Home » Construction Update: Know the differences between your State Security of Payment Regimes

Construction Update: Know the differences between your State Security of Payment Regimes

Posted by Ben Robertson | 09 March 2021 | Civil Contractors and Construction

It is important to be aware of the strict timeframes set by your States’ Security of Payment regime, as it may result in an adjudication decision being made void – which could cause a claimant to lose their right to payment under the relevant Act. 

 

The recent decision in the Queensland case of Civil Contractors (Aust) Pty Ltd v Galaxy Developments Pty Ltd & Ors; Jones v Galaxy Developments Pty Ltd & Ors [2021] QCA 10 (‘CCA v Galaxy’) serves as a prescient reminder to Principals, contractors, sub-contractors and adjudicators to abide by the strict time limits defined by their State’s relevant Security of Payment Act.

The matter concerned whether the jurisdiction of an adjudicator is limited to delivering a decision within the time limit prescribed by the relevant Act – and if so, whether a decision delivered by an adjudicator outside the maximum time period would be void.

A further consideration was, if a decision delivered by an adjudicator after the time limit was void, then would the adjudicator still be entitled to payment of their fees.

The Court of Appeal held that a decision by an adjudicator delivered outside the strict time period prescribed by the Security of Payment Act of Queensland would be made void – except in certain circumstances for “a longer period”, and that the adjudicator would not be entitled to payment of the fees.

Background

All states and territories in Australia have legislation enshrining a Security of Payment Act that defines and facilitates the adjudication of payment and progress claims for contracts in the event of a dispute between parties. In Queensland, the relevant Act is the Building Industry Fairness (Security of Payment) Act 2017 (QLD) (‘BIF Act’).

BIF Act and its Security of Payment Act contemporaries in other states and territories in Australia are designed to reduce the incidence of insolvency in construction industry businesses through protecting cashflow and ensuring that progress payments are recovered promptly.

These Acts specify the process for the paper-based adjudication of progress claims, define an adjudicator’s power to deliver a decision on an adjudicated payment dispute and set out strict time limits: including time limits for delivery of an adjudicator’s determination.

Under the BIF Act, the maximum period for deciding an application [1] is either 10 business days after the response date for a standard claim OR 15 days after the response date for a complex claim.

A claim may also be extended for a ‘longer period’ [2] should the claimant and respondent agree, or with respect to complex claims where an agreement for an extension of time has failed to be made between the claimant and respondent, then within 5 business days after the time the adjudicator would have had to decide the application [3].

Additionally, the Queensland Building and Construction Commission Act 1991 (‘QBCC Act’) operates a distinct licencing regime wherein a person must not carry out unlicensed building work. In the event that a person does carry out building work without the appropriate licence, then they are only entitled to ‘reasonable remuneration’ [4].

The facts and the decision

In February 2018, CCA and Galaxy entered into a contract under which CCA was to perform civil works at a site in Coomera, Queensland.

CCA held a licence under Schedule 2 of the QBCC Act for a ‘builder restricted to structural landscaping’ and their primary work consisted of widening a road as part of a development. The scope of works for CCA also included a range of minor works around a bus shelter.

On 1 July 2019, CCA issued a payment claim to Galaxy for a progress payment of $1,430,070.69. Galaxy provided a payment schedule in reply on 15 July 2019, claiming a payment from CCA for the amount of negative $53,278. As there was a dispute, the matter then proceeded to adjudication.

The First Issue

The adjudicator determined that CCA was entitled to payment of an adjudicated amount of $1,430,070.69. However, the primary judge set aside the adjudicator’s decision on the basis that the decision was void because it was delivered after the time prescribed by the Act.[5]. The Court also held that the adjudicator was not entitled to recovery of his fees.

Specifically, the primary judge referred to  the decision in Niclin Constructions Pty Ltd v SHA Premier Constructions [2019] QCA 177 and held that section 85(1) of the BIF Act set a strict time limit that must be adhered to by adjudicators.

The primary judge found that such a result was in keeping with the key statutory aim of the BIF Act to provide for the quick resolution of a disputed progress payment.

The Second Issue

The primary judge also found that CCA did not hold a building licence to carry out all of the work in question.

The Appeal

CCA appealed the decision of the primary judge regarding the validity of the adjudicator’s decision made outside the time limit proscribed by BIF ACT, and whether the bus stop works were within the scope of CCA’s structural landscaping licence.

The adjudicator appealed the Supreme Court’s orders with respect to his entitlement to payment.

The Court of Appeal upheld the primary judge’s decision with respect to the adjudication application not being determined within the time required by ss 85 and 86 of BIF ACT.

The Court of Appeal found that the bus stop works not within the scope of CCA’s licence, however, given the adjudicator’s determination was out of time, the work being licensed was not material to the outcome of the appeal..

The Court of Appeal upheld the Supreme Court’s orders that the adjudicator was not entitled to payment for his fees.

How might this decision affect you?

This case is a reminder to Principals, contractors, sub-contractors and adjudicators in Queensland to abide by the strict time limits in the security of payment Act, and to ensure that the persons undertaking ‘building work’ hold the appropriate licence.

Is a late adjudication decision void in New South Wales & Victoria?

While both the Supreme Court and Court of Appeal decisions make it clear that a decision made by an adjudicator after the statutory maximum period has passed is invalid and void in Queensland, there is a distinction between the wording in the Queensland, Victorian and NSW legislation.

It is important to be aware that mere knowledge of your local States’ security of payment regime is not necessarily equivalent to understanding how these regimes operate in other States.

For Victoria and its’ security of payment regime under the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘Victorian SOP Act’), the key decision is that of the Victorian Court of Appeal in Ian Street Developer Pty Ltd v Arrow International Pty Ltd & Anor [2018] VSCA 294.

Similarly, for New South Wales and its’ security of payment regime under the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘NSW SOP Act’), the key decisions in the NSW Supreme Court were that of MPM Constructions Pty Ltd v Trepcha Constructions Pty Ltd, Cranbrook School v JA Bradshaw Civil Contracting, and Mt Lewis Estate Pty Ltd v Metricon Homes Pty Ltd.

Both the Supreme Court of New South Wales and the Victorian Court of Appeal have held that an adjudicator may deliver his/her determination after the period for delivery of same set out in the applicable security of payment legislation has elapsed.

What you need to do and consider

Principals, contractors and sub-contractors operating in Queensland must be vigilant regarding the strict timeframes set out in the BIF Act with respect to delivery of an adjudicator’s determination.

We recommend that principals, contractors, and sub-contractors regularly review their processes with respect to the relevant security of payment regimes, particularly if their operations span across different States.

Footnotes
[1] Under section 85(1)
[2] Subject to section 86(3)
[3] Under section 85(1)
[4] As defined and limited under section 42(4) of the QBCC Act
[5] by ss 85(1) and s 86(2)(a) of BIF ACT

 

Resources:

Click to download this article as a pdf.

If you require assistance or have any further commercial or construction related client queries contact us on construction@nexuslayers.com.au

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 This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues. 

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