construction Commission Act 1991, particularly in relation to tougher measures in prosecuting unlicensed building work and targeting insolvency in the building industry. We will be discussing the changes to the QBCC Act in a separate publication, so watch this space.

Project Bank Accounts

The mandatory use of project bank accounts will be gradually phased in over the next two years. From the early 2018, all Queensland Government construction projects of the value between $1 million and $10 million will be covered by the operation of the Act. From 1 January 2019, all of the construction projects above $1 million including the private, 3 commercial and government sector will be required to operate the compulsory project bank accounts. Separate contracts for building work at the adjacent sites for a combined value of over $1 million between the same parties will be taken to be a single contract and thus also covered by the project bank account requirements.

Although a large body of the procedural matters will be addressed by a regulation, which is yet to be drafted, we have summarised the most important provisions with respect to the project bank accounts below.

Despite the flavour of the earlier advertising campaign and the Government’s various press releases, 4 only the head contractors and tier one subcontractors 5 will be covered by the new security of payment regime through the operation of project bank accounts, leaving the end suppliers and subsequent subcontractors out.6 However, these categories of the building industry operators will still be able to recover payments from their employers through the usual channels, like the payment claims and subcontractors’ charges.

Each of the project bank accounts will be utilised to hold on trust only the following amounts:

  • payments by the principal to the head contractor under the building contract;
  • payments to a subcontractor from the head contractor under the first-tier subcontract;
  • retention monies withheld under the first-tier subcontract; and
  • monies the subject of a payment dispute.

This system will necessitate the operation of three separate trust accounts7 for each project, with the head contractor being the trustee and beneficiary of these accounts, while each of the first-tier subcontractors are to have a beneficial interest in the amounts held on trust. The accounts must be operated by a financial institution within Queensland and be generally opened within 20 business days after the head contractor enters into a first-tier subcontract.

There are strict requirements for the operation of the project bank accounts, in particular, deposits and withdrawals only by electronic transfer, withdrawals and transfers between the accounts only by using a payment instruction given to the financial institution.

The head contractor will not be entitled to pay itself unless sufficient funds are held in the trust account to cover payments due to the subcontractors and must cover any short fall in the trust funds, which is unpaid by the principal. If there are insufficient funds in the account the head contractor must pay all of the subcontractors to whom payments are due on a pro rata basis.

There is an express exclusion of the trust account funds from the creditor claims (other than the subcontractor beneficiaries), as well as a prohibition on investment of these funds other than interest earned on each of the accounts. The head contractor is unable to recover the costs of the administration including the bank fees from the funds held in the project bank accounts or from the subcontractor beneficiaries.

Payment claims

The Act establishes a new process for progress payments and associated dispute resolution, which is largely based on the modified provisions of the Building and Construction Industry Payments Act 2004. As opposed to the project bank account provisions, this process is applicable to all suppliers and subcontractors who contribute to a construction contract and the definitions of construction work and the related goods and services for the purposes of the payment claims are very wide.

The new procedure for submission of the payment claims is somewhat more favourable towards the claimants (similar to the old regime prior to the 2014 amendments).

The requirements for the payment claim remain unchanged, although there is currently no express prerequisite for stating that a payment claim is made under the Act (similar to the security of payment legislation in NSW). However, further requirements as to the form and content may be enacted under a regulation for both the payment claim and the payment schedule.

An additional final reference date is added for terminated contracts.

If the construction contract does not provide for a due date of a progress payment, the due date will become the 10 th business day from the date a payment claim is made.

A payment claim must generally be given within 6 months of the carrying out the work or the supply of the related goods and services, unless provided for otherwise in a construction contract. Although only one payment claim is to be made for each reference date, any amounts from previous payment claims may be included in the subsequent claims.

The payment schedule must be provided by no later than 25 business days after the day the payment claim is given or earlier if the shorter period is specified under the relevant construction contract. If the respondent fails to give the payment schedule, as prescribed, the amount in the payment claim becomes payable by the due date for the relevant progress payment, which means that if the contract is silent as to the due date, the respondent is immediately liable for the full amount of the payment claim.

Penalties, as well as disciplinary action under the QBCC Act, now apply for a failure to provide a payment schedule in response to a payment claim.

Dispute Resolution Process

If the respondent does not issue a payment schedule and fails to pay the amount of the payment claim, the claimant may elect to recover the claim as a debt through court action or to apply for adjudication.

There is a further entitlement for the claimant to suspend work with notice upon the conditions specified in the Act.

The claimant may apply for adjudication within the following time frames:

  • for a failure to deliver the payment schedule: 30 business days after the later of the due date for the relevant progress claim or the last day when the respondent could give the payment schedule.
  • for a failure to pay the amount stated in the payment schedule: 20 business days after the due date for the relevant progress payment; and
  • for a dispute with respect to the amount stated in the payment schedule: 30 business days after the claimant receives the payment schedule.

The respondent will be unable to submit an adjudication response if no payment schedule was given with respect to the payment claim. Any adjudication response also may not include any new reasons, which were not included in the payment schedule.

The adjudication response must be given to the adjudicator within the following time frames (‘response date’):

  • for a standard claim within the later of 10 business days after receiving a copy of the adjudication application or 7 business days after receiving adjudicator’s notice that the adjudication application was accepted.
  • for a complex claim (over $750,000 excl GST) 15 business days after receiving a copy of the adjudication application or 12 business days after receiving adjudicator’s notice that the adjudication application was accepted. These timeframes may be further extended at the discretion of the adjudicator for up to 15 additional business days upon application (which must be made within a specified time limit).

After the adjudication response date (which will apply as specified above regardless of whether the respondent is entitled to give the adjudication response), the adjudication decision must be made within 10 business days for a standard claim and 15 business days for a complex claim respectively.

As an alternative to the adjudication process, the claimant may give a 5 business days’ warning notice to the respondent of the intention to commence court proceedings to recover the payment claim. Such notice must be given within 20 business days from the due date of the relevant progress payment. The claimant will then be able to apply for judgment provided that the court can be satisfied that the progress payment was not paid by the due date and that the payment schedule was not given (if applicable). The respondent will be unable to bring as counterclaim or any defence with respect to the matters arising out of the relevant construction contract in those proceedings (similar to the old regime prior to the 2014 amendments).

Subcontractors’ Charges

The provisions of the Subcontractors’ Charges Act 1974 appear to have been adopted with little change. The most notable variation however is the inclusion of the mandatory response period to a claim of charge within 10 business days of service of the claim. Further, a charge under Chapter 4 of the Act will not attach to the funds held in the project bank accounts, which means that from early 2018 the subcontractor’s charges are likely to be only effectively utilised by the subcontractors below the first tier under a building contract. If the claim of charge is issued, the claimant will be unable to enforce a progress claim or to initiate proceedings under Chapter 3 of the Act unless the claim of charge is withdrawn.

Further observations

The Act provides the QBCC with an active role as a watchdog for compliance including, for example, audit of the project bank accounts, registration and administration of the adjudicators and processing of the various hefty fines and penalties under the Act. Strict compliance is anticipated to be enforced, given that imprisonment terms apply to the offences against several provisions of the Act. However, it is yet to be clarified by regulation as to due processes for imposing those penalties.

Curiously, the Act contains a provision for a compulsory review of the reform by the minister to be commenced no later than 1 September 2018, which indicates that the new law is in a live test mode for now.

These changes will affect every stakeholder in the building and construction industry in Queensland. The above information is intended only as a selective overview of the provisions of the Act and should not be interpreted or relied upon for legal advice.

For further information please contact our construction lawyers on (07) 3009 8444.

1 For example, TV commercial from Queensland Department of Housing and Public Works published on Youtube on 1 February 2017.
2 Repeal of the Building and Construction Industry Payments Act 2004 and the Subcontractors’ Charges Act 1974.
3 The contract for construction of three or less residential dwellings and associated structures is currently excluded from this requirement.
4 For example, Premier’s and Minister’s statement on 30 November 2016 published by the Queensland Government.
5 The relevant tiers of subcontracts are defined in s 6 of the Act.
6 With the exception of second-tier subcontractors, in the circumstances where the head contractor and the first-tier subcontractor are related entities – Part 2 Division 3 of the Act.
7 To be opened and maintained by the head contractor.

The Definition of Corporate Insolvency

corporate insolvency

In Australia there is a ‘one size fits all’ approach to determining the definition of corporate insolvency.  The absence of a clear cut definition can lead to ramifications in the practical management of companies that are in financial distress.


Section 95A of the Corporations Act 2001 (Cth), attempts to provide a statutory definition of what constitutes solvency and insolvency:

(1)  A person is solvent if, and only if, the person is able to pay all the person‘s debts, as and when they become due and payable; and

(2) A person who is not solvent is insolvent.

Strict interpretation of this legislation deems that a company is insolvent if it is unable to pay all of its debts, as and when they become due and payable.  However, judicial interpretation over the years has provided that a company, not able to pay a debt when it falls due, may not in fact be insolvent but may be merely suffering from a temporary lack of liquidity.

Case law has provided that the conclusion of insolvency should be established from a thorough consideration of the debtor’s financial position in its entirety and ought not to be drawn simply from evidence of a temporary lack of liquidity. It should be the debtor’s inability, utilising such cash resources as it has or can command through the use of its assets, to meet his debts as they fall due which indicates insolvency (refer to the case of Sandell v Porter (1966)).

A temporary lack of liquidity must be distinguished from an endemic shortage of working capital.  In the case of ASIC v Plymin (2003), Mandie J of the Victorian Supreme Court listed fourteen indicators of insolvency that should be implemented as a beacon to any company that may be looking down the tunnel of insolvency as opposed to merely trading through a temporary phase of illiquidity (although not all of these indicators need to be present for a company to be insolvent). These indicators are:

  • The company is experiencing continuing losses;
  • The company’s liquidity ratio is below 1;
  • The company is subject to overdue Commonwealth and State taxes;
  • The company has evidence of poor relationship with its Bank, including the inability to borrow further funds from it;
  • The company does not have access to alternative finance;
  • The company has an inability to be able to raise further equity capital;
  • The company’s suppliers place the company on cancellation of debt, or otherwise demanding special payments before resuming supply;
  • The company’s creditors are unpaid outside of the trading terms;
  • Issuing of post-dated cheques by the company;
  • Issuing of dishonoured cheques by the company;
  • The company is required to enter into special arrangements with selected creditors;
  • The company becomes the recipient of solicitors’ letters, summons, judgments or warrants issued against it;
  • Payments to creditors of rounded sums which are not reconcilable to specific invoices; and
  • The company has an inability to produce timely and accurate financial information to display the company’s trading performance and financial position, and make reliable forecasts.

The absence of a clear cut definition of corporate insolvency has, and will continue to, lead to ramifications in the practical management of companies that are in distress. Should you have any concerns about the financial position of your company contact us today.

What is a Consumer?

What is a consumer

The introduction of the Australian Consumer Law (ACL) was meant to have the desired effect of delivering balance in the market place. To a certain extent, that may be true. However, there is one provision of the ACL in which it appeared to be the case that we found little guidance from court authorities, namely the question of re-supply under section 3(2) of the ACL. Or so we thought…

Recently this office defended a summary judgment application filed by a third party in our client’s case. The case involves the provision of managed services to customers by an IT company being our client’s company. The third party is alleged to have provided defective computer software to our client, which in turn allegedly caused problems in relation to our client’s provision of services to its customers. The third party brought its application for summary judgment on the basis that our client was not a consumer as defined in the Australian Consumer Law, and, accordingly the provisions of the ACL did not apply.

Section 2 of the Australian Consumer Law includes computer software in the definition of “goods”. To qualify as a consumer under section 3(1) of the ACL the goods have to be acquired for an amount less than $40,000.00 or alternatively the goods are acquired for personal, domestic or household use or consumption (the other provision pursuant to section 3(1)(c) of the goods consisting of a vehicle or trailer is irrelevant for the purpose of this discussion). These provisions are clear enough and on their own would not cause any confusion.

However, the difficulty of statutory interpretation of section 3 of the ACL in its application to the IT services industry arises due to the provisions of section 3(2) of the ACL, in particular section 3(2)(a) regarding the exclusion of the application of section 3 if the acquisition of the goods was for the purpose of re-supply. Our client had acquired goods from a major computer software provider for the purpose of performing its role as a managed service provider to its customers. In providing the managed services to its customer, our client would install the software but not provide the license key to the customer. The customer did not have any control over the computer software and they were never given access to the license key. Due to an alleged defect within the programming of the computer software issues allegedly arose for our client’s customers regarding their computers and eventually the business relationship was terminated causing our client loss.

The principal dispute in the proceeding lay between our client and its customer in relation to the customer repudiating the contract entered into with our client. Nevertheless, the issue regarding the alleged defect in the computer software which our client acquired from the computer software provider meant that it was necessary to bring in that software provider as a third party. In adding the third party, our client relied upon the provisions of the Australian Consumer Law (ACL). The software provider argued that the provisions of the ACL regarding consumers and the protections provided under the guarantees relating to goods did not apply to our client.

The Supreme Court of Queensland heard the third party’s application for summary judgment. As discussed herein, there was little previous court authority which applied to the question of re-supply under section 3(2) in relation to computer software. In particular, there was very little authority which applied to the unusual factual circumstances of this case. Notwithstanding the paucity of authority to guide the parties and the court, the Supreme Court of Queensland nevertheless agreed with our client’s argument there was a triable issue which necessitated our client’s case against the third party being heard, namely the fact that the exclusion under section 3(2) may not apply as the license key for the computer software was not provided by our client to its customers. The Supreme Court considered that based on the fact that the license key had not been provided the goods (in this case the computer software) had not been re-supplied.

If you wish to know about this subject matter please, contact our Commercial Litigation Lawyers for further assistance.