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Top Questions We Get Asked as Building and Construction Lawyers: Part 1

construction FAQs payment claims

My building contract does not provide for due dates for progress payments – am I still entitled to progress payments? I’ve been served with a payment claim under my building contract – now what? I need construction law advice – I’ve not been paid the amount the adjudicator has awarded me.

As building and construction law experts, these are examples of the type of questions we routinely get asked by some of our clients. We’ve compiled a list of some of the common questions we get asked. In this article, we explore the answers to some of these common questions.

 

My building contract does not provide for a due date for progress payments – am I still entitled to progress payments?

Yes, you are still entitled to progress payments.


One of the objectives of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) is to ensure that those individuals that carry out building and construction work or provide related goods and services get paid. This object is achieved, in part, by granting builders a statutory entitlement to progress payments, regardless of whether or not the construction contract makes provision for progress payments.

Accordingly, if your building contract is silent on due dates for progress payments, you can rely on clause 73 (b) of the BIF Act. Pursuant to clause 73 (b) of the BIF Act, if a construction contract does not provide for due dates for progress payments, the time for payment will be 10 business days from the date a payment claim was received. The BIF Act defines a business day from 12:00 am – 11:59 pm and does not include weekends, public holidays, the date the notice was given or the period from 22 December to 10 January. It is important to note that in order to enjoy the statutory entitlement to progress payments afforded by the BIF Act, you must issue a valid payment claim.

For further information, please see our answer to the question below, “What is a payment claim?”.

What is a payment claim?

A payment claim is a written document that requests payment for construction work or related goods or services. Prior to the enactment of the BIF Act a payment claim had to include an endorsement that it was made pursuant to legislation. This is no longer the case – under the BIF Act a claim for payment is considered a valid payment claim if it is in writing and:
• identifies the construction work or related goods and services;
• specifies the amount claimed;
• requests that the claimed amount be paid (a tax invoice satisfies this condition); and
• be the only payment claim served for the relevant reference date.

You must also ensure that your payment claim is properly served upon the correct entity or individual in accordance with the terms of the building contract.

It is important to note that if your tax invoice meets the requirements set out above, it will be considered as a payment claim. Accordingly, it is good practice to have a standard template tax invoice that complies with the payment claim requirements of the BIF Act. By doing this, each tax invoice you issue will be considered a payment claim – the advantage of this is that you will be entitled to rely on the BIF Act to enforce your right to payment.

I’ve been served with a payment claim – now what?

You cannot simply ignore a payment claim. If you’ve been served with a payment claim, the law requires that you respond appropriately to the payment claim. You have two options:

• where you agree with the amounts being claimed, you must pay the claimed amount in full by the due dates; or
• where you disagree with the amounts being claimed, you must respond to the payment claim by properly serving a payment schedule.

If you fail to issue a payment schedule, you will become liable to pay the amount claimed under the payment claim. Furthermore, if you hold a license issued by the Queensland Building and Construction Commission, you may also be subject to disciplinary action under the Queensland Building and Construction Commission Act 1991 QLD.

If you do not pay the amount owed on or before the due date, the builder can take steps to recover the unpaid amounts as a debt in Court or apply for adjudication. In addition, the builder may serve you with written notice of intention to suspend works.

For further information, please see our answer to the question below, “What is a payment schedule?”.

What is a payment schedule?

A payment schedule is a response to a payment claim, in which you are stating the amount you intend or are willing to pay and providing reasons why you are paying that amount, instead of the full amount.


If you receive a payment claim you must, either:
• pay the claimed amount in full by the due date; or
• respond to the payment claim by properly serving a payment schedule.

As the above suggests, you are only required to issue and serve a payment schedule if you do not intend to pay the full amount claimed.

Here’s some important points to bear in mind – a payment schedule must:
• identify the specific payment claim you are responding to;
• state the amount that is to be paid – if you intend to pay an amount that is less than the claimed amount it is essential that you clearly state the reasons for doing so. This is because you will not be allowed to put forward any reasons for withholding payment if the matter proceeds to adjudication; and
• be served within 15 business days of the date you are served with a payment claim of a shorter period if your construction contract provides for one.

I have not been paid the amount the adjudicator has awarded me, what can I do?

If you have not been paid the amount you were rewarded by the adjudicator you can give written notice of intention to suspend construction work. In addition to that you can institute legal proceedings in court to have adjudicator’s decision recognised as a judgement debt.


It is important to note that an adjudicated amount is to be paid within 5 business days of receiving a copy of the adjudicator’s decision or by a later date that the adjudicator may have set. If the party ordered to pay the adjudicated amount fails to do so within the prescribed period, you can:
• give written notice of intention to suspend carrying out construction work;
• institute proceedings in Court to have the adjudicator’s decision recognised as a judgment debt.

Are pay when paid clauses in a construction contract legal?

No. Pay when paid clauses are void – clause 74 of the BIF Act provides that pay when paid clauses have no effect in relation to any payment for construction work carried out or related goods or services supplied under a building contract.


Pay when paid clauses have traditionally been used by head contractors to reduce their payment risk. By using a pay when paid clause, the head contractor is informing a subcontractor that they will pay them after they receive payment from the principal.

 

My building contract does not provide for suspension of works – can I suspend works if I have not been paid?

Yes, you can suspend works if you have not been paid. The BIF Act provides for suspension of works. Under clause 98 of the BIF Act, you have the right to suspend carrying out construction work or supplying related goods and services under a building contract where:

• the other party has failed to respond to your payment claim;
• the other party has not paid the adjudicated amount;
• you have issued a valid notice of intention to suspend; and
• at least 2 business days have passed since you issued the notice of intention to suspend.
If you have validly suspended works under the provisions of the BIF Act you will not be liable for any loss or damage suffered by the other party (or any person claiming through the other party) because of a failure to carry out the construction contract or the supply of related goods and services during the suspension.

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New Legislation Brings Major Changes To The Building And Construction Industry

On 5 February 2020, the Queensland Government introduced the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2020 (Qld) (“Bill”) that will bring major changes to the building and construction industry.

The Bill proposes extensive changes to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (“BIF Act”) that will ensure effective, efficient and fair payment procedures for those who work in the building and construction industry.

These changes will be rolled out in 4 phases; the commencement dates of each phase are outlined below.

Background to the new Building Industry Fairness Legislation

On 14 May 2018, the Minister for Housing and Public Works, Minister for Digital Technology and Minister for Sport established the Building Industry Fairness Reforms Implementation and Evaluation Panel (“the Panel”). The goal of the panel was to review the implementation and effectiveness of the building industry fairness reforms introduced by the BIF Act and provide recommendations accordingly.

The panel’s recommendations were provided in the Building Industry Fairness Reforms Implementation and Evaluation Panel Report (“the Report”).

The Bill was issued as a direct response to the Report, which proposed 20 recommendations to the BIF Act. These recommendations have been grouped into three major themes:

  • Managing the financial transition – to enable minimum financial stress following implementation;
  • Simplifying the framework – to reduce administrative costs while providing for transparency; and
  • Improving protections – by obligating all contractors and private principals in the contractual chain to hold retentions on trust and providing new mechanisms for securing funds in dispute to all claimants.

The Queensland Government has accepted, or accepted in-principle, all 20 recommendations.

Key changes

Major changes have been proposed by the Bill, including reform of project bank accounts (“PBAs”), improvements to the security of payment regime and imposing liability for executive officers.

Project Bank Accounts

The PBA framework will be simplified by removing the requirement for each contract retention to have a separate trust account. This will mean less administration for head contractors and ensure payments that subcontractors are entitled to are protected until they are due to be paid.

Previously, PBAs were only required by government building contracts between $1 million and $10 million. Head contractors were required to have a set of 3 trust accounts (known as PBAs) for each qualifying project that operated to secure funds, under a building contract, until they are paid to a subcontractor:

  1. progress payments;
  2. disputed funds; and
  3. retention money.

The new framework will remove the disputed funds account and rename PBAs “Project and Retention Trusts” accordingly. The new approach to dealing with disputed funds is outlined below under ‘Security of Payment’.

Following implementation of the Bill, head contractors will be required to establish a Project Trust for each project and a Retention Trust for all cash retentions held. This framework will eventually be expanded to all building and construction contractors (including subcontractors) and the private sector through the aforementioned phased approach.

The Queensland Government has acknowledged that the “removal of project and retention funds from operating capital is an intended consequence of the reforms and some businesses may need to change their financial management practices and find other sources of working capital from savings, by increasing debt, or liquidating assets”[1]. In an attempt to overcome this, it has been put forward that the roll out approach will leave “plenty of time for the industry to prepare and have new administrative procedures in place, minimising financial stress”[2].

Security of Payment

The Bill introduces many changes that will improve the security of payment regime by increasing protection for contractors (including head contractors) and subcontractors from a failure to pay by principals. The following examples are some of the major changes presented by the Bill.

Based on New South Wales’ model, head contractor’s payment claims will be required to be accompanied by a supporting statement. Payment claims are requests for payment given to an individual or company from a contractor progressively for construction work (or related goods and services) completed under a construction contract to a certain point in time. The supporting statement must declare that all subcontractors have been paid as at the date of the payment claim or identify any subcontractors which have not been paid and the outstanding amounts.

Further, it will be an offence to pay less that what is stated in a payment schedule. A payment schedule, as required by the BIF Act, is a document that identifies a specific payment claim, states the amount that will be paid and provides reasons if the amount that will be paid is less than the payment claim.

The Bill also introduces additional measures to secure payment. Claimants will be able to make payment withholding requests against the principal over amounts in dispute in adjudication. Payment withholdings requests will enable a claimant to require a higher party [3] to retain the adjudicated amount [4]. Additionally, head contractors can register a security interest over a property for an unpaid adjudicated amount if the respondent is the registered owner of the property [5].

Liability for Executive Officers

Executive officers will be personally liable for certain trust offences by the company if all reasonable steps in ensuring the corporation did not engage in the offending conduct are not taken [6].

An executive officer (of a corporation) is a “person who is concerned with, or takes part in, the corporation’s management, whether or not the person is a director or the person’s position is given the name of executive officer” [7].

Offences that will attract executive liability include withdrawing money from a Project Trust account for an inappropriate purpose, which has a maximum penalty of 300 penalty units ($40,035 at the time of writing) or 2 year’s imprisonment [8], and dissolving a Project Trust without authorisation, which has a maximum penalty of 500 penalty units ($66,725 at the time of writing) or 1 year’s imprisonment [9].

When will the changes be rolled out?

The enhanced PBA program will be rolled out in 4 phases. The phased approach aims to ensure that those most capable to cope with the changes will be affected first.

It is anticipated that Phase 1 will commence on 1 July 2020, extending to government building projects, including Health and Hospital Services, above $1 million.

Phase 2 will commence on 1 July 2021 and will apply to all building projects above $10 million.

Phase 3 will commence on 1 January 2022 and will apply to all building projects above $3 million.

Phase 4 will commence on 1 July 2022 and will apply to all building projects above $1 million.

What this means for you?

Implementation of the Bill will affect every stakeholder in the Queensland building and construction industry.

Participants should familiarise themselves with the Bill to ensure compliance with these forthcoming amendments. In particular, those who will be affected by the replacement of the previous PBA framework with Project and Retention Trusts should consider any financial impacts well in advance of commencement.

How can we help?

If you would like to know more on how the Bill will affect you, please contact our Building & Construction Lawyers on (07) 3009 8444 or email us at [email protected]

 

References:

[1] https://www.hpw.qld.gov.au/__data/assets/pdf_file/0028/9199/panelgovernmentresponse.pdf.

[2] http://statements.qld.gov.au/Statement/2019/11/28/palaszczuk-government-delivers-confidence-for-queensland-tradies-and-business.

[3] If the claimant for the amount is a subcontractor—the person from whom an amount is or becomes payable to the respondent under an arrangement with the respondent for related work or services; if the claimant for the amount is a head contractor—the person who is the financier for the related work or services.

[4] Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2020 (Qld) s 97B(2).

[5] Ibid s 100B.

[6] Ibid s 58A.

[7] Ibid.

[8] Ibid s 20A.

[9] Ibid s 21A.

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The effectiveness of injunctions in relation to claiming security under a construction contract

Performance Bonds

Introduction: performance bonds

A substantial body of jurisprudence has developed with respect to performance bonds provided pursuant to construction contracts and the relevant rights of the parties to such contract. It is clear that this form of security is intended to be the equivalent of cash. Indeed, the High Court of Australia has exclaimed that “instruments of this nature are essential to international commerce and, in the absence of fraud, should be allowed to be honoured free from interference by the courts”. This seems to be the prima facie position that an applicant must displace to succeed in acquiring injunctive relief, preventing recourse to security. Consequently, the contract centrality becomes an underlying theme.

Approach by the courts regarding performance bonds

The authorities have recognised three principal exceptions to the obligation of an issuer of a performance bond, including:

1. In the event of fraud by the party seeking recourse;
2. Unconscionability by the party seeking recourse; or
3. A beneficiary has promised to not have recourse to the performance bond.

In respect of the third instance, the intention of the parties becomes critical and involves contractual interpretation. The case of Clough Engineering Ltd v Oil & Natural Gas Corporation Ltd (Clough) provides insight into this phenomenon and is an invaluable authority in relation to the approach adopted by the courts. Clough establishes the prima facie construction of the contract:

“Insofar as a construction contract may make clear provision for the furnishing of an unconditional guarantee as security for due performance, the normal interpretation…will be that, in response to the stipulated demand, an unqualified transfer of the sums in question is intended, provided only that there is a bona fide dispute or claim on the secured party’s part, and that any further investigation of its merits or extent is not usually intended by the contract.”

Accordingly, the third exception contradicts the presumed position. This occurs as there has been an explicit promise to alter the allocation of risk, creating a contractual impediment to the beneficiary. However, due to the potential injustice, the courts tend to require “clear words” to support an interpretation of a contract which inhibits recourse where a breach is alleged in good faith (without the other two exceptions applying).

Intention of the parties – Performance Bonds As A Risk allocation Device

It seems that if the parties intend that the performance bond is a risk allocation device, this will impact consideration of the primary issues considered at the hearing for an interlocutory injunction, being whether the beneficiary is entitled to call upon the bond and where the balance of convenience lies (a standard consideration in equitable relief). In this circumstance, the entities have agreed as to which of them should bear the financial risk pending final determination. This becomes particularly relevant when a party is relying on the security, pending the outcome of a trial. In the event that there is a risk allocation purpose, failure to resolve issues pertaining to interpretation of the contract at the interlocutory stage may defeat commerciality, depriving the parties of the bargain they have arranged.

If a term of a contract, construed utilising the accepted principles adopted by the courts, shows that the commercial purpose was to allocate the risk of who should be financially impacted notwithstanding that there may be a genuine dispute as to whether a party had failed to comply with their obligations, then the entity benefiting from the security is uninhibited in invoking it. Clear words to the contrary are required to have a condition precedent to recourse. This means that they must be unambiguous and have only one possible meaning.

Granting the injunction

Culminating the above considerations, the courts will intertwine them with their reasoning when determining the required elements for an injunction to be granted. The cases of Saipem Australia Pty Ltd v GLNG Operations Pty Ltd provide background on the principles. The significance of these decisions is that the intention of the parties in respect of the performance bonds as a risk allocation device is relevant to the determination of the balance of convenience in awarding the injunction. The other elements to analyse, being the question of whether there is a serious question to be tried and inadequacy of damages as a remedy, depend on the facts. The typical argument in the commercial discourse is reputational impact in the market and industry.

Conclusion

As can be identified, the effectiveness of injunctions in relation to claiming security under a construction contract depends predominately on the terms of the agreement and their interpretation by the court. These inform the judiciary on the primary issues considered when deciding to exercise discretion when granting the equitable remedy of injunction. This is consistent with the common law philosophies in respect of privity of contract in the context of commercial transactions. Therefore, there needs to be an explicit and unequivocal promise that there will not be a conversion of the bond.

Coinciding with international commerce, the importance of performance bonds as a currency is reflected on several levels in various jurisdictions. Accordingly, the relevant feature of the contract in question regarding injunctions on recourse to security pertains to allocation of risk between the parties. Where the type of security in the construction contract contained other characteristics, such as an interest in property, this would reflect the intention of the parties and the threshold to satisfy the third exception for injunctive relief may decrease. Indeed, the tests may change entirely.

It is evident that seeking, understanding and applying relevant legal principles in construction contract contexts becomes increasingly vital. With the proper advice and drafted terms, recourse to security is a seamless event that occurs without hindrance. The beauty of the law when a party seeks injunctive relief is that the entities involved are ultimately the masters of their destiny. Consequently, it requires a forensic approach and placing value on legal services when creating the written agreement that governs the transaction. Resonating with many doctrines and ideologies of the Australian system, contracts in a commercial space remain dominant.

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5 Ways to resolve a building dispute with your contractor in the commercial space

How to resolve a building dispute with your contractor

Positive relationships in the modern transactional climate are an inherent benefit for your enterprise and these include your business relations with contractors. Due to the nature of building ventures, disputes are an inevitable reality. This means that the ideal method of approaching this issue is focusing on minimisation. Consequently, tailored strategies (developed unilaterally or collaboratively) and streamlined mitigation processes are ideal, providing applicable mechanisms for timely resolution of disputes.

The benefits of timely dispute resolution are voluminous. Examples include:

• Fostering long-term relationships with contractors by reducing total time where friction exists, showing efficiencies and pragmatism
• Maintaining effective resource allocation and expenditure on business operations
• Decreasing the possibility of prolonged litigation

This article will guide you through 5 ways that you can resolve building disputes.

  1. Always Check Your Contract

    Reviewing your contract is the first crucial step in resolving any building dispute with a contractor. Ideally, this would constitute a formal written agreement, avoiding uncertainty of terms and ambiguity. Further, it is a legal requirement to have the contract deduced to writing if the value of the works or goods supplied equal a particular value ($3,300 for residential and $10,000 for commercial). In a situation whereby a document is not produced, reviewing documents such as emails and other communications between you and a contractor regarding the work can assist. This can be a component of various elements that constitute an agreement and will provide insight into the terms.
    For example, you may have written or verbal arrangements that set out:
    – scope of work;
    – pricing of the building project;
    – terms of payment;
    – variation mechanisms;
    – extension of time provisions; or
    – project timelines or time frames.
    While reviewing your contract or correspondence focus on the disputed issues. For example, if you are unhappy with the services provided by the contractor, read the wording of any clause relating to their obligations for services to see if they have breached your agreement.
    Further, check if your contract contains a dispute resolution clause that outlines the steps the parties should follow if there is a confrontation. In the event that it is unresolved, demonstrating that you adhered to stipulated procedures to attempt early finalisation will assist the court and ideally, narrow the array of issues that remain.
    how to resolve a building dispute- check your contract

  2. Communicate and Negotiate

    Communication is the first step and should not be underestimated when a dispute arises. Being transparent and willing to participate can significantly improve the possibility of reaching a settlement. This method is the most efficient way to settle a dispute while exerting very little impact on your business. Additionally, it indicates that the parties can collaborate in the future, facilitating trust. A useful tactic is for the parties to consider the opportunity cost in their respective positions. This will result in them considering the potential expense in relation to alternative avenues to reach a compromise. Approach any negotiations calmly and professionally.

    During negotiations, clearly communicate to your contractor:
    – the issues pertaining to the building dispute and where relevant, what service or product they have failed to provide;
    – expectations in relation to the work; and
    – how the contractor can fix the problem, including a specific time frame.

    Allow them a chance to respond. Often, disputes are the result of misunderstandings that can be solved by open communication. This method will most likely retain positive relations between yourself and the contractor.
    communicate and negotiate the building disputes

  3. Mediation

    If initial discussions are unsuccessful or stagnated by lack of participation, you may need a third party to help with more official negotiations. Mediation is a process conducted by an independent person (the ‘mediator’) to facilitate communications between the parties for the purposes of resolving the dispute. Any agreement reached by the parties can be reduced to a written binding document. The contents should consist of:
    – The terms of the dispute resolution; and
    – signatures by the parties.
    Mediation can be a cost-effective option to settle a dispute without relying on court processes.

  4. Arbitration

    Another type of dispute resolution mechanism that you and a contractor can adopt to achieve a settlement is arbitration. In contrast to mediation, it increases formality, structure and finality. This is correlated with cost. However, it remains less involved than the judicial system and there is still an element of control by the parties. Accordingly, it can only occur by mutual consent. An independent ‘arbitrator’ acts as a judge to determine a result. Depending on the type of arbitration, the outcome is potentially binding on the parties and is enforceable, similar to a judgment of the court. Therefore, it is prudent to seek legal advice prior to engaging in this process.

    As explained, unlike court proceedings, the parties retain control over the various features of the mechanism. For example, they may decide that the rules of evidence do not apply.
    How to resolve a dispute through Arbitration

  5. Going to Court

    Litigation or court proceedings should be your last resort. It is a time consuming and expensive endeavour. Additionally, there is a considerable extent of uncertainty in the outcome. This also applies to circumstances whereby prospects of success are high.

    You can potentially represent yourself in court or a tribunal that exercises judicial power such as the Queensland Civil and Administrative Tribunal (QCAT). However, a solicitor can advise you on your case’s merits, collating evidence and presenting the arguments. If the other party has engaged legal services and you are unrepresented, this can pose a disadvantage.

    Depending on the outcome of the proceedings and the conduct of the parties, the court will potentially make an order in relation to costs. This means that one of the entities will be required to pay the legal fees and disbursements incurred in relation to the matter. There are numerous factors that impact the discretion of the magistrate or judge. Therefore, it is critical that professional advice is obtained prior to initiating in this forum to resolve a dispute.

Conclusion

You may be able to resolve many disputes with contractors by clear, calm communication and negotiations. However, in circumstances where this fails, or you feel this method is futile, alternative dispute resolution mechanisms or court proceedings can be utilised. Accordingly,an experienced litigation lawyer can advise you on the best course of action for your business.

If you have any further questions pertaining to dispute resolution and require the services of a lawyer, do not hesitate to contact us.

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New South Wales Security of Payment Changes that you need to know

Security Of Payments New South Wales

The New South Wales Government has announced that the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Amendment”) and the Building Construction Industry Security of Payment Amendment Regulation 2019 (NSW) (“the Regulation”) will commence on 21 October 2019.

These security of payment amendments will have an impact on developers, head contractors, subcontractors and building material suppliers who operate within the construction industry in New South Wales. This short article will outline the key implications of the Amendment and the Regulation, as well as the steps you will have to take to make sure you are ready for the changes.

Summary: Security of Payment Amendment (NSW)

It should be noted that the Amendment will not be retrospective and will apply to all new contracts entered into after 21 October 2019.

The first key changes are pursuant to the recent New South Wales Court of Appeal decision in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (“Seymour Whyte”) which established that an insolvent company is able to remain a “claimant” for the purposes of their entitlement to serve a payment claim even once they become insolvent.

Although the Seymour Whyte decision set a vital initial precedent, the New South Wales Parliament has indicated that they do not want insolvent claimants taking benefit of the New South Wales Security of Payment legislation. The Amendment now prohibits a claimant in liquidation from serving a payment claim, taking action to enforce a payment claim (including by making an adjudication application) or enforcing an adjudication determination. If a company makes an application for adjudication but subsequently enters into liquidation prior to a decision being made, the application for adjudication is deemed to be withdrawn on the day on which is commenced to be in liquidation.

Given the Amendment has now overturned the precedent set by the Seymour Whyte decision, claimants need to be aware that they can no longer rely on the case law principles set out in Seymour Whyte should they enter into liquidation.

Some additional key changes pursuant to the Amendment are as follows:

• Progress payment and payment claim under the Amendment have now been simplified, with the removal of a reference date requirement for a valid payment claim. There is also the right to serve a payment claim on a monthly basis by the claimant. This can be done at the end of each month in which the construction work was first carried out (or the related goods and services were first supplied), and on the last day of each month afterwards.

• If a contract has been terminated by one party, there is now a statutory entitlement for a payment claim to be validly served on and from the date of termination.

• The requirement for payment claims to be endorsed by, or specifically state that it is made pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW).

• The due date for payment of payment claims by head contractors to subcontractors has been reduced from 30 to 20 business days after the date it was initially made.

• The entitlement for a claimant to withdraw an application for adjudication can only be done should the adjudicator consider it to be in the interests of justice and if the respondent of the adjudication provides their consent.

• The Supreme Court of New South Wales has the power to set aside any part of an adjudication determination based on a jurisdictional error. As a result, this does not impact the entire enforceability of an adjudication decision based on a jurisdictional error.

Summary of the Regulation

As noted above, the Regulation will also come into force on 21 October 2019. The key changes as a result of the Regulations commencement are:

• An owner occupier entering into a construction or building works contract with a builder will be an excluded class of construction contract for the purposes of the security of payment provisions.

• In relation to trust account retention monies, individual executives can be held liable for offences committed by their governing corporation.

What does this mean for you?

All parties engaged in the construction industry are required to understand how the changes will impact them. Industry participants are required to acknowledge the stricter penalties for offences committed after the Amendment. We encourage you to re-visit previous contracts and ensure that project management or administrative processes are compliant.

How can we help?

If you are a developer, construction company or small subcontractor and operate in New South Wales, please contact the Construction Team at Rostron Carlyle Rojas Lawyers on (02) 9307 8900 or email us at [email protected]

Please note that this article has been prepared by Jakob Mignone, Law Clerk and settled by John Christian, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.

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The excluded individual – make sure your company affairs are in order after resignation

excluded individual

In light of the recent Queensland Civil and Administrative Tribunal (QCAT) decision in the case of All Remedial & Building Services Pty Ltd v Queensland Building and Construction Commission; Moss v Queensland Building and Construction Commission (the Decision), the tribunal set aside a determination made by the Queensland Building and Construction Commission (QBCC) that a builder and his company were an excluded individual and excluded company.

As a result of this decision, this short article will provide an outline of the Decision made by QCAT and discuss the importance of having all of your company affairs in order after resignation of a directorship to avoid being caught by section 56AC of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).

Excluded individual and Company: Case background

Lance Moss (Moss) was a builder and the director of two companies; All Remedial and Building Services Pty Ltd (Remedial Building) and All Pro Australia Engineering and Construction Pty Ltd (All Pro). Both companies were involved in conducting building works. In 2014, shortly after incorporating All Pro, Moss had an administrative disagreement with the fellow director of All Pro, and subsequently, decided to “pull out” of the company and only conduct building works using Remedial Building. However, Moss did not officially resign as a director of All Pro until 2016.

In September 2018, an administrator was appointed to All Pro and on this basis, the QBCC deemed All Pro to be involved in a ‘relevant company event’ for the purposes of section 56AC of the QBCC Act. This decision impacted Moss because he previously held shareholdings in All Pro and as a result, the QBCC considered Moss to be an ‘excluded individual’. Accordingly, Remedial Building therefore became an ‘excluded company’ pursuant to section 56AC of the QBCC Act.

What were the issues, was Moss an excluded individual?

The issues in this case were whether Moss should be deemed an ‘excluded individual’, and in turn, whether Remedial Building should also be classified as an ‘excluded company’ for the purposes of 56AC of the QBCC Act.

What was the decision?

In determining their decision, the Tribunal considered that Moss did not have any involvement, nor did he conduct any actual building work for All Pro. Moss indicated that he was under the impression that providing his resignation as a director of All Pro would also result in the shareholdings held by him being transferred out of his name. Moss only realised that he still held a shareholding in All Pro when the QBCC notified him that they deemed him to be an excluded individual based on the administrator being appointed to All Pro.

Given Moss was unaware he still held shareholdings in All Pro, he had no involvement and did not exercise any aspects of control over the company, the Tribunal determined that the QBCC’s decision deeming Moss to be an excluded individual and Remedial Building an excluded company be set aside.

What does this mean for you?

Although the Tribunal set aside the previous decision made by the QBCC, it is important to note that the QBCC will investigate any director, secretary, shareholder or influential person to a building company should an administrator or liquidator be appointed.

How can we help?

If you are concerned that you may still hold shares in previous building companies, or seek advice on how to protect yourself and associated building entities being deemed an excluded individual or excluded company for the purposes of the QBCC Act, please contact the Construction Team at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at [email protected]

Please note that this article has been prepared by Jakob Mignone, Law Clerk and settled by John Christian, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.

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8 Things About the NEW Plumbing and Drainage Act that will transform the trade industry

In 2018, the Queensland Government enacted the Plumbing and drainage act that would repeal the 2002 Act.

What is the new Plumbing and Drainage Legislation?

The Queensland legislature decided to repeal the former ‘Plumbing and Drainage Act 2002’ and replaced it with the ‘Plumbing and Drainage Act of 2018’ (PD Act). As a result of this change, the ‘Plumbing & Drainage Regulation of 2019 (PDR)’ replaced the ‘Standard Plumbing & Drainage Regulation 2003’.

The PD Act has revamped the industry by focusing on safety and efficiency. Undoubtedly, the Plumbing and Drainage Act 2019 seeks conformity with modern demands and conformity with National and state codes of the building industry. In addition, the PD Act sanctions individuals, that operate illegally and contravene certain provisions, more severally. These changes in laws came after concerns raised by interested parties that the former Act was enigmatic and inadequate in making the functioning of the industry easier and efficient. Perhaps this was brought by the former legislations causing confusions through vague, repetitive and unnecessary provisions. Nevertheless, representatives from relevant government agencies and other interested parties participated in a review of the outdated legislation and assisted in finding solutions to shape the new laws in Queensland, as the responses received was internalised and processed by the Department of Housing and Public Works.

What are the relevant changes to the plumbing and drainage act?

Although the Plumbing and Drainage Act 2019, preserves the majority of the provisions from the former legislation, it will transform the industry by:
• Imposing severe penalties on individuals that conduct works without a valid licence. Penalties may include a period of imprisonment;
• Improving the readability of the Act as a whole to ensure simpler interpretations of the provisions;
• Improving the readability of the Act by removing duplicated provisions;
• Establishing simpler procedures and processes to administer and manage permits;
• formulating guidelines for interested parties that is in line with National codes;
• improving and maintaining the health and safety of the public community that is involved in plumbing and drainage services;
• creating an Act that is intelligible by removing irrelevant terminology and substituting them with suitable modern terms;
• And changes time frames to ensure the efficiency.
What is the effect and purpose of the new Regulations?
The regulations objective is to assist the Plumbing and Drainage Act become transparent and simpler for relevant parties to interpret and understand. Subsequently, the regulations assist the enactment and implementation of the PD Act by:
• Approving a working framework that is in line with national plumbing and drainage codes; and
• Approving a standard that is inclusive of Queensland codes and standards; and
• Assisting transition between the former provisions and former regulation to the new ‘PD Act’; and
• To assist authorising bodies, administer certifications efficiently by changing the required timeframes; and
• Acknowledging and managing the expected consequences for the industry, local government and other interested parties.

What are other notable reforms to the legislation in the trade industry?

The trade has further minor changes in the industry that brings Individuals with contractor, nominee supervisor or site supervisor licence types cleared from paying ‘Plumbing and Drainage Occupational fees’ for renewals and new applications. In a situation where the individuals do not hold any of the above-mentioned licences, but are in the possession of Plumbing and Drainage licences only, or individuals in possession of ‘Plumbing and Drainage Licences’ that extend to associated QBCC Licences, the individual would unfortunately miss the payment waiver and be required to pay fees.

What this means for you?

The new Act will ensure efficiency and incorporate the National Codes to ensure consistency throughout the trade industry. This shall serve the Industry with cost effective functioning and bolster the industry as it becomes easier and transparent for the interested parties of the industry. Subsequently, the Act attempts to make businesses simpler with very little prejudice and frustration. In addition to the above, the Act shall improve the readability for interested parties, and assist the industry in assessing and meeting their responsibilities with great accountability and understanding.

How can we help?

If you want to know how the implications of the New Plumbing and Drainage Act will affect your business, whatever the size or scale, please contact our Building & Construction Lawyers on (07) 3009 8444 or email us at [email protected]

Please note that this article has been prepared by Takudzwa Makusha, Law Clerk and settled by John Christian, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.

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Do you conduct Building work in Queensland and New South Wales? The interstate consequences when ventures from down South, go South…

QBCC

The Implications of the QBCC Act on construction projects is broader than you might think

 

In light of the recent decision in Vickers v Queensland Building and Construction Commission & Ors , the insolvency of a related building company operating in New South Wales can also lead to the cancellation of a Queensland company’s builder’s licence by the Queensland Building and Construction Commission (QBCC). This short article will discuss how the liquidation of an interstate entity conducting building works in New South Wales was considered to be a “construction company” under section 56AC of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). As a result, the director of the related entity has had his Queensland builders licence cancelled.

Case Background

Michael Anthony Vickers (Vickers) was the director of two construction companies, Midson Construction (NSW) Pty Ltd (Midson NSW) and Midson Construction (Qld) Pty Ltd (Midson QLD). After Midson NSW was placed into liquidation on 3 January 2018, the QBCC proposed cancellation of Vickers’s building licence. Vickers appealed to the Queensland Court of Appeal, sought declaratory and injunctive relief and judicial review of the QBCC’s Notice of Reasons for cancellation of his builders licence in Queensland.

On appeal, the court considered the following issues:

1. Whether a New South Wales construction company was a “construction company” within the meaning of the QBCC Act; and

2. Whether section 56AC of the QBCC Act was constitutionally valid?

Was Midson NSW a “construction company” according to the QBCC?

Vickers attempted to argue that the definition of a “construction company” pursuant to section 56AC of the QBCC Act could not be extended to a construction company operating in New South Wales. Vickers argued that the definition of a construction company should be restricted to a company that undertakes building works or services on buildings in Queensland, being consistent with the scheme of the QBCC Act.

 

Construction failure outside of Queensland can result in the cancellation of your licence in Queensland

The Court of Appeal held that failure outside of Queensland can trigger the suspension or cancellation of a builder’s licence to operate in Queensland. The QBCC Act is not limited to the operation of a company conducting “building work or building work services” in Queensland. Even though events of insolvency occur outside of Queensland, the Court stated that it was self-evident that the QBCC Act aims to prevent the risk to Queensland consumers arising from building companies becoming insolvent.

A Queensland building licence holder or builder who is associated with a company which has failed to remain solvent within a different jurisdiction is considered to be no different than a licensee becoming insolvent within Queensland. To conclude, where a company has been liquidated, the Court held that section 56AC of the QBCC Act applies irrespective of which state in Australia the construction company undertakes building work and building work services.

Was section 56AC of the QBCC Act constitutionally valid?

Vickers also argued that the words “in this or another State” in section 56AC of the QBCC Act was too remote from the “peace, welfare and good government” of Queensland, and therefore the provision was constitutionally invalid – the Court disagreed. The Court considered that section 56AC of the QBCC Act does not regulate conduct in another State, but rather recognises the consequences within Queensland for actions or failed construction ventures within another State. Consequences being, a company or person who holds a building licence in Queensland may have it suspended or cancelled.

In essence, the QBCC Act aims to protect Queensland consumers by ensuring that a building licence is cancelled should a building company (or associated entity) have insufficient financial stability. The QBCC also requires licensees of building licences to be a fit and proper person, which may reflect the financial stability of a building company or associated entity.

How can we help as your construction lawyers?

If you are completing building works in both Queensland and New South Wales using different entities, or thinking of expanding your business operations into the southern State, please contact the team at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at [email protected]

Please note that this article has been prepared by Jakob Mignone, Law Clerk and settled by John Christian, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.

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QBCC Insurance- Problems with a builder in Queensland?

QBCC Insurance

If you have been the victim of defective or incomplete domestic building work then you may be eligible to claim from the QBCC insurance scheme to allow rectification of the defects and completion of the works.

Queensland Building and Construction Commission (QBCC) administers a compulsory domestic building insurance scheme- the QBCC Insurance Scheme. When you sign a building contract for the construction or additions to a domestic building, the insurance is paid by the builder.

When is QBCC Insurance Required (or Applicable)?

The insurance scheme applies where there is defective building work or where the contract with the builder has been lawfully terminated or the building company has become insolvent (liquidated or bankrupt).

Once a claim has been made to the Queensland Building and Construction Commission, an inspector will assess the defective or incomplete work and issue a notice to the builder to rectify or complete the work within (usually) 14 days. If the original builder refuses or is unable to rectify the work, the QBCC will ask you to obtain quotations from other contractors.

QBCC InsuranceAssuming these are in order, the QBCC will approve and insurance payment for the lowest quotation and then you may choose any contractor to rectify the problems. (You might be interested in viewing the qbcc insurance table 2018, link to pdf supplied below)

QBCC Insurance Premium Table 2018

Insurance is usually available for minor defects up to 6 months from the date of practical completion and for structural or major defects up to 6 years.

The Early Dispute Resolution also offers mediation services and may be able to assist you with general inquiries with respect to builders prior to commencement of building works.

Prior to entering into a contract with a builder, we recommend that you make inquiries of your builder’s qualifications, seek references from past clients and consult with your solicitor.

If you would like any information on the QBCC or your entitlement to claim under the Insurance scheme, contact us today.

For more information you can contact Queens Building and Construction Commission. Contact Number: 139 333 business hours: 7am – 5pm, Monday to Friday, Overseas callers: +61 7 3447 2160. Or email them, Email

QBCC Licence Search

QBCC Contract

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The Subcontractors’ Charges Act – A Case Study

subcontractors charge act

In this construction law blog, Paul Rojas discusses a recent case where the validity of a charge issued pursuant to the Subcontractors’ Charges Act 1974 (Qld) (“the SCA”) was considered.

Facts

Our client issued tax invoices in respect of its work.  Unfortunately, the builder soon entered into Administration so our client issued a subcontractors’ charge pursuant to the SCA (Subcontractors Charges Act) for the unpaid tax invoices to the developer.  Several other subcontractors also lodged charges.  The developer paid the funds into Court and the builder proceeded to issue a notice under the Subcontractors Charges Act certifying the full amount claimed by our client as owing.

Several of the parties commenced proceedings to secure their charges within the one-month time limit.  Our client did not.  These parties then successfully applied to have the proceedings combined and the funds paid out of Court.  The Court retained an amount for our client’s claim.

Our client proceeded to obtain legal advice that his subcontractors’ charge had expired because he had not commenced proceedings within one month after the charge had been served.

We were subsequently engaged by our client to recover the funds paid into Court.

Issues

We were required to consider whether our client’s failure to commence proceedings within one month after service of the charge had caused the charge to become invalid.

Outcome

Our client was fortunate in that the period the builder was in Administration stopped the one-month period from running.  This period restarted once the builder entered into a deed of company arrangement.

During the period of the Builder’s Administration, several other subcontractors had also commenced proceedings to enforce their charges under the SCA.  The effect of this was that:

  • those proceedings were brought on behalf of every other subcontractor who had issued a charge under the SCA; and
  • where the one-month period our client had to commence proceedings had not expired, our client was entitled to “piggy-back” onto those charges by joining the proceedings commenced by the other subcontractors.

However, our client was not able to simply commence fresh proceedings and apply to have them joined.  It needed to identify which proceedings had been commenced within the one-month period and seek to be joined to them as a Plaintiff.  Fortunately, those proceedings were the proceedings in which the developer had paid money into Court.

Rostron Carlyle Rojas Lawyer, Madison Lodder, appeared and successfully obtained orders for payment of our client’s charge.

The above illustrates the importance of engaging lawyers who understand the complexities of construction law and the operation of the SCA.

The RCR Construction team are able to assist in providing advice and strategies for recovery of claims made pursuant to the SCA.  Contact our Construction team, please call us on (07) 3009 8444 or email us at [email protected]

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