CAUTIONARY TALES: ORIGINATING APPLICATIONS UNDER SECTION 78 BIFSOPA

Tradies and infrastructure companies will find the contents of this article familiar:

(a) You submit your invoice for payment of works performed on a project (“Payment Claim”).

(b) The recipient fails to give you a payment schedule (a response to your invoice) and fails to pay you by the due date for payment; or

(c) The recipient gives you a payment schedule saying they will pay you less then what you asked to be paid in your invoice

(d) The end result is that there is a dispute of some sort.

What next? Your legal options:

Section 78(2) of the Building Industry Fairness (Security of Payment) Act 2017 QLD (“BIF Act”) states that you may either:

(a) recover the unpaid portion of the amount owed from the payer, as a debt owing to the claimant, in a court of competent jurisdiction; or

(b) apply for adjudication of the payment claim under part 4.

It seems so simple right?

Wrong…

Let us consider what happened in Panel Concepts Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd (“Panel Concepts”). In this matter, there was an application before the court to have a debt declared as due and owing under section 78 of the BIF Act. To be successful in this sort of application, the court must be satisfied that the following elements have been established:

(a) that the applicant made a payment claim under section 75 of the BIF Act;

(b) that the respondent failed to respond with a payment schedule within the relevant period (which the court noted was made an offence in the BIF Act); and

(c) that the Applicant had given notice under section 99 of the BIF Act.

If these elements can be proven, then the applicant (person wanting to be paid) will be entitled to judgment for the amount claimed in the payment claim.

Where the problems arise…

Although this might seem like a simple case to put before the court, the first argument to defeat your application will be to challenge the validity of your payment claim and there is a number of ways to do this.

For example, are you even licenced to perform all of the works being claimed? If not, you may not be legally entitled to submit a payment Claim (invoice) for the work performed. Why? Because section 42 of Queensland Building and Construction Commission Act 1991 QLD (“QBCC Act”) says so.

However, although a QBCC license is required to carry out the relevant work under section 42 of QBCC Act, you may be able to submit a Payment Claim if you engaged appropriately licensed subcontractor to carry out a portion of the work on your behalf. Obviously, the facts will change depending on the wording of the contract, so, get advice on this point before proceeding to adjudication or court as a failure to do so may mean that you waste your money on unnecessary legal fees.

In the Panel Concepts case, the second issue considered was whether the payment claim identified the construction work to which it related. In this case, the payment claim was delivered on 25 August 2021. It was very brief. It identified the date (25 August) and contained just these words “claim for completion of tilt panels”, and then an amount of $85,000. It also referred to some minor variation work not relevant to the application. “A very spare description of the work, to say the least”, as stated by Justice Porter QC.

Relevantly, Justice Porter QC also stated in Panel Concepts:

“there is, however, no absolute rule that can be applied to every payment claim as to whether it sufficiently identifies the construction work to which the progress payment relates. With gratitude to Justice Brown, I adopt her Honour’s summary of the relevant principles in KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178:” (“KDV”):

…

In KDV, the court stated, inter alia: ”the test to determine whether the payment claim sufficiently identifies the construction work the subject of the claim is an objective one. The assessment is not made only by reference to the terms of the claim itself. As White J commented in Neumann Contractors Pty Ltd v Peet Beachton Syndicate Ltd, “[t]he evaluation of the sufficiency of the identification takes into account the background knowledge of each of the parties derived from their past dealings and exchanges of documentation”.

Unfortunately for Panel Concepts, their payment claim was insufficient and not capable of identifying the work being claimed for, thus making their Payment Claim invalid and despite having a prima facie case by looking at section 78 of the BIF Act. As a result, Panel Concepts were also liable to pay the costs of the respondent in defending the proceeding. This is obviously in addition to not getting paid in the first instance.

WALLACEWEIR TIPS AND TRICKS

In your invoice, include as much detail as possible to enhance your chances of getting paid. Stop being lazy with your invoicing and stop assuming your payer will understand what you are asking them to pay you for, especially if the claim is hundreds of thousands of dollars in in some case millions.

Next, start with your staff. Train and teach them the importance of how to gather enough evidence to support your claim for payment and refer to that documentation in your payment claim if the wording seems insufficient or ambiguous. Tip, use clear and unambiguous wording.

Also, try to identify the scope of works being performed for the period you are seeking to get paid and link it to the work performed and materials and labour required to do the job.

Don’t include work not yet performed!

Consider identifying the area of work on site by reference to chainage markers or the level being worked on.

Consider using items, rates, quantities, dates of work, trade breakdowns, claims paid to date, retention/ security breakdowns, identify omissions of work, identify defect rectifications and non-charges so they don’t think you are charging them for rectification of defects, refer to emails approving variations, use headings for variations and refer to notices and approvals of those variations.

Your aim should be to make it impossible for them to say they don’t understand your Payment Claim.

Evidence is your friend, use it.

Triple check the amounts are correct before sending.

Disclaimer

We trust this article was insightful. If you would like to talk to our experienced construction and infrastructure team, please do so by contact chelsey@wallaceweir.com.au or catherine@wallaceweir.com.au of Wallace Law Group.

Please note that this article is written as an informative piece and that you must not take the contents of this article as legal advice. Wallace Law Group accepts no liability from your reliance on this article.