Along with the Plumbing and Drainage Act 2018, the latest amendments to the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) were also passed by Parliament.
The amendments were mostly adding further clarification to the Act, rather than adding new content. However there is one new addition to security of payment that is important to note and that is the amendment to responding to a payment claim, section 76.
Those of you who have attended one of my workshops or followed the changes will recall that there was a new term included in the BIF Act, which was the “response period”. The response period was the time in which the payer had to respond to a payment claim. If the payer did not respond within that period the payer risked both:
being liable for the entire amount claimed in the payment claim; and
a QBCC fine.
So how has section 76 and responding to a payment claim changed?
Firstly, it is important to note that the consequences of not responding to a payment claim have not changed from the original the BIF Act. If the payer does not respond within a certain time period the payer risks both:
being liable for the entire amount claimed in the payment claim; and
a QBCC fine (maximum 100 penalty units).
What has changed is how the time period for responding to a payment claim is determined.
Previously, there were a number of ways that the response period could be calculated including the default provision, which stated:
“the period that is 25 business days after the day the payment claim is given to the respondent.”
Although this default provision worked for subcontracts, which have a maximum payment period of 25 business days, it did not work for head contracts, which have a maximum payment period of 15 business days.
However, the amendments to section 76 go further than changing the default provision to 15 business days, the amendments also clarify and simplify what was a relatively complicated section to a much shorter, simpler and user friendly version.
Gone is the definition of response period. Instead, section 76 merely states that the time period for responding to a payment is whichever of the following periods ends first:
The period stated in the contract, if any;
15 business days after the payment claim was given to the respondent.
This method for calculating the date for responding to a payment is very similar to the current Building and Construction Industry Payments Act 2004 requirements, which is within the earlier of:
The period stated in the contract, if any;
10 business days after the payment claim is served.
But what if I pay the amount claimed?
Previously, if you did not want to send a payment schedule and you didn’t want a QBCC fine, you needed to pay the claimant before the end of the response period, which could be significantly earlier than the due date for payment.
Again this has been amended to a much simpler and more user friendly alternative, which states that the payer is not required to give the claimant a payment schedule if the payment claim is paid in full by the due date.
So what do you need to know about responding to a payment claim under the BIF Act?
If you pay the full amount of the payment claim by the due date, you do not need to send a payment schedule;
If you disagree with the payment claim, you must send a payment schedule, by the earlier of:
The time stated in your contract, if any;
15 business days from the date you were given the payment schedule;
If you don’t pay the payment claim by the due date and you do not send a payment schedule within 15 business days or earlier if required by your contract:
You are liable for the full amount of the payment claim; and
You risk a QBCC fine.
The changes to the BIF Act are due to come into force on 17 December 2018. Please note that contracts you are signing now are likely to be affected by the BIF Act.
Do you want to know more about the BIF Act? Please contact us today on 07 3128 0120 or subcontractors@arbuildinglaw.com.au.
