THE BCIPA four years on -

The impact of the Building and Construction Industry Payments Act 2004 (BCIPA) in Queensland, and the application of adjudication have been profound. This bulletin examines the lessons learned from the significant body of case law spawned from the BCIPA and the impact upon the administration of contracts and drafting.

Introduction

The BCIPA aims to achieve efficient and prompt payment for construction work and the statutory right to progress payments and an adjudication process are the means by which the BCIPA aims to achieve that result. "Although one might have thought that, by now, all of the quirks of and possible gaps in the [legislation] have been explored, recent cases show that is not the case". Accordingly, we identify a number of traps and tips for participants in the construction industry.

Payment claims

Section 17 of the BCIPA states that a person entitled to a progress payment may serve a payment claim upon the person liable to make the payment. The payment claim must identify the construction work or related goods and services to which the claim relates and state the claimed amount. Further, the payment claim must state that it was made under the BCIPA.

It is clear from the cases that to be valid, a payment claim must, on its face, purport in a reasonable way to identify the construction work to which the claim relates, the amount claimed, and state it is made under the BCIPA.

The payment claim need not be encyclopaedic to be valid, but there must be sufficient detail and specificity to enable the recipient to understand the basis of the claim.
A payment claim that does not purport in a reasonable way to comply with the above requirements fails to comply with the essential and mandatory requirements of the BCIPA so that it is a nullity for the purposes of engaging the adjudication and enforcement procedures of the BCIPA.

If your payment claim fails to comply with the above requirements and you purport to exercise your right to suspend works by giving the appropriate notice (where a payment schedule is not received in response or the amount claimed is not paid), the respondent may terminate the contract for wrongful suspension of works and sue for loss and damages as a result of the suspension of the works and termination of the contract.

Also, any adjudication determination will be void on the basis that there was no valid payment claim.

Payment schedules

Section 18 of the BCIPA states that a respondent served with a payment claim may respond with a payment schedule. The schedule must identify the payment claim to which it relates and the scheduled amount. Where the scheduled amount is less than the claimed amount the schedule must state why this is the case.
If a respondent wishes to object to the payment claim on the basis that it does not comply with the essential and mandatory requirements so that it is a nullity for the purposes of BCIPA, the respondent must serve a payment schedule in which that objection is taken.

Importantly, if a respondent does not serve a payment schedule within the prescribed time and the claimant seeks judgment in court, the respondent cannot resist judgment on the ground that the payment claim was not valid by reason of non-compliance with the BCIPA.

As noted above, if a respondent fails to serve a payment schedule within the time prescribed, the claimant can stop work, even where the contract does not provide a right to do so, until three days after the claim has been paid.
As with payment claims, be sure to draft detailed payment schedules.

Adjudication or court

Adjudication application

A claimant may apply for an adjudication determination if -
(a) the respondent serves a payment schedule but the scheduled amount is less than the claimed amount, or the respondent fails to pay the whole or part of the claimed amount by the due date; or
(b) the respondent fails to serve a payment schedule on the claimant and fails to pay the whole or part of the claimed amount.

The formal requirements of an adjudication application are provided in s 21(3) of the BCIPA. However, be sure you submit your adjudication application within the strict time limits prescribed otherwise your application will fail.

It is important that your adjudication is sufficiently detailed and includes the necessary supporting material including copies of the payment claim and schedule and other documents necessary to prove your claim. If seeking time based compensation, be sure the contract expressly permits it and you can prove it, for example, by providing time sheets.

Be sure to serve the application on the right person and that you can prove that it was served when it was. Even though the BCIPA allows for service of the application by post and facsimile, personal service will avoid any uncertainty and help avoid a dispute that could result in a court finding that the strict time limit was not observed.
The question then is whether to adjudicate or apply to the court for summary judgment.

Where a payment schedule is not delivered or not delivered on time, or the amount the respondent admits in the payment schedule is to be paid is not paid on time, then applying for summary judgment will usually be the best course. This course also prevents the respondent from raising a defence or counter claim.

However, where the amount admitted in the payment schedule is not acceptable and the claim is a relatively straight forward one, then the adjudication process is often better and quicker.
It should be noted that these proceedings are heard in a court and not the Commercial and Consumer Tribunal (CCT).

Adjudication response

The respondent may give an adjudicator an adjudication response anytime within the latter of 5 business days after receiving a copy of the application, or two business days after receiving notice of an adjudicator's acceptance of the application.

Again it is important to ensure there is sufficient detail in your response so that an adjudicator can understand your position and follow your argument.

Adjudicator's decision

The adjudicator is to decide the amount of the progress payment to be paid, the due date and the rate of interest payable.

Conclusion

The BCIPA aims to achieve efficient and prompt payment for construction work or the provision of related goods and services, however participants will have identified a number of injustices, including the BCIPA's inability to address ambush claims.

As decisions made under the BCIPA, such as adjudication determinations, are only subject to review by way of judicial review on limited grounds and under very limited circumstances it is critical that participants observe the lessons learned so far, comply with each and every requirement of the BCIPA and remember that timing is everything!