Legal News & Analysis – Asia Pacific – Australia – Construction & Real Estate

As indicated in Part 1 of this update, there have been announcements regarding significant changes to the Queensland and New South Wales security of payment regimes. In this Part 2 we consider the announcements in respect of Queensland.

The Queensland government will introduce:

• Regulation of Adjudicators operating under the Queensland Act.
• Reduction of timeframes for serving Payment Claims.
• An increase in the timeframes for responding to payment claims under the Queensland Act and for responding to adjudications under the Queensland Act.

The Best Of Times And The Worst Of Times (Not To Mention Just The Extra Time)

In 2013, the Queensland Minister for Housing and Public Works commissioned a report by barrister Andrew Wallace into the issue of payment dispute resolution in the Queensland construction industry. The report, which was prepared with stakeholder consultation, made a number of key recommendations for changes to the Queensland security of payment regime.

Of concern to a number of major developers and principals has been an ongoing perception that some contractors, rather than using the Act’s procedures to maintain cashflow, have been using the Act to leverage payment for questionable variations and to obtain releases during the period of the contract in respect of claims for allegedly defective work.

On the back of Mr. Wallace’s recommendations, the Queensland Government this week sounded the horn and announced that significant changes are to be made as follows.

• There is to be an “Adjudication Registry”, which will appoint the adjudicators under the Act and regulate their accreditation based on “skills, knowledge and experience”.
• Adjudicators will be entitled to be paid even where they have determined that they do not have jurisdiction to consider the dispute, and adjudicators will be required to consider the jurisdictional point.
• Timeframes under the Queensland Act are to be dramatically changed:-An adjudication respondent will now be permitted to include in its Adjudication Response material which was not included in its original Payment Schedule.
  • Payment claims must be brought within 6 months of the date work was last carried out or goods/services were provided (as opposed to 12 months);
  • Final payment claims must be brought by the later of the date required under the contract or 28 days after the defects liability period. If neither of these is applicable then the final claim must be brought within 6 months of the date work was last carried out or goods/services were provided;
  • An alternate adjudication process will be implemented for “large or complex claims“, which are stated to be those for “greater than AUD 750,000 or for latent condition or time related cost“:-
    • The time for providing a Payment Schedule will be increased to 15 business days (from 10 business days). This will be extended to 30 business days if more than 91 days has passed since the applicable reference date in the contract;
    • The time for providing an adjudication response will be increased to 15 business days, with power for the adjudicator to grant a further 15 days extension;
  • The definition of “business days” will exclude Christmas and New Year’s Day, to prevent ambush adjudications during the holiday period.

These changes will swing momentum in favour of principals and head contractors. Interestingly, the Queensland Building and Construction Industry Payments Agency’s figures state that of the AUD 864m claimed this Financial YTD, only AUD 98m has been awarded in the adjudications which followed. Furthermore, perhaps most interestingly, 65.7% of Queensland claimants are subcontractors¹, suggesting that cashflow is very much a live issue in the Sunshine State.

Time and tide and NSW subcontractors wait for no one. Whilst it is difficult to assume that Queensland’s building industry is immune to the industry insolvency issues noted in the Collins report, for now at least, Queensland principals (and head contractors) can play the waiting game.

End Notes: 

1 Building & Construction Industry Payments Agency – Overall Statistics, March 2014

Related: Part 1: New South Wales

For further information, please contact:

Glen Warwick, Partner, Clyde & Co

[email protected]

Paul Morgan, Clyde & Co

[email protected]

Homegrown Construction & Real Estate Law Firms in Australia