18 Sep 2014

All change: A revised SOP regime in Queensland

by Frazer Moss

As Queensland's new security of payment regime is expected to commence by the end of the year, it's important that you start looking at your own internal processes to be sure they comply.

The significant reforms proposed for Queensland's security of payment legislation, the Building and Construction Industry Payments Act 2004, were passed last week and are expected to commence before year end.

Key changes to the BCIPA

The Building and Construction Industry Payments Amendment Bill 2014 was passed through Parliament on 12 September after a prolonged period of scrutiny before a Parliamentary Committee, which involved requests for additional submissions and public hearings.

That process led to a number of changes being made to the original Bill that was tabled on first reading, but the key reforms we previously reported on remain:

  • the role of authorised nominating authorities (ANAs) is abolished;
  • the Queensland Building and Construction Commission (QBCC) is the single point for applying for the appointment of an adjudicator;
  • two types of payment claim are created – standard and complex – with different timeframes applying to each;
  • in respect of complex claims, the amended Act will permit a respondent to raise new reasons in an adjudication response and the claimant has a right of reply;
  • an extended blackout period for the counting of days will apply at Christmas and New Year;
  • there is an effort to preserve adjudication decisions where only parts of them are found affected by jurisdictional error; and
  • a claimant must give a respondent a second chance to deliver a payment before it can start court proceedings to recover payment where a payment schedule has not been delivered within time.

Sensibly, the original transitional arrangements have been revised. Now, apart from the appointing process and other functions given to the QBCC, the amended provisions of the Act will apply only to contracts entered into after the start of the amended Act. A date has yet to be fixed for the start, but it is expected to be sometime before year end.

The future role of ANAs

The loudest voices heard during the Committee process were those of the ANAs who were fighting for their survival, but to no avail.

Existing ANAs will have a short-lived legacy role as they must continue to administer applications made to them before the start date of the amending Act. Apart from that however, they will have no role in the future, other than perhaps as training and accreditation providers for adjudicator qualification courses. The necessity for proper training and education was something that was emphasised by the Committee and the Government has undertaken to set out relevant requirements in Regulations, which are under preparation.

Adjudicator appointment

Concern was expressed in a number of quarters about the concept that a government registrar will be appointing adjudicators to disputes involving the State and the potential for perceived bias favourable to State to creep in when selecting an adjudicator. The Committee recommended an alternative model be adopted where the State is a party, but the Government has elected to regulate the selection process generally through the implementation of approved policies of the Board of the QBCC and the daily publication of the appointment of adjudicators.

Standard vs complex claims

A number of submissions were received for and against the creation of the differing "standard" and "complex" regimes. One particular criticism of the original Bill that resonated with the Committee was that the definition of a "complex" payment claim was too wide and uncertain. A simplification was recommended. The Government agreed.

A "complex" claim is now simply one whose value exceeds $750,000 (or such greater amount set by Regulation) exclusive of GST. The requirement for a claimant to mark a claim as "standard" or "complex", with consequences if they got it wrong, was also dropped.

Significantly, the ability of a respondent to raise new reasons in an adjudication response relating to a complex claim was retained, as were the differing timeframes for delivering a payment schedule. Respondents to a complex payment claim have 15 business days to deliver a payment schedule (rather than 10 for a standard claim), though that increases to 30 business days if the payment claim is given more than 90 days after a relevant reference date.

The new ability to give additional reasons, and also the right of the claimant to deliver a reply to those additional reasons, will probably be an area of particular controversy that will be played out in future court challenges to adjudication decisions.

SOP discord

The amendment of the Queensland legislation brings further complexity to those who are involved in the administration of construction contracts in multiple jurisdictions. On the eastern seaboard alone, three different security of payment regimes will be in operation in 2015 in each of Queensland, New South Wales and Victoria.

The aspiration of a harmonised Australia-wide approach to security of payment within the construction industry looks further away than ever. Indeed, the Queensland Government indicated that there might be even more changes to the Queensland Act coming, with investigations being carried out into whether adjudicators should be able to direct the release of retention moneys and securities, and there being the potential for the establishment of a statutory retention trust fund.

What you should do now

As the amended Act is expected to commence by the end of the year, it's important that you start looking at your own internal processes to be sure they will comply with the new regime.

For claimants, this means understanding not just the new timeframes and processes, but also the crucial new distinction between standard and complex payment claims.

As for respondents, they cannot assume that the longer timeframes or the ability to include new reasons in an adjudication response will absolve them of the responsibility to deal promptly and properly with payment claims – because they won't.

Claimants, respondents and adjudicators will also need to keep watching developments in this area, as finer details are to be set out in regulations, which will be made soon. We'll keep you posted.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.