PAYMENT CLAIMS V PAYMENT SCHEDULES - WHAT YOU NEED TO KNOW

This article adopts the definitions in the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act).

Payment claims and payment schedules are the modern way parties claim and determine amounts due to pay in the building and construction industry. Unfortunately, for many contractors they do not understand what this means despite working in the building and construction industry. Presumedly because there is no formal training in this area for tradies. In that regard, this article aims to simplify this process as is stands in Queensland.

Payment Claims

A payment claim is essentially an invoice you send to the party who is liable to pay you money for the goods and services that you or your company supplied pursuant to the BIF Act.

The first mistake for people to make is that they presume that once they issue the invoice, they will be paid for the amount stated in the payment claim. This may be true in some respects, however really this is not true for the following reasons:

(a)        payment claims need to be assessed by the party you give it to, so they can be satisfied that you are in fact owed the money you are seeking to be paid;

(b)        if the payment claim is unclear, it may not be capable of being understood by the party receiving it;

(c)        you may have performed defective work, that might impact the amount you would have been entitled to;

(d)        you may have submitted the payment claim before the reference date, and your payment claim is invalid;

(e)        you may have submitted multiple payment claims within the reference date; and

(f)         you may have failed to issue a supporting statement with your payment claim.

All of the above are examples only and do not contain an exhaustive list of issues that could impact the amount you are to be paid (if anything). On this basis, you should strongly seek guidance about how your company could improve its payment claims to improve the likelihood of getting paid.  

The key takeaway here is that invoices (payment claims) do not guarantee your entitlement to payment, and this is a common misconception that contractors need to change and understand. We are hoping this article sheds light on that.

Payment Schedules

Firstly, the BIF Act is about cashflow for contractors carrying out construction works as defined in the BIF Act. Typically works are performed under a contract and under the supervision of site superintendents, head contractors’ representatives and/ or principals’ representatives (examples only). Commonly there are multiple trades on site that are all being supervised and managed by the responsible party appointed so the head contractor or principal (as the case may be) are not in breach of their contractual obligations; and, to ensure these parties remain within their project budgets for the duration of the project. This is not always the case, but this is the general gist of things.

The BIF Act sets the framework for the party you say should pay you (principal, head contractor or subcontractor as the case may be), to fairly assess your payment claim and to ensure your contractual works are not defective, have not incurred any unnecessary expense, delay or issues that would impact your claim to payment to name a few examples.  

Now that you understand the reasoning for why payment schedules exist, they can now be briefly summarised as a document given in response to a claim for payment that records the examination of the claim to payment and any necessary adjustments to the claimed amount and the reasons for those deductions or additions. This is an oversimplification, but nevertheless can help with your understanding of the points we are trying to make.

The person who issues the payment schedule is called a respondent, and the respondent must respond to the payment claim with its payment schedule. A very simplified explanation is that the payment schedule is a record of the amount the respondent agrees to pay the person who issued the payment claim.

You may be thinking why can they assess my payment claim? I am telling them what they owe me in my invoice!

Timeframes

Firstly, a construction contract should clearly set the day that the payment claim is to be issued to the respondent. This is called a reference date. It is typical for reference dates to be set at say the 25th or last day of each calendar month. Nonetheless, each contract can legally set their own reference date as permitted by section 67(1)(a) of the BIF Act. If a contract is silent on the reference date, section 67(1)(b)(i) will set it on the last day of each month the work was carried out. 

Tip: only submit payment claims on or after the reference date and only include goods and services you performed and supplied.

We now know that payment claims are given on or after each reference date. So, when is the payment schedule due?

The respondent to a payment claim may give the claimant its payment schedule on:

(a)        the period set under the contract; or

(b)        15 business days after the payment claim is given to the respondent,

whichever is earlier of the two.

Note - A failure to give a payment schedule as required under this section is also grounds for taking disciplinary action under the Queensland Building and Construction Commission Act 1991.

If there is no dispute that your payment claim is to be paid and the respondent intends to pay the amount claimed by you, then a payment schedule does not need to be given. However, the respondent becomes liable under section 77(2) of the BIF Act to pay the claimed amount by either not issuing a payment schedule as required under section 76 of the BIF Act; or failure to pay whole or part of the claimed amount on or before due date for payment.

The due date for payment is usually on the day agreed under the construction contract or is 10 business days after the day a payment claim for the progress payment if the contract is silent on the matter.  

Note - A ‘pay when paid’ provision in a construction contract has no effect, see section 74.

Note - A provision in a construction management trade contract or subcontract providing for payment of a progress payment later than 25 business days is void, see the Queensland Building and Construction Commission Act 1991, section 67U.

Note - A provision in a commercial building contract providing for payment of a progress payment later than 15 business days is void, see the Queensland Building and Construction Commission Act 1991, section 67W.

Payment schedule less than payment claim

If the respondent gives the claimant a payment schedule, the respondent must pay the claimant the amount proposed in the payment schedule no later than the due date for the progress payment to which the payment schedule relates.

Consequences of failing to pay amount in payment schedule

If you have been given a payment schedule and it is not paid by the due date for payment, you may:

(a)        recover the unpaid portion of the amount owed from the respondent, 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 of the BIF Act.

Adjudication

If you wish to apply for adjudication, you must do so in the approved form and within 20 business days after the due date for the progress payment to which the claim relates; or for an application relating to the amount stated in the payment schedule being less than the amount stated in the payment claim, 30 business days after the claimant receives the payment schedule.

Court proceedings

Pursuant to section 99 of the BIF Act, if after being given a payment claim, the respondent fails to pay the amount stated in the claim on or before the due date for the progress payment to which the claim relates; and because of the failure to pay, the claimant intends to start court proceedings to recover the unpaid portion of the amount owed to the claimant, the claimant must give the respondent written notice (a warning notice), in the approved form, of the claimant’s intention to start the proceedings.

The claimant must not give the respondent the warning notice later than 30 business days after the due date for the progress payment. If you fail to provide a warning notice within 30 business days, you will be time barred from bringing a claim before the court for this type of cause of action. That is not to say that you cannot submit another payment claim for the unpaid portion on the next reference date.

If you would like advice in respect of your circumstances, we are happy to provide you with a free initial consultation to help you determine your next steps (if any). Please contact us 1300 011 123 team@wallaceweir.com.au

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.