Security of Payment Act (Qld)
The Building Industry Fairness (Security of Payment) Act 2017 provides a debt-recovery process for who work in the construction industry in Queensland. In the industry, the Act is commonly known as the “Security of Payment Act”, where security of payment refers to a service provider’s right to receive payment as it falls due under a contract. All states and territories have security of payment legislation.
The Security of Payment Act grants an entitlement to progress payments, whether or not a contract provides for them, and establishes a procedure for making and responding to payment claims, adjudication of disputed claims and recovery of payments.
“Work”, for a contract, involves skilled or unskilled labour done by a person in the construction, decoration, alteration or repair of a building; excavation; and the demolition, removal or relocation of a building. It includes the supply of materials, the manufacture of project-specific components for a contract, and the supply of labour.
A payment claim is a written request for payment for construction work or for related good and services, as defined under section 68 of the Security of Payment Act. A payment claim must:
- identify the construction work or related goods and services; and
- state the amount claimed; and
- request the amount be paid.
It should refer to a valid reference date, provided by a contract or the Act. For a progress payment, a claim must be made within 6 months of the work being done or the period specified in the contract. For a final payment, a claim must be made within 6 months of the work being done or the related goods and services being supplied, or the period specified in the contract.
A payment claim made by a head contractor must be accompanied by a supporting statement that declares all subcontractors have been paid. If they have not been paid, the statement must declare this and give reasons.
The Queensland Building and Construction Commission (QBCC) investigates complaints about payment claims, including a failure to provide a supporting statement or a statement that is false or misleading.
If a payment claim is not to be paid in full by the due date, a payment schedule must be supplied to the claimant. Section 69 of the Security of Payment Act defines a payment schedule as a written document which:
- identifies the payment claim; and
- states the amount the claimant will be paid; and
- provides reasons the amount may be less than the amount claimed.
The schedule must be provided within 15 days of receiving a payment claim or earlier if stated in the contract.
A penalty of 100 penalty units ($13,345) may apply if a payment schedule is not supplied within the required time.
Adjudication is a fast, cost-effective alternative to court which is conducted by the QBCC. Under section 79 of the Security of Payment Act, it is available to a claimant who has made a valid payment claim and:
- has not been paid in full by the due date; or
- has not been paid the full amount in the payment schedule; or
- disagrees with the amount proposed to a paid in the payment schedule.
The claimant must apply to the QBCC Registrar for adjudication. An application must be made:
- within 30 business days of the due date for payment;
- within 30 business days of the last day given to issue a payment schedule;
- within 20 business days of a failure to pay the full amount under a payment schedule;
- within 30 business days of receiving a payment schedule for an amount less than the claimed amount
An adjudicator will assess the payment claim and may request written submissions from the parties. They will then decide whether the respondent is required to pay, and how much (the adjudication amount). A copy of the adjudication certificate is given to both parties. If necessary, the certificate can later be filed in court as a judgement for a debt.
The adjudication amount must be paid within five days or another time decided by the adjudicator. A maximum penalty of 200 penalty units ($26,690) applies for non-payment. If not paid, the claimant can take further action, including:
- suspending work;
- applying to a court for a judgment debt;
- making a payment withholding request to a higher party in the contractual chain;
- lodging a statutory claim over the property where the work was done, if the respondent or their relative owns the property.
Under section 109 of the Security of Payment Act, a subcontractor can lodge a notice of claim to recover outstanding payments owed under a contract by an entity higher than a contractor in the contractual chain. Money owed to the contractor can be held while the dispute is being decided then redirected to a subcontractor after a court decision is made.
If such a “subcontractors’ charge” is lodged, adjudication is not available. A charge must be lodged within three months of work being completed and will apply only if there is money owing to the contractor by the entity higher in the chain.
For advice or representation in any legal matter, please contact Armstrong Legal.