Discussion Paper – Payment dispute
resolution in the Queensland building and
construction industry
Final Report
_____________________________________________________________________________________________________
Andrew Wallace
Barrister-at-Law
May 2013
Final Report of the Review of the Discussion
Paper –
Payment dispute resolution in the Queensland
building and construction industry
Report to the Honourable Tim Mander,
Minister for Housing and Public Works
Andrew Wallace
Barrister-at-Law
24 May 2013
This is the Final Report in response to the Discussion Paper entitled ‘Payment dispute
resolution in the Queensland building and construction industry’, prepared to assist the
Minister for Housing and Public Works gain an understanding of the various payment related
issues confronting stakeholders in the building and construction industry, particularly in
relation to the operations of the Building and Construction Industry Payments Act 2004 (Qld).
DISCLAIMER
While every effort has been made to ensure that this document is correct at the time of printing, the
State of Queensland, the Queensland Building Services Authority, the Building and Construction
Industry Payments Agency, its agents, employees and the author, disclaim any and all liability to any
person in respect of anything or the consequence of anything done or omitted to be done in reliance
or upon the whole or any part of this document.
COPYRIGHT NOTICE
In keeping with the Qld Government’s commitment to encourage the availability of information, you
are welcome to reproduce the material that appears in the Payment dispute resolution in the
Queensland building and construction industry Final Report for personal, in–house or non–
commercial use without formal permission or charge. All other rights are reserved. If you wish to
reproduce, alter, store or transmit material appearing in the Queensland building and construction
industry Final Report for any other purpose, request for formal permission should be emailed to:
brian.bolton@bsa.qld.gov.au at the Building Services Authority.
ACKNOWLEDGMENTS
My sincere gratitude is extended to Jenny Phillips and Penny Geraghty who have fulfilled the role of
the Review Secretariat admirably. I also wish to thank my research assistant, solicitor Eden Bird who
provided me with invaluable assistance.
2
Table of Contents
1.
EXECUTIVE SUMMARY ...................................................................................................................... 6
4.
PURPOSE OF THE DISCUSSION PAPER .....................................................................................14
2.
3.
5.
6.
7.
8.
9.
BACKGROUND .....................................................................................................................................14
OBJECT OF THE BCIPA .....................................................................................................................14
TERMS OF REFERENCE ...................................................................................................................14
REVIEW METHODOLOGY................................................................................................................15
Written Responses to the Discussion Paper.................................................................................15
HISTORY OF SECURITY OF PAYMENT.......................................................................................16
GENERAL FEEDBACK FROM CONTRIBUTORS .......................................................................17
CURRENT LEGISLATIVE FRAMEWORK ....................................................................................21
THE BCIPA – CONSULTATION ISSUES.................................................................................................28
Question 1: Do you think the jurisdiction of BCIP Act should be reduced to specifically
exclude payment claims for some types of work or work over a stated value?..................29
Q1 – Recommendations........................................................................................................................50
Question 2: Do you think that the respondent needs to be more clearly identified in the
contract in relation to who should receive a payment claim under the BCIP Act? ............51
Q2 - Recommendations.........................................................................................................................58
Question 3: Do you believe that the BCIP Act should allow other types of payment
claims, including claims by purchasers, to be subject to adjudication? .................................59
Q3 - Recommendation...........................................................................................................................65
Question 4: Should the BCIP Act be amended to allow an adjudicator to direct payment
in favour of the respondent for an amount greater than the claim?........................................66
Q4 - Recommendations.........................................................................................................................75
Question 5: Do you believe the type of payment claim under the BCIP Act should be
restricted?.......................................................................................................................................................76
Q5 - Recommendations.........................................................................................................................89
Question 6: Should BCIP Act be expanded to allow adjudicators to require the release of
a security such as a bank guarantee? ...................................................................................................90
Question 12: Is security of payment an issue for retentions? If so how do you think this
could be improved?.....................................................................................................................................90
Q12 - Recommendations.................................................................................................................. 107
Question 6 of the Discussion Paper posed the following question: Should BCIP Act be
expanded to allow adjudicators to require the release of a security such as a bank
guarantee? ................................................................................................................................................... 108
Q6 - Recommendations...................................................................................................................... 119
Question 7: Should claimants be required to reference BCIP Act on payment claims if
they want to be entitled to rely on the BCIP Act?......................................................................... 121
Q7 - Recommendation........................................................................................................................ 127
3
Question 8: Do you consider the current process of authorised nominating authorities
appointing adjudicators appropriate?.............................................................................................. 128
Q8 – Recommendations..................................................................................................................... 165
Question 9: Do you believe that the timeframes for the making of and responding to
claims under the BCIP Act are appropriate? .................................................................................. 167
Question 10: Do you believe the BCIP Act allows persons who carry out construction
work or supply related goods and services to serve large and complex payment claims
in an untimely and unfair manner? ................................................................................................... 167
Q9 - Recommendation........................................................................................................................ 205
Q10 - Recommendations................................................................................................................... 206
Question 11: Should the BCIP Act allow claimants at the lodgment of an adjudication
application to place a charge on monies owing to a respondent head contractor by a
principal? ..................................................................................................................................................... 207
Q11 - Recommendations................................................................................................................... 219
Question 13: Do you believe that some respondents are misusing the legal process by
commencing Supreme Court proceedings to delay the payment of an adjudicated
amount?........................................................................................................................................................ 220
Q13 - Recommendations................................................................................................................... 225
Question 14: Are there any other issues you wish to raise in relation to the effectiveness
of the BCIP Act process or the jurisdiction of BCIP Act?............................................................ 226
Q14 - Recommendations................................................................................................................... 254
Question 15: Would you support the making void of any unreasonable timeframes for
notification of extension of time requests within contracts? .................................................. 257
Question 16: Would you support the making void of any unreasonable timeframes for
notification of variations within contracts? ................................................................................... 257
Q15 - Recommendation.................................................................................................................... 263
Q16 - Recommendation ..................................................................................................................... 263
Question 17: Would you support making void a construction contract which entitles a
purchaser to terminate a contract for convenience?.................................................................. 264
Q17 - Recommendations................................................................................................................... 270
Question 18: Do you believe that the BCIP Act requires amendment to specifically
address preconditions and other contractual provisions which purport to unreasonably
and unfairly restrict the application of BCIP Act?........................................................................ 271
Q18 - Recommendation ..................................................................................................................... 277
Question 19: Do you have any concerns about a legislative amendment being made to
the BCIP Act to make clear that a statutory declaration attesting to the payment of
workers, subcontractors and sub-subcontractors is a valid precondition to the
submission of a payment claim? ......................................................................................................... 278
Q19 - Recommendation ..................................................................................................................... 283
Consultation Questions...................................................................................................................... 284
TABLE OF CASES:...................................................................................................................................... 286
4
Table of Statutes: ...................................................................................................................................... 291
Bibliography: .............................................................................................................................................. 293
ANNEXURES................................................................................................................................................ 296
ANNEXURE A:........................................................................................................................................ 297
ANNEXURE B: ........................................................................................................................................ 301
ANNEXURE C: ........................................................................................................................................ 304
ANNEXURE D:........................................................................................................................................ 306
5
1.
EXECUTIVE SUMMARY
In an attempt to effect significant cultural change in the making of late or nonpayments to contractors and subcontractors in the building and construction industry,
the Queensland Legislature with bi-partisan political support promulgated the
Building and Construction Industry Payments Act 2004 (Qld) (“the BCIPA” or “the
Act”). The operative provisions commenced on 1 October 2004.
The object of the BCIPA is to ensure that a person is entitled to receive and able to
recover progress payments, if they undertake to carry out construction work, or
supply related goods and services, under a construction contract.
The BCIPA operates to provide greater “security of payment” for contractors in an
industry that typically operates under a hierarchical chain of contracts with inherent
imbalances in bargaining power.
To achieve this objective, the BCIPA grants an entitlement to progress payments
whether or not the relevant contract makes provision for progress payments, and
also establishes a procedure for the making of, and responding to payment claims in
set statutory timeframes and for the referral of disputed or unpaid claims to an
adjudicator for a decision.
An adjudicator’s decision is legally enforceable and there are limited grounds for
review. However, the contractual rights of the parties are preserved, so that either
party dissatisfied with an adjudication decision may take further action through the
courts to enforce their contractual rights. The legislative scheme has been described
as “pay now, argue later”.
The BCIPA has now been in operation for eight and half years. On 21 December
2012, the Hon. Tim Mander Minister for Housing and Public Works, released a
Discussion Paper entitled ‘Payment dispute resolution in the Queensland building
and construction industry’ (“the Discussion Paper”) to seek industry stakeholder
feedback on the operations of the BCIPA.
I was appointed on 21 December 2012 to:
1. Review and assess the submissions received in response to the Discussion
Paper;
2. Liaise with relevant stakeholders, including those who provide submissions
in relation to the Discussion Paper to clarify or seek further information in
relation to the issues raised by the Discussion Paper; and
3. Prepare and submit a report to Government identifying the findings, options
for reform and any recommended legislative amendments.
A total of 128 written submissions were received in response to the Discussion
Paper and a total of 86 individual interviews were conducted with stakeholders from
a broad cross-section of the industry. Many of the written submissions received
provided very detailed examination of the nineteen questions posed in the
Discussion Paper.
6
There were also a significant number of written submissions made to the Review
which did not specifically address the questions posed in the Discussion Paper.
Those views were however considered in the formulation of any additional
suggestions for improvement of the operation of the Act.
As a general comment, the majority of stakeholders considered that the Act was an
important piece of legislation designed to overcome the power imbalances between
those who perform construction work or who supply related goods and services
(“contracted parties”) and those for whom the construction work or the supply of
related goods and services is provided (“contracting parties”).
It is fair to say however that the BCIPA has had a polarising effect on the industry
with those sectors who stand to benefit from its continuation in its current form being
most supportive, whilst the attitude of those who have the Act used against them
ranged from ambivalence to contempt.
In considering all of the submissions provided to the Review, both written and oral, I
have attempted to the best of my ability, when formulating my recommendations to
observe the latin maxim Primum nil nocere1. In building industry parlance this might
be best translated as “If it ain’t broke, don’t fix it.”
In forming my recommendations I have considered all of the written and oral
submissions made to the Review. I have also drawn upon my own experiences as a
subcontract carpenter and joiner, a contractor, a consumer of building services, an
adjudicator and a barrister, over the past twenty-three years. It would be fair to say
that I have seen the industry from all angles.
Where recommendations have been made for change, I have not considered them
lightly or frivolously and I have wherever possible attempted to maintain the integrity
of the Act in its current form for the majority of parties who have learned to work
within its confines over the past eight and a half years. By all accounts, the Act has
had a positive impact on the majority of stakeholders’ contract administration
processes. Any changes to the Act should not detract from those improvements but
should seek to further enhance them.
Key Reforms
The BCIPA is by no means “broken” but it faces structural challenges to its integrity
and operation without meaningful reform. The recommendations made as part of
this Review are designed to underpin what is broadly accepted as a “gamechanging” piece of legislation in the building and construction industry in this State.
The proposed reforms must ensure that:
1.
1
Subject to existing exclusions, the BCIPA has as broad an application as is
possible to all persons who perform construction work or who supply related
goods and services;
“First, do no harm”
7
2.
3.
4.
The timeframes contained within the Act more equitably balance the
interests of both parties by ensuring the delivery of expeditious outcomes to
maintain cash flow for contracted parties versus the entitlement of
contracting parties who must be given proper and adequate opportunity to
“put their case”;
Adjudications are delivered by suitably qualified and experienced
adjudicators who act impartially and who are appointed independently of
their own interests or the interests of a particular sector within the industry;
To the extent possible, Government refrain from unnecessarily involving
itself in transactions between two commercial entities, save for if there is
clear evidence of a significant power imbalance, or prospect of abuse or
misuse of market share.
In support of these key reforms, after considering all of the submissions to the
Review, I make the following recommendations:
1.
The jurisdiction of the BCIPA should not be reduced or restricted to specifically
exclude payment claims for some types of work other than those already provided
in ss.3 and 10.
2.
Subject to recommendations 22 & 23, the jurisdiction of the BCIPA should NOT be
reduced or restricted by operation of either a cap on the value of payment claims
or contract value.
3.
That the timeframes provided in the BCIPA be extended as detailed in response to
Question 9 of the Discussion Paper.
4.
Any amendments to the BCIPA should only come into effect after the Government
has had sufficient opportunity to inform relevant parties and stakeholders of the
legislative changes and the forthcoming date that they will take effect.
5.
The requirements for service of payment claims made under the BCIPA do NOT
need amending.
6.
The BCIPA should NOT be amended to allow other types of payment claims,
including claims by purchasers, to be subject to adjudication.
7.
The BCIPA NOT be amended to allow an adjudicator to decide an amount in
favour of a respondent in circumstances where the respondent’s contractual
entitlement to set-off exceeds the value of the claimed amount.
8.
The BCIPA be amended to ensure more just and equitable outcomes be achieved
in relation to the apportioning of adjudication fees by providing:
(a) Legislative guiding principles that an adjudicator may consider when
apportioning adjudication fees between the parties;
(b) Legislated procedures for the making of formal offers to settle (for the
purposes of adjudication only) and subsequent consequences based on
Part 8, Division 3 and Part 9, Division 2 of the Queensland Civil
Administrative Tribunal Rules 2009.
8
9.
The BCIPA should NOT further restrict the types of payment claims that can be
made under the Act.
10.
Part 4A of the QBSA Act should be amended to make it an offence for a
contracting party not to advise a contracted party in writing upon the reaching of
the contract milestone being, when the contracted party is entitled to claim for the
release of retention/security.
11.
Monies held on retention and other forms of security, should be held under a
Construction Retention Bond Scheme.
12.
The BCIPA should be amended to permit a payment claim to include a claim for
the release of security.
13.
The BCIPA should be amended to empower an adjudicator to direct the release of
security.
14.
In the event that the Government does not implement the Construction Retention
Bond Scheme, the BCIPA should be amended to make it an offence for a
contracting party who fails to return a security held under a construction contract,
as directed by an adjudicator; and which will also result in the allocation of demerit
points against their licence.
15.
The BCIPA should be amended to expressly provide that a payment claim may
include a claim for retention and that such retention is recoverable under the Act.
16.
Section 17(2)(c) of the BCIPA should continue to require a payment claim to state
that it is made under the Act. No further amendment is necessary.
17.
The current process of authorised nominating authorities appointing adjudicators is
not appropriate and should be discontinued as soon as is practicable.
18.
The power to appoint adjudicators should be restricted to the Adjudication
Registry.
19.
The BCIPA should be amended to ensure that adjudicators fall within the
jurisdiction of the Crime and Misconduct Commission. In the event that
Recommendations 17 and 18 are not accepted by Government: the BCIPA should
be amended to ensure that authorised nominating authorities fall within the
jurisdiction of the Crime and Misconduct Commission.
20.
The Adjudication Registry should be required to maintain in the adjudicator register
a list of “Active Adjudicators”.
21.
A person who is listed on the adjudicator register as an “Active Adjudicator” must
advise the registrar in writing within 1 business day of his or her engagement for
the provision of advice, preparation of a payment claim or payment schedule,
adjudication application or adjudication response, submissions or correspondence,
or any other representation of a party to an adjudication.
9
22.
The BCIPA timeframes should be amended along the following lines for ALL
payment claims and adjudication applications:
 Unless the contract provides a longer period, restricting the time in which a
claim can be made to 6 months after the construction work was last carried
out or the related goods and services were supplied.
 If the payment claim is in relation to the recovery of a final progress
payment including for the recovery of retention and/or the return of security,
a final payment claim may be served within the period worked out under the
contract or if the contract does not provide, the period of 28 days after the
expiry of the defects liability period, whichever is the later.
 Extend the time in which a respondent has to serve an adjudication
response to 10 business days after receiving a copy of the adjudication
application or 7 business days after receiving notice of an adjudicator’s
acceptance of the application, whichever is the later.
 The definition of the term “business day” in Schedule 2 of the Act to exclude
the three business days prior to Christmas Day and the three business days
after New Years Day.
23.
The BCIPA should be amended to reflect new requirements and processes
(‘composite scheme’) for any payment claim which contains a claim for:
(a) a sum greater than $750,000; or
(b) a latent condition; or
(c) a time related cost.
24.
With regard to claims made under the ‘composite scheme’, the following
timeframes and specific requirements will apply:
 A respondent will be able to provide a payment schedule within prescribed
timeframes according to a “sliding scale”, depending upon the time taken by
the claimant to serve its payment claim;
 The default period for a respondent to serve an adjudication response shall
be the later of the following to end 15 business days after receiving a copy of the application;
 13 business days after receiving notice of an adjudicator’s acceptance of
the application.
 A respondent may apply to the adjudicator to seek an extension of time for
up to an additional 15 business days to provide an adjudication response
and the adjudicator must give the claimant an opportunity to be heard on
the application before making his or her decision.
 A respondent shall be entitled to raise reasons for refusing all or part of the
claimed amount in the adjudication response which had not been raised in
the payment schedule and the claimant will be provided a right of reply.
 Adjudicators should be allowed 15 business days to decide an adjudication
application, unless either of the parties agree upon a longer period.
25.
The BCIPA should NOT be amended to allow claimants, at the lodgement of an
adjudication application, to place a charge on monies owing to a respondent by a
principal or superior contractor.
10
26.
The Government should adopt a “watching brief” on the success or otherwise of
Division 2A of the Building and Construction Industry Security of Payment Act
1999 (NSW).
27.
There is no necessity or justification for the Government to attempt to alter the
rights of the parties to invoke the supervisory jurisdiction of the Supreme Court
over decisions made by adjudicators.
28.
The BCIPA should be amended to expressly permit the Court, where appropriate,
to sever part of an adjudication decision that is affected by jurisdictional error, and
in the process confirm that the balance of the adjudication decision remains
enforceable.
29.
Section 19 of the BCIPA should be amended to provide the requirement that a
claimant wishing to proceed to make an application to a court pursuant to
s.19(2)(a)(i), must first provide the respondent with a “second chance” to provide a
payment schedule.
30.
Section 24(5) of the BCIPA should be amended to require a respondent to serve
the adjudication response on the claimant as quickly as possible, but no later than
2 business days after it was provided to the adjudicator.
31.
Section 26 of the BCIPA should be amended to provide that an adjudicator must
make a decision as to whether he or she has jurisdiction.
32.
Section 35 of the BCIPA should be amended to clarify that an adjudicator acting in
good faith is entitled to his or her fees, even if the adjudicator’s decision is found to
be void or otherwise not effective at law.
33.
Section 35 of the BCIPA should be amended to provide that an adjudicator is
entitled to charge a reasonable fee in the event that he or she concludes that there
is no jurisdiction to decide the matter.
34.
The BCIPA should be amended to expressly permit a claimant to withdraw an
adjudication application.
35.
Adjudicators should be required, as an entitlement to maintain registration as an
‘Active Adjudicator’, to satisfy mandatory continuing professional development
(CPD) rules, where as a minimum 10 points per 12 month period are obtained.
Such CPD rules should be developed in consultation with relevant industry
stakeholders.
36.
Adjudicators should be registered and appropriately graded according to their
skills, experience and qualifications.
37.
The development and implementation of a “Rapid Domestic Adjudication” (“RDA”)
model to fast track domestic building disputes with mandated response timelines.
See Annexure C for details.
11
38.
In consultation with industry stakeholders, the elements necessary to obtain an
adjudication qualification as contained within Schedule 1, Part 2 of the Building
and Construction Industry Payments Regulation 2004 should be amended with at
least the following additional elements:
 Overview of the law of contract;
 Analysis of common standard form building contracts;
 Analysis of costs and claims in the building and construction industry;
 Detailed analysis of building construction claims and contractor
entitlements;
 An overview of the law of building and construction; and
 A detailed analysis of the ethical obligations of an adjudicator.
39.
Assuming Government accepts Recommendations 17 and 18, I recommend that it
be a condition of an adjudicator’s registration that:
(a) In the event that an adjudicator, acting in that capacity, has been found by a
Court in Australia to have made a jurisdictional error or denied the parties
procedural fairness, the adjudicator must advise the registrar in writing
within 7 days of receipt of the Court decision and the registrar will not further
appoint the adjudicator unless satisfied that the cause of the error has been
resolved;
(b) Any adjudicator found by a Court in Australia to have acted not in good faith
in performing the role of an adjudicator, must advise the registrar in writing
within 7 days of receipt of the Court decision and shall be called upon by the
registrar to show cause under s.78 of the BCIPA why their registration
should not be suspended or cancelled; and
(c) Any adjudicator found by a Court in Australia to have acted not in good faith
in performing the role of an adjudicator twice in a 5 year period, must advise
the registrar in writing within 7 days of receipt of the Court decision and
shall be called upon by the registrar to show cause under s.78 of the BCIPA
why their registration should not be cancelled.
40.
That the penalty rate of interest calculated under s.67P(3)(a) of the Queensland
Building Services Authority Act 1991 (Qld) should be amended to the rate made up
of the sum of the following(i) 3% a year;
(ii) the rate prescribed under the Civil Proceedings Act 2011, section 59(3) for a
money order debt.
41.
In the event the Government elects NOT to accept Recommendations 17 and 18, it
should be a requirement of an ANA’s registration that it fully discloses to
prospective parties all likely fees and costs, including any service fees or similar
obtained from the adjudicator.
In the event the Government elects to accept Recommendations 17 and 18, all
adjudication fees and costs should be regulated and published.
43. There is no necessity or justification for the Government to attempt to alter the
rights of the parties by introducing amendments to the BCIPA which would set
mandatory minimum timeframes for the notification of extension of time claims.
42.
12
44.
There is no necessity or justification for the Government to attempt to alter the
rights of the parties by introducing amendments to the BCIPA which would set
mandatory minimum timeframes for the notification of variation claims.
45.
There is no demonstrable case for Government intervening in construction
contracts by introducing amendments to the BCIPA or the enactment of any other
legislation which would declare void a termination for convenience clause.
46.
There is no demonstrable case for Government intervening in construction
contracts by introducing amendments to the BCIPA or the enactment of any other
legislation which would mandate a contracted party’s entitlement to a loss of profits
in the event that a construction contract was terminated by invoking a termination
for convenience clause.
47.
The BCIPA should be amended to expressly provide that a claimant’s entitlement
to serve a final payment claim is not extinguished post-termination of the contract.
48.
There is no demonstrable case for Government intervening in construction
contracts by introducing amendments to the BCIPA which would make void any
preconditions or other purported unreasonable or unfair contractual conditions to a
statutory entitlement to a progress payment.
49.
The BCIPA should NOT be amended to require a claimant to provide a statutory
declaration attesting to the payment of workers, subcontractors, subsubcontractors or suppliers as a valid precondition to the submission of a payment
claim.
13
2.
BACKGROUND
On 21 December 2012, the Hon. Tim Mander, Minister for Housing and Public
Works, released a Discussion Paper entitled ‘Payment dispute resolution in the
Queensland building and construction industry’ (“the Discussion Paper”).
The opportunity to provide submissions in response to the Discussion Paper closed
on 22 February 2013.
3.
OBJECT OF THE BCIPA
The object of the BCIPA is to ensure that a person is entitled to receive and able to
recover progress payments, if they undertake to carry out construction work, or
supply related goods and services, under a construction contract.
The BCIPA operates to provide greater “security of payment” for building contractors
in an industry that typically operates under a hierarchical chain of contracts with
inherent imbalances in bargaining power.
To achieve this objective, the BCIPA grants an entitlement to progress payments
whether or not the relevant contract makes provision for progress payments, and
also establishes a procedure for the making of, and responding to payment claims in
set statutory timeframes and for the referral of disputed or unpaid claims to an
adjudicator for a decision.
There are limited grounds for the review of an adjudication decision. However, the
contractual rights of the parties are preserved, so that either party dissatisfied with
an adjudication decision may take further action through the courts to enforce their
contractual rights.
The BCIPA is designed amongst other things to provide for a legally enforceable
decision without the delay and costs associated with civil legal proceedings.
However, neither party loses their right to pursue their legal entitlements.
4.
PURPOSE OF THE DISCUSSION PAPER
The purpose of the Discussion Paper was to obtain feedback from industry
stakeholders, head contractors, subcontractors and suppliers concerning the
operations of the BCIPA.
5.
TERMS OF REFERENCE
I have been engaged to:
1. Review and assess the submissions received in response to the Discussion
Paper;
14
2. Liaise with relevant stakeholders, including those who provide submissions
in relation to the Discussion Paper to clarify or seek further information in
relation to the issues raised by the Discussion Paper; and
3. Prepare and submit a report to Government identifying the findings, options
for reform and any recommended legislative amendments.
6.
REVIEW METHODOLOGY
The Discussion Paper canvassed a number of issues relating to the operations of
the BCIPA. Industry stakeholders were invited to respond to 19 questions, as well as
raise any issue not directly identified in the Discussion Paper.
Submissions both written and oral have been provided by a broad cross-section of
industry stakeholders. These include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
mining and resources sector companies;
mining and resources sector representative bodies;
tier 1 multi-national and national major building contractors;
small and medium sized commercial building contractors;
large, medium, and small sized subcontractors;
industry groups representing major contractors, major subcontractors, house
builders and subcontractors;
civil contractors;
civil contractor representative bodies;
Government Departments, Authorities and Local Government Authorities;
other State and Territory government bodies charged with the responsibility
of administering “Security of Payment” legislation;
Property Council of Australia;
solicitors acting for and on behalf of industry stakeholders;
barristers;
professional representative bodies;
Authorised Nominating Authorities;
Adjudicators and an industry group representing adjudicators;
Adjudication claims preparers.
Written Responses to the Discussion Paper
A total of 128 written submissions were received in response to the Discussion
Paper. A number of the submitters have requested that their written submissions
and their identity remain confidential. Annexure A attached, is a table of the
submitters, identified by their industry sector only and a summary of their responses
to the questions.
To protect the identity of those wishing to remain anonymous, I have decided that it
is appropriate that I not disclose the author of many of the submissions made to the
Review. I have however disclosed the names of various industry groups and
representative bodies, none of whom objected to the publication of their identities.
15
Individual Interviews
A total of 86 persons were interviewed, four of them twice. Interviews were
conducted either over the telephone or in person at the offices of the Queensland
Building Services Authority at 299 Montague Road, West End or in my chambers at
Maroochydore. Interviews were conducted between 29 January 2013 and 27
February 2013. Each interview was scheduled for 45 minutes, although most
interviews were approximately 1 hour in duration.
Some stakeholders chose to address in the interview as many of the nineteen
questions contained in the Discussion Paper as time permitted. However, most
stakeholders used the opportunity to address specific areas of concern they had with
the BCIPA, whether or not such issues were contained in the nineteen questions. A
number of stakeholders in the individual interviews requested that any oral
submissions they made to the Review not be attributable to them. To protect their
identities, I have decided not to publish any names of the interviewees.
Subject to this exception, I have attached a table of the interviewees, identified by
the interviewee’s position and their industry sector only, which is marked Annexure
B.
7.
HISTORY OF SECURITY OF PAYMENT
The concept of “pay now, argue later”2 interim dispute resolution in Queensland has
resulted from the introduction of the BCIPA which commenced on 1 October 2004.
Similar forms of “security of payment” legislation have been enacted in all States and
Territories in Australia from 1999. The genesis of the BCIPA emanates from the
United Kingdom which first enacted the Housing Grants, Construction and
Regeneration Act 1996 (UK). Although operating under various guises, “security of
payment” legislation now also operates in New Zealand, the Isle of Man, Singapore
and Malaysia. The Republic of Ireland is also considering a similar Bill based on the
UK model.
The BCIPA is most closely aligned to the NSW cognate legislation, the Building and
Construction Industry Security of Payment Act 1999 (NSW) (“the NSW Act”), it being
the first jurisdiction in Australia to introduce the scheme.
The issue of “security of payment” for subcontractors working within the building and
construction industry in Australia has been debated for decades.3 However, it
arguably became most nationally prominent in the hearing of evidence and
submissions during the Royal Commission into the Building and Construction
Industry in 2001 and 2002.
2
Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [96] per Palmer J
Scurr MBE, Hon. AT, Inquiry into Security of Payment within the Building and Construction Industry
(Queensland Government, September 1996), p. 151
3
16
“Security of Payment in the Building and Construction Industry throughout Australia remains
one of the most significant and controversial issues impacting the success or failure of any
party working in the industry. In fact we believe it would be fair to say that despite
endeavours to date to remedy Security of Payment in some states, in general, Security of
Payment practices in this industry throughout Australia remain barbaric and definitely unfair.
For that reason, we seek your assistance in taking up the initiatives outlined in this
Discussion Paper to reform Security of Payment practices in the industry.”4 [Emphasis added]
The Hon. Terence Rhoderic Hudson Cole QC noted in his Final Report of the Royal
Commission into the Building and Construction Industry (“the Cole Royal
Commission”) that:
“Security of payment problems within the building and construction industry can result from:
(a) the operation of ‘rogue’ builders, who deliberately delay or avoid the payment of
subcontractors;
(b) builders using non-payment of existing claims as a bargaining tool to reduce
subsequent claims;
(c) builders who are in financial difficulty and do not have the cash flow to pay
subcontractors; and
(d) builders that become insolvent and cannot pay the full amounts owing to their
creditors, including subcontractors.
Security of payment problems are not, however, confined to projects undertaken by rogue or
insolvent builders. They can arise on projects involving some of the largest contractors in
Australia. That point was emphasised in the submission of the Civil Contractors Federation
(CCF), which said that ‘unfortunately, tactics of deliberately delaying payments in this
industry is not limited to rogue builders or head contractors in the industry and is now in fact
common practice throughout the contract chain commencing with the client. This in turn
creates ever increasing cash-flow problems throughout the contract chain’.”5
8.
GENERAL FEEDBACK FROM CONTRIBUTORS
It is evident from an examination of the submissions to the Review that the BCIPA
has a polarising effect on two broad scale industry participants, those who benefit
from its operation and those who have the Act used against them for the recovery of
progress payments.
Generally speaking, those who benefit from the BCIPA are in favour of it, whilst
those who routinely have it used against them, are not, or at least are not in favour of
the BCIPA in its current form. That is not to suggest that all subcontractors who
have used the BCIPA consider it to be a success.
4
Civil Contractors Federation submission to the Cole Royal Commission in response to Discussion Paper 12,
exhibit 1827, p.2
5
Final Report of the Royal Commission into the Building and Construction Industry, p. 229, Vol 8
17
The following are extracts from various submissions to the Review:
“The BCIPA legislation is in our view the single most important driver of positive cultural
change within the Queensland Commercial Building and Construction Industry to have
occurred within the last 20 years.”
“The principle of the BCIP Act is to be applauded and it seems to work when used for the
purpose it is intended. … It is found that by keeping up with administrative matters,
particularly in relation to variations and extensions of time and the like, the system is
significantly more organised and methodical…. The ability to use the BCIP Act as a tool to
intentionally ‘ambush’ another party, however, needs some review.”
"… Generally, we note that a very small number of uncontested complaints should not be
allowed to undermine overwhelmingly successful legislation. In considering any complaint as
to the operation of the Act we submit that, before considering amendment, the complaint
must be held to be justified. Before the review upholds any complaint and where it reflects in
any way on the operation of an ANA under the Act, we submit the ANA must be given the
opportunity of making a full response to any such complaint.”
“It would be a tragedy if the BCIPA allowed the politics of the parties and the dispute
resolution industry to manipulate the Act for their own purposes, moving it away from sound,
traditional procedures and, in the process, creating an ineffective burden on the industry with
little benefit to the parties, the industry or society. The Victorian and Western Australian
security of payment Acts are good examples of legislation that do not reflect the real-world
process and do nothing to advance the overarching objectives of the Government or the
interests of the construction industry. As a result, they are largely ignored by the industry;
and that is as well.
Similar changes to the BCIPA would almost certainly have the same effect.”
“The Association of Wall and Ceiling Industries has welcomed the implementation of the
BCIP Act since its introduction to the construction industry as the legislation has been very
successful in resolving many payment disputes in a structured and timely manner. We wish
to emphasise the need to retain the legislation in a form that is simple, transparent and
ensures a rapid adjudication and judgment of payment claims.”
“In the area of the smaller claims that I have decided, I believe that the Act is achieving
exactly what it has set out to do. (That is providing the decisions flow through to the claimant
actually being paid). In the majority of the cases, the claimant is obtaining a rapid outcome
awarding a payment that is being withheld unfairly.
One of the great benefits of the Act in its current form is its simplicity and it would be a step
backwards if the review overly complicates the Act and its application.
The Act has had an intangible impact of improving the administration of contracts throughout
the industry and bringing the parties together once a dispute has been identified. The pure
availability of the Act often brings the respondent to the table and I have had several
instances where an application has been withdrawn as the parties have settled before a
decision is handed down.
18
The original reasons for implementing the Act should remain at the fore. It was aimed at
overcoming the imbalance of power between the holder of the cash and those that carried
out work and this should remain the focus of the Act.”
An in-house counsel for a national building contractor advised the Review during an
individual interview that:
“Adjudication cures the ruinous problem of the costs of litigation and arbitration.”
“My primary view is that no amendments should be made to the BCIP Act, in favour of
pursuing a national security of payment model.
It makes little sense to have eight disparate pieces of security of payment legislation and
COAG should be encouraged to pursue the formation of a federal legislation to this end.”
Conversely, there were submissions which ranged from the offering of suggestions
to improve the scheme to very significant changes which would if accepted, change
the nature of the legislation.
“There should be a uniform security of payment regime in Australia. There is no valid reason
why the various states cannot co-operate and agree the implementation of such uniform
legislation. We would suggest that if it can be agreed for arbitration, it can also be agreed for
adjudication.
As part of a uniform national approach, serious consideration needs to be given to the
recommendations of the Collins inquiry into construction industry insolvency. We are not
advocating that all the recommendations of that inquiry should be introduced; indeed, many
of the recommendations are already in operation in Queensland. However, the
recommendations should be considered by all interested stakeholders on a national basis,
and implemented nationally when a consensus is reached.”
“There are five key concerns which Queensland Major Contractors Association Members
consistently raised in responding to the Discussion Paper:
1. Parties should be able to nominate in the construction contract who must be served
with a payment claim under the Act and the place/method of service;
2. Parties should be able to nominate an ANA (or a procedure for choosing an ANA) in
the contract;
3. Legislative amendments to address issues which members view as being matters for
commercial negotiation should not be made;
4. The timeframes for responding to payment claims should be lengthened; and
5. While the 12 month period allowed to make a payment claim is extensive and does
give claimants the opportunity to serve large and complex payment claims in an
untimely and unfair manner, if the timeframes for responding to claims were
lengthened, the 12 month period would be acceptable.
XXXX understands the importance of cash flow in the construction industry, and does not
oppose an accelerated adjudication process, on a ‘pay now, argue later’ basis. However, we
consider there is presently an imbalance in the Building and Construction Industry Payment
(sic) Act 2004 (Qld) ("BCIPA") as it stands.
19
A contributor to this imbalance is the ability of the claimant to choose the Authorised
Nominating Authority (‘ANA’) who appoints the adjudicator, which gives rise to a perception
that adjudicators may be promoting themselves as ‘claimant friendly’.
Claimants have pursued very large and contentious claims, especially for delay, disruption
and acceleration, for which the accelerated adjudication processes provided for under the
BCIPA are ill-suited. Within the accelerated timeframes it is not fair or reasonable for a
respondent to be required to deal with dozens of volumes of previously unseen material, as
we have experienced, including substantial witness statements/ statutory declarations, and
voluminous expert reports.
BCIPA entitles claimants to make a claim up to one year after project completion, in respect
of issues that should have been raised contemporaneously while the project was underway.
This does not accord with the underlying intent of the BCIPA as it does not promote
cashflow. Rather it allows for ‘global claims’ to be made after practical completion that could
not be objectively justified under the terms of the contract. This places enormous financial
stress on the respondent, who is required to finance the process until any overpayments can
be recovered from claimants, perhaps years after payment.”
“The [Queensland Law Society – Mining and Resources Law Committee] supports the
objects of the BCIP Act. There is no doubt it has played a significant role in addressing cashflow and solvency issues in the local building industry. It has also had some less positive
outcomes. For principals and head contractors working on major construction projects in
Queensland, the BCIP Act has led to increased cost, resourcing, complexity and uncertainty
of contract administration.”
“The [Queensland Resources Council] (‘QRC’) considers that it is critical within the
resources sector to preserve the contractual framework agreed to between the parties in
order for there to be contractual certainty and to protect the right of parties to contract freely.
The BCIP Act currently conflicts with this objective, as it allows claimants excessive scope to
serve excessive claims for amounts outside the scope of the agreed contractual terms.
Further, adjudicators decisions are often not based on proper consideration of the
contractual terms, which leads to appeals against their determinations and increased and
costly litigation.
The statutory adjudication process is intended to be a rapid and ‘interim’ dispute resolution
process - as such, the QRC contends that this process must proceed, and must be seen to
be, proceeding on the basis that the parties are first and foremost bound by the terms of the
relevant contract. This contention is consistent with the notion inherent in the BCIP Act that a
claimant may only seek, monies payable under the contract, and cannot claim damages or
other legal or equitable forms of relief.
QRC contends that the review of the BCIP Act should follow best legislative principles,
requiring reconsideration of the primary objectives for enacting the legislation.
The BCIP Act, and similar legislation in other Australian states, is aimed at addressing
inherent imbalances in bargaining power which exist between small subcontractors and
head contractors.
This view is supported by the explanatory notes and the second reading speeches for the
BCIP Act and similar legislation in other Australian states enacted for the same purpose
(such as the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW
Act) and the Construction Contracts Act (2004) (WA) (Western Australian Act).
20
…
The BCIP Act was therefore intended to protect the solvency of small contractors in the
building industry. Instead the BCIP Act is now the battleground for contesting payments into
the hundreds of millions of dollars between major global companies and their projects and
equally major size national or global contractors. The policy targets, i.e. small contractors,
have been lost in the titanic-sized claims increasingly emerging under the legislation.”
“Our company has had on occasion to utilise the legislation and found that it is only suitable
if the amount owing is in excess of $5 – 10,000.00 dollars. Any amount below that level is
restrictive in that the cost of retrieval prohibits pursuing the claim. The other issue with the
smaller amounts is that the principal contractor knows that these amounts are difficult to
chase by the claimant and they use it to their advantage.”
9.
CURRENT LEGISLATIVE FRAMEWORK
The following is an extract from the Discussion Paper which outlines the current
legislative framework of the BCIPA:
1.1
The BCIP Act
Overview
The BCIP Act plays an important role in facilitating security of payment for persons
carrying out construction work or supplying goods and services in the building and
construction industry. The building and construction industry is particularly vulnerable
to security of payment issues because it typically operates under a hierarchical chain
of contracts with inherent imbalances in bargaining power. The failure of any one
party in the contractual chain to honour its payment obligations in a timely manner
can cause a domino effect on other parties resulting in restricted cash flow, and in
some cases insolvency.
The BCIP Act establishes a statutory entitlement for a person to receive and recover
a progress payment where that person undertakes to carry out construction work
under a construction contract or undertakes to supply related goods and services
under a construction contract. The BCIP Act provides that the entitlement to a
progress payment exists whether or not the contract makes provision for such
payment.
The BCIP Act also establishes a procedure for the adjudication of a payment dispute
under a construction contract. This procedure involves:
•
•
•
•
the making of a payment claim by the person claiming payment;
the provision of a payment schedule by the person by whom the payment is
payable;
the referral of a disputed claim or a claim that is not paid to an adjudicator for
a decision;
the payment of the progress payment decided by the adjudicator.
21
Decisions of an adjudicator in relation to a payment dispute are enforceable as a
judgment debt. However, the decision of an adjudicator is an interim decision in the
sense that the adjudicator’s decision does not extinguish, or otherwise effect, a
party’s contractual rights to obtain a final resolution of their payment dispute in a
court or tribunal of competent jurisdiction. In practice, the majority of disputes which
are subject to adjudication are not referred to a court or tribunal.
The BCIP Act also provides protection for subcontractors in stated circumstances in
relation to unfair payment terms. Specifically, the BCIP Act provides that a ‘pay when
paid’ provision in a construction contract has no effect.
Construction contracts subject to the BCIP Act
The BCIP Act applies to construction contracts. A construction contract means a
contract, agreement or other arrangement under which one party undertakes to carry
out construction work for, or to supply related goods or services to, another party.
Construction work and the supply of related goods and services include the
following:
•
•
•
•
•
•
•
•
•
•
building work;
civil engineering;
demolition;
electrical work;
hire of plant or equipment;
maintenance;
landscaping;
professional services, such as architectural design;
surveying and soil testing;
the supply of building materials.
However, the BCIP Act does not apply to:
•
•
the drilling for, or extraction of, oil or natural gas;
the extraction, whether by underground or surface working, of minerals,
including tunneling or boring, or constructing underground works, for that
purpose.
…
Statutory entitlement to progress payments
The BCIP Act gives a person a statutory entitlement to a progress payment in
circumstances where that person has undertaken to carry out construction work, or
to supply related goods or services, under a construction contract. A progress
payment includes:
22
•
•
•
the final payment for construction work carried out, or for related goods and
services supplied, under a construction contract;
a single or one-off payment for carrying out construction work, or for supplying
related goods and services, under a construction contract;
a payment that is based on an event or date, known in the building and
construction industry as a ‘milestone payment’.
The statutory entitlement to a progress payment occurs from each “reference date”
under the construction contract.
The reference date is a date stated in, or worked out under, the contract as the date
on which a claim for a progress payment may be made. If the contract does not
provide for the matter, the reference date is:
•
•
the last day of the named month in which the construction work was first
carried out, or the related goods and services were first supplied, under the
contract;
the last date of each later named month.
Making a claim for a progress payment
A person who is, or who claims to be entitled to a progress payment (the claimant)
may serve a payment claim on the person who, under the construction contract, is or
may be liable to make the payment (the respondent).
A payment claim must:
•
•
•
identify the construction work or related goods and services to which the
progress payment relates;
state the amount of the progress payment that the claimant claims to be
payable;
state that the claim is made under the BCIP Act.
A payment claim may be served up to 12 months after the construction work to
which the claim relates was last carried out or the related goods and services to
which the claim relates were last supplied. The payment claim may be served after
12 months if a longer period is provided for in the construction contract.
A claimant cannot serve more than one payment claim in relation to each reference
date under the construction contract. However, the claimant may include in a
payment claim an amount which has been the subject of a previous claim.
Responding to a claim for a progress payment
If a respondent has been served with a payment claim, the respondent may serve a
payment schedule in response to the claim.
23
The payment schedule must identify the payment claim to which it relates and state
the amount of the payment, if any, that the respondent proposes to make. If the
amount in the payment schedule is less than the claimed amount, the payment
schedule must state why the amount is less, including reasons for any amount being
withheld by the respondent.
A respondent has 10 business days after the service of the payment claim to serve a
payment schedule on the claimant. This period may be shorter if so provided in the
construction contract. If the respondent fails to serve a payment schedule (in
response to a payment claim) within the applicable timeframe, the respondent
becomes liable to pay the claimed amount to the claimant on the due date for the
progress payment.
If a respondent fails to serve a payment schedule on the claimant within the time
allowed and does not pay the whole or any part of the claimed amount by the due
date for the payment, the claimant has the option of:
•
•
recovering the unpaid portion of the claimed amount from the respondent, as
a debt owing to the claimant, in any court of competent jurisdiction;
making an adjudication application in relation to the payment claim.
In addition, the claimant may serve notice on the respondent of the claimant’s
intention to suspend the carrying out of construction work or the supply of related
goods and services under the construction contract.
Claimant’s options if served with a payment schedule
If a respondent serves a payment schedule on the claimant within the time allowed
but does not pay the whole or any part of the scheduled amount by the due date for
the payment, the claimant has the option of:
•
•
recovering the unpaid portion of the schedule amount from the respondent, as
a debt owing to the claimant, in any court of competent jurisdiction;
making an adjudication application in relation to the payment claim.
In addition to the above, the claimant may serve notice on the respondent of the
claimant’s intention to suspend the carrying out of construction work or the supply of
related goods and services under the construction contract.
The claimant may also apply for adjudication in circumstances where the amount
stated in the payment schedule is less than the amount claimed in the payment
claim.
24
The adjudication process
Under the BCIP Act, a claimant may refer a payment dispute to adjudication if the
claimant has served the respondent with a payment claim and the respondent has:
•
•
served a payment schedule within the required timeframe (i.e. 10 business
days or less if stated in the contract) and either:
• failed to pay all or part of the scheduled amount by the due date for
payment; or
• stated an amount in the payment schedule less than that which was
claimed; or
failed to serve a payment schedule within required timeframe (i.e. 10 business
days or less if stated in the contract) and has not paid all or part of the
claimed amount by the due date.
The BCIP Act provides that a claimant seeking adjudication of a payment dispute
must apply to an authorised nominating authority. An authorised nominating authority
is a person registered under the BCIP Act to receive adjudication applications and to
nominate adjudicators to decide the applications. Authorised nominating authorities
are not government agencies.
The purchaser of construction work or related goods or services under a construction
contract cannot be a claimant or make a make a counterclaim. The purchaser is
always a respondent under the BCIP Act and an adjudicator cannot decide that a
claimant is to pay money to the purchaser.
Upon receipt of an application for adjudication, the authorised nominating authority
appoints an adjudicator registered under the BCIP Act to decide the payment
dispute. The adjudicator accepts the adjudication application by serving notice of the
acceptance on the claimant and the respondent.
The claimant must serve a copy of the adjudication application on the respondent.
The respondent may give the adjudicator a response to the claimant’s adjudication
application within five business days after receiving a copy of the application or two
business days after receiving notice of an adjudicator’s acceptance of the
application, whichever is the later.
The respondent may only give an adjudication response if the respondent has
previously served a payment schedule on the claimant within the applicable
timeframes (see discussion above). Further, the respondent cannot include in the
adjudication response any reasons for withholding payment unless those reasons
have already been included in the payment schedule served on the claimant.
The adjudicator is required to decide the adjudication application within 10 business
days of the earlier of the adjudicator’s receipt of the adjudication response or the
date on which the adjudicator should have received the adjudication response. This
timeframe can be extended by consent of the parties.
25
Jurisdiction of the adjudicator
The jurisdiction of the adjudicator is limited to deciding the following:
•
•
•
the amount of the progress payment, if any, to be paid by the respondent to
the claimant (the adjudicated amount);
the date on which any amount became or becomes payable;
the rate of interest payable on any amount.
In reaching a decision, the adjudicator may consider the following matters only—
•
•
•
•
•
the provisions of the BCIP Act and, to the extent relevant, part 4A of the
Queensland Building Services Authority Act 1991;
the provisions of the construction contract from which the application arose;
the payment claim to which the application relates, together with all
submissions, including relevant documentation, that have been properly made
by the claimant in support of the claim;
the payment schedule, if any, to which the application relates, together with all
submissions, including relevant documentation, that have been properly made
by the respondent in support of the schedule;
the results of any inspection carried out by the adjudicator of any matter to
which the claim relates.
The adjudicator’s decision must be in writing. The adjudicator must state in the
written decision the reasons for the decision, unless the claimant and the respondent
have both asked the adjudicator not to include the reasons in the decision.
Enforcement of an adjudication decision
The respondent must comply with an adjudicator’s decision to pay the adjudicated
amount to a claimant, including the rate of interest payable.
If the respondent fails to pay the adjudicated amount by the due date, the claimant
may obtain an adjudication certificate from the authorised nominating authority. The
adjudication certificate may then be filed in a court and enforced as a judgment debt.
In addition to obtaining an adjudication certificate, the claimant may take action
against a non-paying respondent to suspend carrying out construction work or
supply of related goods and services under the construction contract.
Costs of adjudication
The BCIP Act operates on a user pays basis. The adjudicator is entitled to be paid
for adjudicating an adjudication application the amount, by way of fees and
expenses, agreed between the adjudicator and the parties to the adjudication. If no
amount is agreed a reasonable amount is payable.
26
The claimant and respondent are each liable to contribute to the payment of the
adjudicator’s fees and expenses in equal proportions or in the proportions the
adjudicator decides.
Use of the BCIP Act
The BCIP Act is widely used in the building and construction industry. In the 2011/12
financial year there were 731 applications for adjudication. Graph A illustrates the
number of adjudications lodged per financial year since the commencement of the
BCIP Act on 1 October 2004.
Graph A: Applications for adjudication for financial years 2005-2012.
Source: Building and Construction Industry Payments Agency, April 2013
Anecdotal evidence suggests that the existence of the BCIP Act promotes early
resolution of payment disputes by the parties without the need for resolution through
formal adjudication or court processes. Industry stakeholders have indicated that in
comparison to the number of adjudication applications lodged, many more matters
are resolved through improved communication and negotiation between the parties.
Generally, it would appear that the introduction of the BCIP Act has significantly
improved the payment culture of the industry.
1.2
Subcontractor’s Charges Act 1974
The Subcontractors’ Charges Act 1974 (SC Act) provides an alternative remedy to
the BCIP Act for a subcontractor who is owed money by a contractor under a
construction contract in circumstances where money is also payable to the
contractor by the principal (e.g. a developer).
The SC Act enables a subcontractor to lodge a notice of claim of charge over money
owed by the principal to the contractor. The key benefit of the SC Act is that it allows
a subcontractor to secure payment for work through the use of a statutory charge
which in effect freezes money payable by the principal to the contractor for the
benefit of the subcontractor. The money is frozen pending a final resolution of the
payment dispute between the contractor and subcontractor through the courts.
27
Currently, a subcontractor cannot pursue payment under both the SC Act and BCIP
Act. The subcontractor is not entitled to make a claim under the BCIP Act if they
have registered a charge against funds held by a principal or owner under the SC
Act.
THE BCIPA – CONSULTATION ISSUES
Part 2 of the Discussion Paper identified potential options for reform and
improvement of the BCIPA. Some submissions to the Review challenged the
description of the BCIPA in the Discussion Paper as a “dispute resolution and security
of payment mechanism for the building and construction industry”. Some submitters
argued that the BCIPA is not a dispute resolution mechanism but rather a statutory
scheme for the valuation of progress claims, nothing more, nothing less.
These same submitters argue that those who would suggest that the BCIPA is
anything more than this, fundamentally misunderstand the nature of the scheme and
the objects of the Act.
I tend to think it is both a statutory scheme for the valuation of progress claims and a
dispute resolution mechanism. It is certainly my experience both as Counsel and an
adjudicator that I have seen the Act facilitate meaningful dialogue between disputing
parties which ultimately results in a settlement of the dispute. To my way of thinking
that is one of the great benefits of the Act. It forces parties to communicate, albeit in
very tight timeframes. It has been said that nothing quite focuses the parties’
attention like an impending trial date. I have found that the Act operates in a similar
fashion. These personal views of mine accord with a number of those submissions
provided to the Review by other construction lawyers and adjudicators.
I shall now deal which each of the questions contained in the Discussion Paper, in
turn.
28
Question 1: Do you think the jurisdiction of BCIP Act should be
reduced to specifically exclude payment claims for some types of
work or work over a stated value?
If so, what should be excluded?
Background
This question raises arguably one of the most significant issues to be considered in
this Review. Without overstating its importance, the outcome of Government’s
response to the recommendation made in respect to Question 1 will have wide
reaching consequences for all stakeholders in the building industry and further afield,
irrespective of its decision.
Presently, the BCIPA has no monetary thresholds or limits. It applies, subject to the
limitations contained in ss.3 and 10 to any construction contract entered into on or
after 1 October 2004 irrespective of whether the contract is written or oral or partly
written and partly oral or whether the contract is expressed to be governed by the
law of Queensland or another jurisdiction.6
Feedback outcomes
Of the written submissions provided to the Review, 16% of submitters considered
that the jurisdiction of the Act should be restricted to specifically exclude payment
claims for some types of work or for work over a stated value, whilst 48% were
opposed to the notion and 35% did not directly respond to the question.
A keen mathematical eye will identify that these figures only add up to 99%. This is
a recurring event in respect to all of the questions considered in this Report. The
remaining 1% is constituted by stakeholders who were uncommitted in their
response.
On face value, one might look at the above figures and determine that there is little
need to restrict the Act as contended, but of course like all of the questions posed in
the Discussion Paper, the decision to amend the Act should not be determined by a
simple poll of interested parties, many of whom have divergent vested interests,
least of all where only 128 written submissions were received and where 86
interviews were conducted. In saying that, I do not belittle the efforts made by those
contributors to the Review. Far from it, without their invaluable insight and
assistance, I could not have been informed to the extent that I have.
6
See s.3(1) of the Act
29
Relevant legislative provisions
The term “construction contract” is defined in Schedule 2 of the Act :
construction contract means a contract, agreement or other arrangement under which one
party undertakes to carry out construction work for, or to supply related goods and services
to, another party.
The term “construction work” is defined in s.10 of the Act. It has a very broad
definition. Section 10 provides:
10 Meaning of construction work
(1) Construction work means any of the following work—
(a) the construction, alteration, repair, restoration, maintenance, extension,
demolition or dismantling of buildings or structures, whether permanent or not,
forming, or to form, part of land;
(b) the construction, alteration, repair, restoration, maintenance, extension,
demolition or dismantling of any works forming, or to form, part of land, including
walls, roadworks, power-lines, telecommunication apparatus, aircraft runways,
docks and harbours, railways, inland waterways, pipelines, reservoirs, water
mains, wells, sewers, industrial plant and installations for land drainage or coast
protection;
(c) the installation in any building, structure or works of fittings forming, or to form,
part of land, including heating, lighting, air-conditioning, ventilation, power supply,
drainage, sanitation, water supply, fire protection, security and communications
systems;
(d) the external or internal cleaning of buildings, structures and works, so far as it is
carried out in the course of their construction, alteration, repair, restoration,
maintenance or extension;
(e) any operation that forms an integral part of, or is preparatory to or is for
completing, work of the kind referred to in paragraph (a), (b) or (c), including—
(i) site clearance, earth-moving, excavation, tunnelling and boring; and
(ii) the laying of foundations; and
(iii) the erection, maintenance or dismantling of scaffolding; and
(iv) the prefabrication of components to form part of any building, structure or
works, whether carried out on-site or off-site; and
(v) site restoration, landscaping and the provision of roadways and other access
works;
(f) the painting or decorating of the internal or external surfaces of any building,
structure or works;
(g) carrying out the testing of soils and road making materials during the construction
and maintenance of roads;
(h) any other work of a kind prescribed under a regulation for this subsection.
(2) To remove doubt, it is declared that construction work includes building work within
the meaning of the Queensland Building Services Authority Act 1991.
(3) Despite subsections (1) and (2), construction work does not include any of the
following work(a) the drilling for, or extraction of, oil or natural gas;
(b) the extraction, whether by underground or surface working, of minerals, including
tunnelling or boring, or constructing underground works, for that purpose.
[Emphasis added]
30
The meaning of “related goods and services” is defined in s.11 of the Act. Section
11 provides:
11 Meaning of related goods and services
(1) Related goods and services, in relation to construction work, means any of the
following—
(a) goods of the following kind—
(i) materials and components to form part of any building, structure or work
arising from construction work;
(ii) plant or materials (whether supplied by sale, hire or otherwise) for use in
connection with the carrying out of construction work;
(b) services of the following kind —
(i) the provision of labour to carry out construction work;
(ii) architectural, design, surveying or quantity surveying services relating to
construction work;
(iii) building, engineering, interior or exterior decoration or landscape advisory
services relating to construction work;
(iv) soil testing services relating to construction work;
(c) goods and services, in relation to construction work, of a kind prescribed under a
regulation for this subsection.
(2) In this Act, a reference to related goods and services includes a reference to related
goods or services.
It is the exclusionary provisions contained in s.10(3) of the Act which the Review has
received the most number of submissions. Notwithstanding that, Question 1 of the
Discussion Paper is not directed at the resources sector in isolation. The question
raises the prospect of excluding particular types of work and the introduction of a
monetary cap on work that would otherwise fall within the definition of “construction
work”.
Support for change
Those who supported amending the Act to restrict its operation, either in the capping
of the value of work that can be claimed or by excluding particular kinds of work,
made the following arguments:
The Act was designed for “the little guy”
A number of submissions were made to the Review which suggested that when the
Act was drafted, it was designed to protect “the little guy” 7, the small subcontractor
against the well-resourced contractor. Proponents of that view argue that the Act
was intended to balance the scales in favour of those who are least able to
prosecute a civil action for the recovery of monies owing for construction work
performed. Similarly, proponents of the “restricted view” point to the fact that the Act
is now sometimes used by large multi-national building contractors who are claiming
sums up to $90m and more.
7
Written submission to the Review
31
In arguing that the BCIPA was never intended to assist the recovery of high value
progress claims, a number of written and oral submissions made to the Review
sought to rely upon the then Minister’s Second Reading Speech of the Building and
Construction Industry Payments Bill 2004 (Qld) and the Second Reading Speech of
the New South Wales equivalent legislation, the Building and Construction Industry
Security of Payment Bill 1999 (NSW) (“the NSW Bill”). The Second Reading Speech
of the NSW Bill stated in part:
“… it is all too frequently the case that small subcontractors, such as bricklayers, carpenters,
electricians and plumbers, do not get paid for their work. Many of them cannot survive
financially when that occurs, with severe consequences to themselves and their families.
The [New South Wales] Government is determined to rid the construction industry of such
totally unacceptable practices.”
Monetary Caps
Various mining companies and the Queensland Resources Council among others
were strong advocates for the introduction of capping the value of work able to be
claimed, or excising altogether from the Act, specific types of work, most notably
resource industry related construction work.
In a written submission to the Review, it was suggested by an adjudicator that claims
in excess of $20m should be excluded from the Act because they would ultimately
be dealt with in the Supreme Court. However this submitter provided no evidence to
support that submission. I am unaware of any studies having been performed which
would support the contention, or otherwise.
The same adjudicator suggested that s.10(3) of the BCIPA should be amended to
include “the construction of a plant involved in the extraction or processing of
minerals and natural gas” and that by amending the Act in this way, it would be
consistent with the equivalent provisions in the Western Australian legislation.
A large national development company argued that a $2m cap should be placed on
payment claims. It was suggested that this would entitle more than 90% of claims to
be dealt with under the Act and enable more higher value claims to be dealt with
under the alternative dispute resolution processes available under the contract or at
law. Importantly, the developer was of the view that any amendments to the Act
should not have retrospective effect.8
A large multi-national company involved in the resources sector argued that the Act
should be excluded from:
•
•
payment claims over $1m. This would retain access to the BCIPA in 90% of
applications previously brought under the Act and would alleviate the present
difficulties experienced with large claims;
construction contracts with original values over $5m9; and
Written submission to the Review
A number of written submissions were received which suggested the exclusion of the Act for construction work
where the contract value exceeded the sum of $5m
8
9
32
•
construction work carried out in the Queensland resources sector, in a similar
manner to the restrictions imposed by s.4(3) of the Construction Contracts Act
2004 (WA).
In the experience of the aforementioned company, the BCIPA has led to additional
time and cost where payment disputes would have otherwise been dealt with under
the dispute resolution clauses under the contract or in court. The submitter also
recommended that:
•
•
any amendments to the Act restricting construction work performed for the
resources sector should take effect retrospectively;
failing acceptance of the proposed restrictions of the Act, as a less favoured
option, the Act should provide a sliding scale of timeframes in which the
parties and the adjudicator may perform their respective roles. [Emphasis added]
On the other hand, a lawyer involved in the resources industry submitted that to
place a cap on either the value of claims or the contract value would lead to arbitrary
and unfair outcomes. However, notwithstanding that, the submitter suggested that
construction work for mines, oil and gas installations, refineries and major projects
should be excluded.
The submitter argued that10:
•
•
•
•
•
•
the value of such contracts necessitated the payment claims being complex,
technical and of high value;
the participants to such contracts had equal bargaining power;
excessive regulation in Queensland makes such projects uncompetitive in a
worldwide capital market for financing of resource and major projects;
the BCIPA is contrary to the Queensland Government’s stated objective of
reducing “red tape”;
to exclude mining related construction work by seeking to broaden the
exclusion in section10(3) would still result in imprecise and uncertain
application” of the “mining exclusion”;
a simpler and more precise approach to the excision of mining related
construction work is to exclude particular physical locations of where the
construction work is performed, for example where construction work is
performed on land the subject of an Exploration Permit or a Mineral
Development License. A similar “Tenure Approach” could be taken in
relation to major projects that are co-ordinated by the Co-ordinator General
under s.26 of the State Development and Public Works Organisation Act
1971 (“SDPWO Act”) or a declared prescribed project under s.76E of the
SDPWO Act.
Other submitters considered that the Act should not exclude a particular sector, such
as the mining industry but were in favour of monetary caps of the amount claimed.
These submissions suggested that payment claims should be capped at figures
ranging between as little as $50,000 and up to $50m.
10
Written submission to the Review
33
The Act unfairly overrides the contract
The issue of the Act continuing to “override” the agreed contract dispute resolution
clauses was a consistent complaint of many submitters seeking amendments to
restrict the Act.11
Adjudicators are ill-equipped to deal with complex payment disputes
Another frequent criticism of the BCIPA process, particularly in high value, complex
contractual settings is that many adjudicators are ill-equipped to deal with such
matters, in terms of their own qualifications, experience and under the times
permitted to them under the Act. A common criticism was that many adjudicators
are not legally qualified, but are often called upon to decide complex issues of
contract law. The Review has received a significant number of complaints about the
perceived impartiality of adjudicators and the way in which they are appointed under
the Act. I will return to this issue in greater detail when responding to Question 8 of
the Discussion Paper below.
Should Government be excluded from the Act?
A government department argued that ideally the Act should not bind the Crown
although concedes that this would be contrary to s.6 of the BCIPA. In any event, the
department argued that the exclusionary provisions contained in s.3 of the Act
should be broadened to exclude it because it [the department]:
•
•
•
•
•
complies with the model litigant principles;
has robust dispute resolution clauses in its standard contract which has
previously been approved by the relevant industry representative body;
has contracts which are based on Australian Standard precedents;
often deals with the same contractors repeatedly using the same agreed
standard contracts, where the industry has a sound knowledge of contract
provisions and the risk of contract disputes is reduced; and
generally uses contractors who are pre-qualified and who are generally not as
susceptible to cash-flow issues as non-prequalified contractors.12
Support for status quo
Those stakeholders who were opposed to restricting the Act argued:
11 Written
12
submissions to the Review
Written submission to the Review
34
Mining companies need to improve their contract management procedures
That the pressures being felt by mining companies are no different, except perhaps
for the size of the claim, than any other building industry participant. One submitter
opposed to restricting the Act argued that mining companies;
“… should do what the large construction companies did when the BCIP Act first came into
force, engage professional contract administrators, improve their procurement practices,
streamline and develop more efficient business practices and improve contract relations with
their suppliers.”13
A quantity surveyor in written submissions to the Review stated that he had recently
been commissioned to provide expert advice to a major contractor looking to perform
construction work for a mining company. The submitter said that:
“… the contract was easily one of the worst examples of a contract that I had seen in over
thirty years in practice.”
He continued:
“There is a need for the mining industry to develop significantly better contracts and better
contract management. Inclusion in the BCIPA is one way to encourage better contract
management practice.
Excluding mining, or other types of work, can only have the effect of halting progress
towards more professional, productive, sustainable contract management practices.”
Thin edge of the wedge
Another common criticism leveled at any proposed restriction of the Act was that it
would be seen as “the thin edge of the wedge”. That is, if Government excluded a
particular sector, such as the mining industry from the operation of the Act, then what
would prevent other large infrastructure developers from seeking the same statutory
exemptions? It was suggested that to exclude mining companies from the ambit of
the Act would see Government pressured from within to also exclude its own
departments for major infrastructure such as for the construction of roads and
bridges, dams and the like. So too, if such exemptions were made for the mining
industry, large commercial builders could argue that they too should be exempted. 14
Mining companies are no different to any other stakeholder
Another stakeholder argued:
13
14
Written submission to the Review
Written submissions to the Review
35
"There can be no justification for legislation discriminating against a contractor simply
because the contract will potentially be owed more than other contractors. Large claims are
not necessarily more complex than small claims.
A contractor entitled to a large progress payment needs an expedited mechanism for
recovering it just as much as a contractor entitled to a small progress payment."15
Better to extend timeframes
Other stakeholders argued that the answer to the concerns raised by the mining
industry and other stakeholders regarding the pressures they were placed under by
the Act was to extend various timeframes. One large commercial construction
company suggested that the timeframes for the Respondent to provide an
adjudication response should be extended from five business days to 20 business
days and that the time an adjudicator has to decide the matter should be extended
from 10 business days to 20 business days.16
Those with larger claims need access to the Act more than others
A building contractor succinctly put his opposition to restricting the legislation in this
way:
“… the BCIPA Act has saved our business on a number of occasions if anything those with
larger claims need it more. We have more to lose.”17
The Act should remain broadly based
Another representative of a large national commercial building contractor rejected
the proposal to restrict the Act. He said:
“No, BCIPA should in my view be broadly based and should capture all building and
construction work irrespective of value and complexity. However, domestic building
contracts for single dwellings (i.e. builder/mum and dad owner) should continue to be
exempt.”18
One size does not fit all
A number of written submissions were received which promoted a change from the
existing “one size fits all” approach.
15
Written submission to the Review
Written submission to the Review
17
Written submission to the Review. A number of submissions were made to the Review of similar import
18
Written submission to the Review
16
36
Many submissions contended that the Act needs to cater for different values of
payment claim and complexity, giving a respondent a more fair and equitable
opportunity to mount a proper defence to the claim.
Consideration
Context
Graph B demonstrates the number of adjudication applications made for mining and
infrastructure construction work and related goods and services provided since the
commencement of the Act in 2004. Graph B also demonstrates the increase in the
value of mining and related infrastructure claims for construction work performed
since the commencement of the Act in 2004.
Graph B:
Source: Building and Construction Industry Payments Agency, April 2013
It is apparent from an observation of the above graph, that the number of mining and
infrastructure adjudication applications has been increasing at only a modest rate. 19
The value of the claims whilst remaining relatively consistent in the years up to
2010/11 has significantly increased in 2011/12. Further, the BCIP Agency has
advised me that in the year to date of 2012/13, there have been 67 payment claims
brought for mining and infrastructure related construction work with a claimed value
of $474,809,645.71. That represents a 113% increase on the value of claims in the
previous year.
19
At an average of 3% per year
37
It is unclear whether this increase is as a result of increased payment disputation in
the resources sector, or reflective of the magnitude of the increase in capital
expenditure. Perhaps it may be a combination of both factors.
What did the Act originally intend?
I have reviewed the then Minister’s Second Reading Speech of the Building and
Construction Industry Payments Bill 2004 (“the Bill”). The Hon. R.E Schwarten said
among other things:
“…
Improving payment outcomes for all parties operating in the building and construction
industry is a key priority for this government. Security of payment has been an issue for
many decades, particularly in relation to subcontractors.
The application of the Bill covers all forms of construction contracts other than contracts
involving “resident owner” under the Domestic Building Contracts Act 2000.
…” [Emphasis added].
The Explanatory Notes to the Bill contain the following extract:
“…
The building and construction industry is particularly vulnerable to security of payment issues
because it typically operates under a hierarchical chain of contracts with inherent imbalances
in bargaining power. The failure of any one party in the contractual chain to honour its
obligations can cause a domino effect on other parties resulting in restricted cash flow, and
in some cases, insolvency.
…” [Emphasis added]
There is simply no mention in the Second Reading Speech of the Bill, or in the
Explanatory Notes to the Bill which would suggest that the Legislature intended the
Act to operate in the restrictive manner that is contemplated in Question 1 of the
Discussion Paper. The Act does not distinguish between a claimant who may be a
subcontract carpenter seeking payment in the sum of $10,000 and a multi-national
building contractor seeking payment in sum of $100m.
I accept that in the second Reading Speech of the NSW Bill, that the then
responsible Minister20 spoke of “small subcontractors, such as bricklayers,
carpenters, electricians and plumbers” but there is no reason to suggest that that
reference ought to be construed as being at the exclusion of larger contractors.
In the Second Reading Speech of the NSW Bill in the Legislative Council, the Hon.
E. M. Obeid said among other things:
20
The Hon. M. Iemma
38
“The bill covers civil engineering as well as architectural work, mechanical and electrical
work in buildings, maintenance, landscaping and decorating. It affects all parties who
contract for that work including owners, contractors, subcontractors and consultants, and
applies to both commercial and residential work.
The party who will be most affected by the legislation is the party who, for the party’s
improper financial benefit, delays making legitimate progress payments. This bill gives
claimants a quicker and cheaper means of enforcing payment or ensuring that when in
dispute, the debtor does not retain use of the disputed money but securely sets it aside until
the dispute is resolved.” [Emphasis added].
Reference to extrinsic materials such as a second reading speech or explanatory
notes accompanying a Bill may be taken into consideration21 when interpreting
legislative provisions but it is by no means mandatory, nor are they conclusive as to
the meaning. Pearce and Geddes observe in Statutory Interpretation in Australia (7 th
ed. 2011):
“The fundamental task of a court is to interpret and apply the words of the legislation. It is
not permitted to give effect to ministerial intent as expressed in reports of parliamentary
debates at the expense of the enacted words.”
The words of the relevant Minister must not be substituted for the text of the law. 22 I
would suggest that the interpretive assistance obtained from extrinsic materials such
as a second reading speech of similar legislation from another jurisdiction is even
less helpful, although I have not been able to find any authority on that specific
question.
However, in Project Blue Sky Inc v Australian Broadcasting Authority 23 McHugh,
Gummow, Kirby and Hayne JJ said:
"[T]he duty of a court is to give the words of a statutory provision the meaning that the
legislature is taken to have intended them to have. Ordinarily, that meaning (the legal
meaning) will correspond with the grammatical meaning of the provision. But not always.
The context of the words, the consequences of a literal or grammatical construction, the
purpose of the statute, or the canons of construction may require the words of a legislative
provision to be read in a way that does not correspond with the literal or grammatical
meaning."
In Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross24
French CJ and Hayne J restated "some basic principles" of statutory construction.
Their Honours at [23] cited Alcan (NT) Alumina Pty Ltd v Commissioner of Territory
Revenue25 per Hayne, Heydon, Crennan and Kiefel JJ:
21
s.14B of the Acts Interpretation Act 1954 (Qld)
Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518, per Mason CJ, Wilson and Dawson JJ
23
(1998) 194 CLR 355 at [78]
24
(2012) 293 ALR 412 at [23] - [32]
25
(2009) 239 CLR 27 at [47]
22
39
"This Court has stated on many occasions that the task of statutory construction must begin
with a consideration of the text itself. Historical considerations and extrinsic materials cannot
be relied on to displace the clear meaning of the text.
The language which has actually been employed in the text of legislation is the surest guide
to legislative intention. The meaning of the text may require consideration of the context,
which includes the general purpose and policy of a provision, in particular the mischief it is
seeking to remedy." (citations omitted)
After referring to Project Blue Sky French CJ and Hayne J stated in Certain Lloyd’s
Underwriters (at [26]):
"The purpose of legislation must be derived from what the legislation says, and not from any
assumption about the desired or desirable reach or operation of the relevant provisions."
There is in my view, simply nothing expressly stated in the BCIPA which would
suggest that the Act intended its operation to be limited to a particular amount or
industry sector.
I am not persuaded that the BCIPA was intended to deal with or benefit only small
subcontractors or only deal with claims up to a certain value. There is nothing to
suggest that in the provisions of the Act.
Is there a problem with the use of third party project managers?
A representative of a large building contractor advised the Review in an individual
consultation that it had performed $400m worth of resource sector work over the last
three years. The representative described that in one of those contracts, there was
an international third party project management company appointed by the principal
to administer the contract. The representative described the work performed by the
project management company as “absolutely abysmal”. The representative advised
the Review that his company was waiting for up to three months to have progress
claims certified by the project manager. The representative implored the Review not
to exclude the resources sector from the operation of the Act, because it served as
his company’s best insurance to ensure payment.
I note that similar allegations to those raised in the preceding paragraph were made
by other contractors and their representatives throughout the Review process and
that such criticisms were not restricted to principals operating in the resources
sector. The Review was advised that some third party project management
companies are remunerated or rewarded for bringing projects in under budget. If
this is accurate, one wonders how any contract administered by a third party could
possibly be administered objectively and fairly, if the third party stands to gain
financially from recommending that a principal withhold funds from the contracted
party or by refusing to approve payment for variations or extensions of time and the
like.
40
Should the resources or any other sector be excluded from the operation of the Act?
The Queensland Resources Council in its written submission to the Review argued
among other things that:
“The current BCIP Act acts as a ‘surcharge’ on projects in Queensland, a cost that both the
companies producing wealth and the state can ill-afford, as resource project investment
across Australia as well as in Queensland now battles to achieve major cost reductions in
the entrenched economic paradigm of collapsed commodity prices. Major companies are
entitled to evaluate the total legislative regime in Queensland in their investment risk
assessments. The BCIP Act is a "sovereign risk" factor. Amending section 10(3) of the
BCIP Act so as to align with the WA "mining exemption" would only be adopting the best
legislative standard presently in force in Australia. It would only level the playing field for
project investment in Queensland, tackling investment leakage or diversion to WA head-on.
Significantly, it is not a total exemption, and nor would its adoption put Queensland projects
ahead of WA on the risk curve.” [Emphasis added].
The term “sovereign risk” is explained in the service Australian Corporate Finance
Law as26:
“The ongoing viability of any project is subject to the political environment where it is situated
and the effect of decisions, policies and actions of government. Accordingly, financiers will
need to assess the likelihood, and likely impact, of changes to laws and regulations, the
government’s approach to market regulation and whether the political environment is stable
and predictable. If a government entity is required to make payments in relation to a project
(eg, in relation to PPPs where payment is made by way of availability charge), its sovereign
credit rating will also be a relevant consideration for the project.
Given its political and economic stability, democratic institutions and highly developed legal
framework, Australia is generally not susceptible to traditional political or sovereign risks
like corruption, restrictions on foreign currency transfers, nationalisation and expropriation of
assets, war and civil unrest, or government breach of contract. However, sovereign risk in
the form of new taxation regimes or other changes of law or policy still exists.”[Emphasis added]
At [4.340] when discussing the principles associated with project risks, the Australian
Corporate Finance Law states:
“Each project will have a unique set of risks and circumstances for the financier to consider.
Part 3 of this chapter discusses the most common and significant risks that arise in project
financings.
In this context it is important to note that not all risks demand the same level of importance
for each project. For instance, sovereign risk is largely considered to be of minimal concern
in a country such as Australia, but may be of paramount importance for a project in more
volatile parts of the world like West Africa.”
26
Australian Corporate Finance Law, Lexis Nexis Australia, March 2013 Chapter 4 at [4.080]
41
The relevant exclusionary provisions contained within s.4(3) of the Construction
Contracts Act 2004 (WA) (“the WA Act”) are suggested by some submitters as a
viable alternative to the more restricted provisions contained in s.10(3) of the BCIPA
given that Western Australia also has a resources driven economy similar to that of
Queensland.
Section 4(3) of the WA Act provides:
(3) Despite subsection (2) construction work does not include any of the following work
on a site in WA —
(a) drilling for the purposes of discovering or extracting oil or natural gas, whether on
land or not;
(b) constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or
extracting any mineral bearing or other substance;
(c) constructing any plant for the purposes of extracting or processing oil, natural gas
or any derivative of natural gas, or any mineral bearing or other substance;
…
The sort of construction work that is excluded by s.4(3)(c) was thought to comprise
such work as the construction of coal handling and preparation plants, iron ore
extraction/beneficiation plants and gas processing plants and the like.
Although more expansive than its Queensland equivalent, s.4(3)(c) of the WA Act
was recently interpreted narrowly in the Supreme Court of Western Australia in Re
Anstee-Brook; Ex parte Karara Mining Ltd27 where Le Miere J said at [16]:
“Whether the pipeline is part of any plant for the purposes of extracting or processing any
mineral bearing substance, in this case iron ore, depends upon whether the pipeline, and the
function performed by it, is so related to the extraction or processing of iron ore that it
warrants being held to be plant. The evidence does not establish that the pipeline performs a
function so related to the extraction or processing operations so as to make it part of the
plant. The function performed by the pipeline is to transport water from the borefield to the
mine site and camp. Clause 1.1 of the Pipeline Contract provides that raw water is required
for mine site operation and potable use. Paragraph 1.1.4 provides that infrastructure at the
mine site to receive the raw water includes a raw water tank at the campsite, a raw water
tank at the mine site and a raw water dam at the mine site which receives overflow from the
raw water tank. Thus, the function of the pipeline is to transport the water from the bore field
to the campsite and mine site. The water, or most of it, is then subsequently used for the
purposes of extracting or processing iron ore. However, no extraction, concentration, filtering
or other processes that form part of the extraction or processing of the iron ore takes place in
the pipeline. The evidence does not establish the function performed by the pipeline, or the
relationship between the pipeline and any part of the plant that directly extracts or processes
iron ore, is such that the pipeline might be properly regarded as part of any plant for the
purposes of extracting or processing any mineral bearing substance. Ground 3 of Karara's
case has no reasonable prospect of success.”(Emphasis added)
In a similar way s.4(3)(c) of the WA Act was interpreted narrowly in Conneq
Infrastructure Services (Australia) Pty Ltd v Sino Iron Pty Ltd 28.
27
28
[2012] WASC 129
[2012] WASAT 13
42
The Queensland Resources Council in its written submissions to the Review,
encouraged the Queensland Government to expand upon the exclusionary
provisions contained in section 4(3) of the WA Act to strategically position
Queensland as “being more attractive to investment than the WA resources sector”.
The interpretation of the “mining industry exclusionary provisions” contained in
s.10(3) of the BCIPA have also been interpreted narrowly by the Queensland
Supreme Court in Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd29 which
decision was confirmed by the Court of Appeal in Thiess Pty Ltd v Warren Brothers
Earthmoving Pty Ltd30. The decision in Thiess was again affirmed in HM Hire Pty Ltd
v National Plant and Equipment Pty Ltd31.
As part of the Review, I spoke with a number of government officials responsible for
the “security of payment” legislation in other jurisdictions in Australia. In speaking
with the Western Australian Building Commissioner, Mr. Peter Gow, he advised me
that the Western Australian Government was planning to review the WA Act. Mr.
Gow advised that the issue of whether s.4(3) of the WA Act may be amended to
include the claiming for the construction of plant and equipment and infrastructure is
likely to form part of the review. Mr. Gow acknowledged that there was an
expectation that the operation of the WA Act was likely to be expanded to allow such
claims rather than restrict them.32
If the Western Australian Government does expand the provisions contained in
s.4(3)(c) of the WA Act as a result of its own review as expected, then there is little
justification to restrict the operation of the BCIPA. The Queensland Government
may consider consulting with the Western Australian Government on this issue to
arrive at an appropriate and consistent exclusionary provision for the extraction of oil,
gas and minerals.
I do not accept that the BCIPA constitutes an unreasonable sovereign risk to the
State of Queensland. The geo-political stability of all of the Australian states and
territories and the nation as a whole are well accepted as a secure place in which to
invest. I do not accept that the BCIPA makes Queensland any less secure than
does the cognate legislation in the other states and territories. It is also worth restating that similar security of payment legislation now also operates in the UK, New
Zealand, the Isle of Man, Singapore, Malaysia and the Republic of Ireland is also
considering a similar Bill based on the UK model.
Big contractors = Big debts
An in-house counsel for a national building contractor advised the Review 33:
“Just because you are a big contractor, doesn’t mean that the issue of cash flow is not
significant”.
29
[2011] QSC 345
[2012] QCA 276
31
[2013] QCA 6
32
During an individual interview
33
During an individual interview
30
43
Blanket exemption unjustifiable
Another in-house lawyer but on this occasion for a resource sector company told the
Review that he did not agree with a blanket industry exemption for the resources
sector. He said that he could not “see any economic, moral or legal justification for
an exemption” where the same exemption would not be provided to others. The
lawyer described the drive by the resources sector as “unjustifiable”.34
Construction work is construction work
I am in agreement with both of these last mentioned comments. Construction work
is construction work, whether it is performed on an office block development in
George Street, Brisbane or whether it is constructing a road on a mining site in
Rolleston. Provided the construction work or the related goods and services
satisfies the requirements set out in s.10 or 11 of the Act, I can think of no valid
reason, nor has one been provided to me, why one sector of the industry should be
treated any differently to another.
Equality before the law
In my view, it cannot be justified why contracted parties who work in the resources
construction sector should be treated less favourably under the law than their
counterparts in every other sector of the building and construction industry in the
State. The Parliament has recognised the significance of this fundamental legislative
principle of equality before the law and indeed it is a tenet of our parliamentary
democracy based on the rule of law35. If Government were to accede to the
demands of the resources sector, I am quite confident that other sections of the
industry would seek similar concessions. Before long, the exclusionary provisions
contained in s.10 of the Act would be comparable to the conga line of exclusionary
provisions of the definition of “building work” contained in s.5 of the Queensland
Building Services Authority Regulations 2003.
For the same reasons stated above I would also reject a proposal that the Act be
amended to exclude construction work performed or the supply of related goods and
services:
(i) On land the subject of an Exploration Permit or a Mineral Development
License or similar;
(ii) Provided to the State of Queensland36.
34
During an individual interview
See s.4 of the Legislative Standards Act 1992
36
See s.6 of the BCIPA
35
44
Sophisticated Participant – “Opt-out or Get Out”
It was also suggested in a written submission to the Review, that the Act should be
amended to enable a claimant who meets the requirements of a “sophisticated
participant” to be able to opt-out of the BCIPA. The “sophisticated participant”
proposal is said to have been modeled on the “sophisticated investor” provisions
contained in s.761GA of the Corporations Act 2001 (Cth).
No criteria was provided by the submitter as to how a participant would be
objectively classified as “sophisticated”. I am concerned that some principals and
contracting parties may misuse their market dominance to require contracted parties
to opt out of the BCIPA by identifying them as a “sophisticated participant”. Any
attempt to introduce such an exemption would be subject to abuse. It would also be
inconsistent with s.99 of the BCIPA which prohibits any attempt to contract out of the
Act. Section 99 provides:
99 No contracting out
(1) The provisions of this Act have effect despite any provision to the contrary in any
contract, agreement or arrangement.
(2) A provision of any contract, agreement or arrangement (whether in writing or not) is
void to the extent to which it—
(a) is contrary to this Act; or
(b) purports to annul, exclude, modify, restrict or otherwise change the effect of a
provision of this Act, or would otherwise have the effect of excluding, modifying,
restricting or otherwise changing the effect of a provision of this Act; or
(c) may reasonably be construed as an attempt to deter a person from taking action
under this Act.
One small subcontractor advised the Review:
“… I am constantly frustrated with erroneous and in many cases unscrupulous conditions
that increase the overall risk on a project that should not be there. Our company and many
others that I know flaunt these risks simply because we need the work and the principles
(sic) know that if we choose to not accept the conditions in there (sic) contract they will have
no problem finding some other sub-contractor who is prepared to accept the risk. We have
lost at least two projects that I know of because we were not prepared to accept the
conditions.”
I do not accept that an “opt-out” provision is desirable because it is open to abuse
and may result in contracted parties being given unreasonable ultimatums to “optout” or “get out”.
Monetary Caps
The concept of a monetary cap has at face value some immediate attraction. I
accept the views adopted by White J in John Holland Pty Ltd v Walz Marine Services
Pty Ltd37 where her Honour said at [58]:
37
[20112] 28 BCL 62: [2011] QSC 39
45
“A great deal of time and expenditure was undoubtedly invested in the preparation of the
claim and payment schedule and the adjudication application and adjudication response.
The thoroughness with which they were presented bordered on prolixity. I understand that
this is a feature of many adjudications under BCIPA. While I appreciate that the quantum of
progress claims made under the Act can be very high, and that the outcome of the
adjudication can have serious consequences for the liquidity of either or both parties, I doubt
that the Legislature envisaged such a development. The adjudication process may be more
suited to comparatively small, uncomplicated claims than to large, complex claims.”
The nature of the adjudicators duty “to provide a speedy interim decision on the
papers”38 is likely to have been the source of her Honours’ concerns raised in John
Holland v Walz. Under the “one size fits all” approach, it is difficult to reconcile an
intention on the Legislature’s part that the Act would be dealing with claims in the
order of tens of millions of dollars. Yet, as I have previously noted the Act makes no
express reference to an upper jurisdictional limit, nor does the Second Reading
Speech or Explanatory Notes infer or imply that the operation would be restricted to
small subcontractors.
One of the problems that I forsee with the introduction of a monetary cap, whether
that cap be placed on the value of a particular payment claim or on the contract sum,
is that it will no doubt lead to significant inequities between parties in the contractual
chain. For instance, if a cap were placed on the original contract value at say a
figure of $5m. The contracted party in any construction contract with an original
value in excess of $5m would be excluded from the operation of the Act against the
principal or its superior contractor.
Given that the use of subcontract labour is prolific in the building and construction
industry in Queensland and throughout the nation and given that suppliers have an
entitlement to the operation of the Act under s.11 of the Act, a monetary cap would
ensure that the contracted party’s39 subcontractors and suppliers are able to utilise
the operation of the Act against it, yet the contracted party would not be able to
utilise the Act against the contracting party above it in the contractual chain. This
would, in my view represent an intolerable burden on major contractors of varying
sizes and would almost inevitably result in significant insolvency events across the
industry and would adversely affect subcontractors and suppliers below them in the
contractual chain.
This is one of the justifications relied upon by the Housing Industry Association and
Master Builders for the introduction of a domestic adjudication scheme because at
present, whilst a subcontractor is able to claim against the builder of a residential
dwelling, the same builder cannot use the Act against a resident owner. 40
If it were left to the parties to agree upon their own monetary threshold for the
operation of the Act, as was suggested in a number of written submissions to the
Review, this would lead to significant inequities within the industry where potentially
some sub-contractors would be able to utilise the Act, whilst others would not.
38
Ibid at [57]
Under the head or superior contract
40
See s.3(2)(b) of the BCIPA
39
46
I am of the view that allowing the parties that kind of contractual freedom to in effect
contract out of the BCIPA, is not only contrary to s.99 of the Act, but is likely to lead
to superior contractors abusing their power imbalance, rendering subcontractors with
limited recovery options other than the court process.
In my view, the introduction of a monetary cap would result in disastrous
consequences, across the industry and I therefore reject the concept.
Dispute resolution clauses
A number of submissions have been provided to the Review criticising the operation
of the Act because it effectively circumvents the parties agreed contractual dispute
resolution clauses. Whilst I accept that is the effect of the Act, I do not accept it as a
valid criticism. Some dispute resolution clauses are of dubious utility, others are
drafted in such a way that they do not lead to a speedy resolution of the dispute.
Some dispute resolution clauses are drafted in such a way that they create a
labyrinth of protracted measures, hoops and hurdles that a subcontractor is required
to traverse, whilst being starved of much needed cash-flow.
The following clause is a typical dispute resolution clause in a commercial building
contract:
37.
37.1
37.2
37.3
37.4
37.5
Dispute Resolution
Until the relevant provisions of this clause 37 have been complied with, no Party
shall commence any action, bring any proceedings or seek any relief or remedy in a
court or by arbitration, except that nothing in this clause 37 prevents either Party
from seeking interlocutory or equitable relief from a court.
Any issue, dispute, controversy or claim (a "Dispute") arising out of or in relation to
this Agreement must be the subject of a notice from the disputing Party to the other
Party setting out the material particulars of the Dispute ("Notice"), and must
immediately be referred to the Representative of each Party who must endeavour in
good faith to resolve the Dispute expeditiously.
lf the Dispute has not been resolved within 7 days of reference to the
Representatives pursuant to clause 37.2 the Dispute must be referred to the
Dispute Resolution Representative of each Party who must endeavour in good faith
to resolve the Dispute expeditiously.
lf the Dispute has not been resolved or an alternate method of resolving the Dispute
has not been agreed within 7 days of reference to the Dispute Resolution
Representatives pursuant to clause 37.3, or a longer period if the Parties agree, the
Dispute may be submitted by either Party to mediation. If the Dispute is submitted to
mediation and the Parties do not, within 7 days after the Dispute is submitted to
mediation, agree on:
(a) a mediator and the mediator’s compensation;
(b) the procedure for the mediation; or
(c) the timetable of each step of the procedure,
(d) the mediation will be conducted in accordance with the Australian Commercial
Dispute Centre’s Mediation Guidelines in force at the time that the Dispute is
referred.
lf a Dispute is not resolved within 60 days after the date of the Notice given in
accordance with clause 37.2, either Party who has complied with this clause 37 may
47
terminate the dispute resolution process undertaken and commence court
proceedings in relation to the Dispute.
Most dispute resolution clauses do not have the ability to focus the attention of the
minds of the disputing parties as the adjudication process can do. In my view, it is
entirely appropriate for the Act to circumvent dispute resolution clauses because
they may be drafted in such a way that they do little to properly address the issues in
dispute in a timely fashion.
Extending the timeframes
There appears to be broad recognition that the “one size fits all” approach of the
BCIPA is having unintended consequences for a number of stakeholders, particularly
those at the “top end” of the industry. There also appears to be broad support, even
among those who would prefer to see a blanket exemption of the mining industry
from the operation of the Act, for providing longer periods of time in which the parties
and the adjudicator may perform their tasks under the Act.
A number of different approaches have been suggested by stakeholders to the
question of how time could be extended to the parties of an adjudication application,
including:
(i) The granting of wide discretionary powers to adjudicators who would
determine, based on the material available to them, what times would be
appropriate to allow the parties to fulfill their obligations under the BCIPA;
and
(ii) Expressly providing in the Act set timeframes for certain functions to be
performed in particular circumstances.
I acknowledge that the timeframes contained in the Act are straight-forward and
consistent irrespective of the value of the claim or how long it has taken the claimant
to serve the payment claim. There is an obvious attraction to maintaining strict
simplicity. However, given the many concerns that have been raised during the
course of this Review, it is my view that the “one size fits all” legislative approach
cannot be permitted to continue when there are adjudications of claims for modest
sums of under $1000 ranging up to $90m and climbing.
I have explored in detail the timeframes set out under the BCIPA in response to
Question 9 of the Discussion Paper.
Retrospective Application of the Proposed Amendments
A number of submissions were received by the Review that sought to have the
proposed amendments of the Act to have retrospective application.
48
That is, some submitters in favour of amending the legislation to restrict the Act
suggested that such changes should take effect from the date of the commencement
of the amendment.
The effect of such a provision would be that parties to a contract that is on foot would
be caught by the amendments. This would mean that some parties to an existing
construction contract would have their statutory entitlements under the BCIPA
extinguished. Such parties may have or are even likely to have factored into their
pricing of the construction work, the fact that they would be entitled to rely upon the
operation of the Act. Any such proposed commencement of the amendment would
operate retrospectively to the detriment of a contracted party.
There is no doubt that the Legislature can, should it decide to do so, pass legislation
that has retrospective application.
In Pearce and Geddes, Statutory Interpretation in Australia (7th ed, 2011) the
learned authors note at [10.9]:
"There is nothing preventing a parliament from making laws having retrospective operation.
This fact was alluded to by Higgins J in R v Kidman (1915) 20 CLR 425 at 451 where he
pointed out that, while there are plenty of passages that can be cited showing the
inexpediency, and the injustice, in most cases, of legislating for the past, of interfering with
vested rights, and of making acts unlawful which were lawful when done, such passages do
not raise any doubt as to the power of the legislature to pass retrospective legislation, if it
sees fit."
In the event that Government does restrict the operation of the Act, care must be
exercised to ensure that such amendments would comply with fundamental
legislative principles. Fundamental legislative principles are the principles relating to
legislation that underlie a parliamentary democracy based on the rule of law. 41
The principles include requiring that legislation has sufficient regard to(a) rights and liberties of individuals; and
(b) the institution of Parliament.42
Whether legislation has sufficient regard to rights and liberties of individuals depends
on whether, for example, the legislation does not adversely affect rights and liberties,
or impose obligations, retrospectively.43
Should the exclusionary amendments be passed by Parliament to take effect on the
commencement of the amendments without any transition period, then this would
constitute a breach of fundamental legislative principles because it removes existing
statutory rights of parties who have entered into a commercial arrangement on the
understanding that those rights applied.
41
See s.4(1) of the Legislative Standards Act 1992
See s.4(2) of the Legislative Standards Act 1992
43
See s.4(3)(g) of the Legislative Standards Act 1992
42
49
If the proposal to restrict the operation of the Act is accepted by Government, then
the amendments should apply to contracts entered into after the commencement of
the proposed amendments.
Suggested Legislative Amendments
Apart from those referred to in Recommendation 3, I make no suggested legislative
amendments.
Q1 – Recommendations
1.
The jurisdiction of the BCIPA should not be reduced or restricted to specifically
exclude payment claims for some types of work other than those already
provided in ss.3 and 10.
2.
Subject to recommendations 22 & 23, the jurisdiction of the BCIPA should NOT
be reduced or restricted by operation of either a cap on the value of payment
claims or contract value.
3.
That the timeframes provided in the BCIPA be extended as detailed in
response to Question 9 of the Discussion Paper.
4.
Any amendments to the BCIPA should only come into effect after the
Government has had sufficient opportunity to inform relevant parties and
stakeholders of the legislative changes and the forthcoming date that they will
take effect.
50
Question 2: Do you think that the respondent needs to be more
clearly identified in the contract in relation to who should receive a
payment claim under the BCIP Act?
Background
Those stakeholders seeking changes to the identification of respondents did so for
varying reasons. Many submitters acknowledged that service of a payment claim to
the ‘correct’ address of a respondent or upon the person who is best equipped to
respond to the payment claim was a significant problem, particularly given the tight
deadlines provided under the BCIPA and particularly in cases where the respondent
is a corporation with numerous offices throughout the state and nationally.
It was argued that respondents could ill afford a situation where a payment claim, for
instance, is served on an office or person who had no involvement in the project the
subject of the payment claim and neither understood the significance of the payment
claim, nor the paramount importance of expediency in dealing with it.
Other submitters considered the question dealt more with the actual identity of the
“correct” respondent.
Feedback outcomes
Of the written submissions provided to the Review, 32% were in favour of some form
of legislative change to more clearly identify the respondent and the method and
place of service, whilst 28% considered that the existing arrangements were
satisfactory and 40% of submitters did not directly respond to the question.
Relevant legislative provisions
For the purposes of this question, the service of payment claims under the BCIPA is
contained in s.17(1) which provides:
(1)
A person mentioned in section 12 who is or who claims to be entitled to a progress
payment (the claimant) may serve a payment claim on the person who, under the
construction contract concerned, is or may be liable to make the payment (the
respondent).
The provision of service of documents under the BCIPA is presently contained within
s.103 of the Act which provides:
103 Service of notices
(1) A notice or other document that under this Act is authorised or required to be served
51
on a person may be served on the person in the way, if any, provided under the
construction contract concerned.
(2) Subsection (1) is in addition to, and does not limit or exclude, the Acts Interpretation
Act 1954, section 39 or the provisions of any other law about the service of notices.
[Emphasis added]
Section 39 of the Acts Interpretation Act 1954 provides:
39 Service of documents
(1) If an Act requires or permits a document to be served on a person, the document
may be served—
(a) on an individual—
(i) by delivering it to the person personally; or
(ii) by leaving it at, or by sending it by post, telex, facsimile or similar facility to,
the address of the place of residence or business of the person last known to
the person serving the document; or
(b) on a body corporate—by leaving it at, or sending it by post, telex, facsimile or
similar facility to, the head office, a registered office or a principal office of the
body corporate.
(2) Subsection (1) applies whether the expression ‘deliver’, ‘give’, ‘notify’, ‘send’ or
‘serve’ or another expression is used.
(3) Nothing in subsection (1)—
(a) affects the operation of another law that authorises the service of a document
otherwise than as provided in the subsection; or
(b) affects the power of a court or tribunal to authorise service of a document
otherwise than as provided in the subsection.
Support for change
Those advocating change argued:
Problems with service
“The current definition allows for claims to be lodged inconspicuously through the
Respondent's office, which could be interstate or vastly removed from the administration of
the site. The contract should state the place of service together with ability for this to be
amended following appropriate notice (as the place of service may change from a site
location to office at the end of a project).”44
Another submitter suggested even more restrictive measures:
“The BCIP Act could be amended to require payment claims to be served only on the legal
person named in the construction contract.”45
44
45
Written submission to the Review
Written submission to the Review
52
Identifying the correct person to be served – ‘Gaming the system’
Similarly, another submitter suggested that in cases where the respondent is a
corporation:
“… it would provide better clarity for a corporate position (such as a director) to [be]
specified in the contract for service of BCIP Act claims and notices. The current legislation
can be problematic for large corporations.
A place for payment should also be identified in the contract.”46
In another written submission to the Review it was suggested 47:
“ … that the BCIP Act should be amended to require payment claims to be served upon a
contractually agreed person and at a contractually agreed location. This could be achieved
by amending s.17(1) of the BCIP Act as set out below. (1) A person mentioned in section 12 who is or who claims to be entitled to a progress
payment (the claimant) may serve a payment claim on the person who, under the
construction contract concerned:
(a) has been nominated by a party under the contract to be the person upon whom
any payment claims issued under the contract for the purposes of this Act must
be served;
(b) otherwise, is or may be liable to make the payment (the respondent), at the
place which, under the construction contract concerned;
(c) has been nominated by a party under the contract to be the place at which the
service of any payment claims under the contract for the purposes of this Act
must be made;
(d) otherwise, is the place of business of the respondent which has the most direct
connection to the construction contract concerned.
These amendments would overcome the current problematic practice of ‘gaming the system’
that some claimants engage in by serving payment claims upon a person that is unfamiliar
with, or at an office of the respondent that is remote to, the construction work to which the
claim relates. This practice results in the respondent having effectively less time to review
the payment claim, as time is spent locating and sending the claim to the appropriate person
within the respondent’s organisation who has the ability to respond to the claim. These
amendments would improve fairness in the payment claim process, which is especially
important given the harsh consequences that arise (under ss.18(5), 19 and 20 of the BCIP
Act) where a respondent does not adhere to the strict time frames upon receiving a payment
claim.”
Service by email
Other submitters provided additional suggestions to ensure that the BCIPA is
administered more fairly:
46
Written submission to the Review
Numerous other written and oral submissions were received that the timeframes under the Act unfairly
prejudiced the interests of contracting parties
47
53
In one such submission, a quantity surveyor suggested that the BCIPA should
provide for electronic transmission of documents under the Electronic Transactions
Act 2001 (Qld).48
Another submitter agreed, saying:
“… the Respondent and the Claimant should be able to choose to state in the contract the
preference as to whom, how and where service may be effected for the purpose of the
BCIPA but still allowing service on the other party at any place and to any person as would
be permitted under the present BCIPA provisions. Caution in drafting a change would need
to be exercised so that Respondent’s could not name a person who may be unavailable from
time to time if they are the only one to accept service. Similarly, caution would need to be
exercised to avoid specifying the only place and method of service as the (sic) some
respondents may specify times and locations that are difficult to achieve in practice.
Electronic service and fax service is in a different category and could improve the process if
expressly permitted under an amended BCIPA.”49
Support for status quo
The main thrust of those opposed to legislative changes in response to Question 2
was that there was no perceived problem with the identity of respondents.50
Consideration
It is fair to say that this question did not rate highly as a significant issue with those
who took part in the individual stakeholder consultations.
It is important to recognise that s.103(1) of the BCIPA already entitles the parties to
agree on the method of service, the place of service and upon whom service may be
effected for each party. As the Queensland Court of Appeal has held in Neumann
Contractors Pty Ltd v Traspunt No 5 Pty Ltd51, s.103 “appears to be facultative rather
than mandatory in nature.” However, s.103(1) is subject to the provisions contained
in subsection (2) in that any agreed form of service between the parties does not
limit or exclude the operation of s.39 of the Acts Interpretation Act 1954.
As acknowledged in one of the submissions extracted above, if the parties
contractual rights were permitted to override the provisions contained in s.39 of the
Acts Interpretation Act 1954, circumstances might be envisaged where building
contracts may require a payment claim and/or adjudication application or other
documents to be served upon a particular person at a particular place in a particular
manner which may be designed to obfuscate or delay service of documents under
the Act.
48
Written submission to the Review
Written submission to the Review
50
Written submissions to the Review
51
[2011] 2 Qd R 114 at [28] per Muir JA , Holmes and Chesterman JJA agreeing
49
54
The mischief that could be achieved by such an amendment would in my view
outweigh the current concerns of some, mainly contracting parties.
It should be recognised that whilst service of documents may have legitimately been
a vexed issue whilst the BCIPA and the internal processes of individual businesses
were being bedded down, the Act has now been in place for eight and a half years.
Businesses have had ample opportunity to put in place effective systems which
should prevent the difficulties complained of by some parties.
There is also in my view, some doubt as to whether the suggested changes to the
service provisions of the BCIPA52 would survive the operation of s.109X of the
Corporations Act 2001 (Cth)53 which provides (note that subs (4) and (5) were
omitted by an amending act):
109X Service of documents
(1) For the purposes of any law, a document may be served on a company by:
(a) leaving it at, or posting it to, the company’s registered office; or
(b) delivering a copy of the document personally to a director of the company who
resides in Australia or in an external Territory; or
(c) if a liquidator of the company has been appointed—leaving it at, or posting it to,
the address of the liquidator’s office in the most recent notice of that address
lodged with ASIC; or
(d) if an administrator of the company has been appointed—leaving it at, or posting it
to, the address of the administrator in the most recent notice of that address
lodged with ASIC.
(2) For the purposes of any law, a document may be served on a director or company
secretary by leaving it at, or posting it to, the alternative address notified to ASIC
under subsection 5H(2), 117(2), 205B(1) or (4) or 601BC(2). However, this only
applies to service on the director or company secretary:
(a) in their capacity as a director or company secretary; or
(b) for the purposes of a proceeding in respect of conduct they engaged in as a
director or company secretary.
(3) Subsections (1) and (2) do not apply to a process, order or document that may be
served under section 9 of the Service and Execution of Process Act 1992.
(6) This section does not affect:
(a) any other provision of this Act, or any provision of another law, that permits; or
(b) the power of a court to authorise;
a document to be served in a different way.
(7) This section applies to provisions of a law dealing with service whether it uses the
expression “serve” or uses any other similar expression such as “give” or “send”.
Section 109X of the Corporations Act 2001 (Cth) may override any amendments
made to the service provisions of the BCIPA to the extent of any inconsistency.54
52
In respect to companies at least
To the extent the Corporations Act 2001 would apply
54
Section 109 of the Commonwealth Constitution
53
55
Electronic Service
As to the question of whether the BCIPA should be amended to expressly permit
service by email55, I am of the view that s.103(1) of the Act allows the parties to
agree on the method of service.
If the parties wish to permit service of documents by email, they are free to do so. I
do not however consider that a party should be compelled under statute to accept
service by email if the contract does not permit it. In my view, no legislative
amendment is required or necessary. Service by fax is expressly permitted under
s.39(1) of the Acts Interpretation Act 1954. No further legislative amendment is
required or necessary.
Who is the proper Respondent?
As eluded to previously, some submitters dealt with Question 2 as though the
identity of the ‘proper’ respondent was in issue.
In a written submission to the Review, it was suggested that:
“While the issue of identity and liability are very occasional issues it is not my experience
that this is a shortfall particularly advantaging or disadvantaging either party. If such a
change was required it could have serious and unintended consequences for oral contracts.
The Act in its current form is sufficiently wide to allow the facts to be considered and the
Respondent identified and found liable where appropriate under the courts’ statements
regarding ‘other arrangement’.”
Similarly, the written submission of a construction law firm noted that:
“… there would be difficulty in the application of any such requirement as BCIPA also covers
“arrangements” and oral contracts.”
A ‘construction contract’ is defined in Schedule 2 of the BCIPA as:
“construction contract means a contract, agreement or other arrangement under which
one party undertakes to carry out construction work for, or to supply related goods and
services to, another party.”
The BCIPA in its current form applies in circumstances where the contract may be
oral56 and where the relationship between the claimant and respondent may not be
one of a contract in the legal sense of the term as acknowledged by Nicholas J in
Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd 57, where his Honour said at
55
Similar submissions were made by several ANA’s
Section 3(1)(a)
57
[2005] NSWSC 45
56
56
[41]:
“With regard to the authorities, and to its context in the Act, in my opinion the term
‘arrangement’ in the definition is a wide one, and encompasses transactions or relationships
which are not legally enforceable agreements. The distinction in the definition between ‘a
contract’ and ‘other arrangement’ is intended by the legislature to be one of substance so
that under the Act construction contracts include agreements which are legally enforceable
and transactions which are not.
Thus in distinguishing between these relationships I understand the legislature intends that
‘contract’ is to be given its common law meaning and that ‘arrangement’ means a transaction
or relationship which is not enforceable at law as a contract would be.
Accordingly I reject the submission for Okaroo that the term ‘arrangement’ should be
understood to mean an agreement which is tantamount to a contract enforceable at law.”58
To seek to restrict the identity of the person “liable to make the payment” to a person
expressly nominated in a contract would restrict the Legislature’s intention to allow
the BCIPA to be used in circumstances where a relationship was not governed by a
“legal contract”. It would also run counter to the express provisions that the Act
applies in circumstances where a contract is oral.59
On the latter point, at first blush, there may appear to be some justification for the
exclusion of oral construction contracts from the operation of the BCIPA.
Section 67G of the Queensland Building Services Authority Act 1991 (“QBSA Act”)
makes it an offence for both the contracting and contracted party to enter into an oral
building contract. However, whilst an offence under the QBSA Act, the Legislature
has not seen fit to restrict a party’s ability to recover payment as it has for unlicensed
contractors in s.42 of the QBSA Act.60 Therefore, in my view there is insufficient
justification to amend the Act to remove oral construction contracts from its
operation.
In my view, it is a matter for the parties in the terms of their contract to clearly identify
the parties to that construction contract, their address for service and their preferred
method of service. That is not a matter for which the Legislature should need to
further regulate.
Notwithstanding these views, the service provisions contained in s.39 of the Acts
Interpretation Act 1954 should continue to be made available to the parties of a
construction contract to prevent harsh or unreasonably onerous service provisions
being imposed upon a party in the construction contract.
58
Nicholas J’s interpretation of the term “arrangement” was followed by Douglas J in Bezzina Developers Pty Ltd
v Deemah Stone (Qld) Pty Ltd [2007] QSC 286 at [21]-[22] and cited in Mansouri v Aquamist Pty Ltd (2011) 27
BCL 201; [2010] QCA 209 at [15] per Fraser JA de Jersey CJ and White JA agreeing
59
Section 3(1)(a) BCIPA
60
See Cant Contracting Pty Ltd v Casella [2007] 2 Qd R 13; [2006] QCA 538
57
Suggested Legislative Amendments
Nil
Q2 - Recommendations
5.
The requirements for service of payment claims made under the BCIPA do
NOT need amending.
58
Question 3: Do you believe that the BCIP Act should allow other
types of payment claims, including claims by purchasers, to be
subject to adjudication?
If so, what changes would you suggest?
Background
For the purposes of the Discussion Paper and this Report, a purchaser of
construction work and/or related goods and services is the person for whom the work
is performed, in other words the “contracting party” or the “respondent” in an
adjudication application.
Currently, the BCIPA only permits a party who performs construction work and/or
who supplies related goods and services, the contracted party to be able to initiate
the recovery of a progress payment against a contracting party under the Act. A
contracting party cannot utilise the Act to initiate any payment recovery action
against a contracted party.
Feedback outcomes
Of the written submissions provided to the Review, 14% were in favour of amending
the Act to allow a contracting party to serve a payment claim on the person who
performed the construction work or who supplied the related goods and services
(“the contracted party”), whilst 47% were opposed and 37% did not respond directly
to the question. The majority of those opposed to amending the BCIPA did so on the
basis of not wanting to further complicate the existing system, arguing that it was not
in accordance with the object of the Act.
Relevant legislative provisions
The object of the BCIPA is provided in s.7, which states:
“The object of this Act is to ensure that a person is entitled to receive, and is able to recover,
progress payments if the person(a) undertakes to carry out construction work under a construction contract; or
(b) undertakes to supply related goods and services under a construction contract.”
Support for change
The arguments made by submitters in favour of amending the Act included:
59
“Adjudicators will ordinarily calculate the value of a cross-claim anyway.”
One ANA in its written submissions stated:
"The argument that the option would increase the volume of complex matters being referred
to adjudicators is not true. Large construction contracts almost always include a provision for
set-off of cross claims by the respondent. The present problem is that the cross claim can
only reduce or extinguish the claimant's right to progress payment and it cannot result in a
liability for the claimant to pay anything to the respondent.
The adjudicator presently has to decide the cross claim. If the adjudicator could decide that
the claimant must pay the respondent an amount, the adjudication would be no more
complex than it is now."61
Determining “temporary financial position”
In another written submission, it was suggested by a lawyer that:
“Yes. The true object of the BCIP Act should be for the temporary financial position (which
construction lawyers call “temporary finality”) of all parties to the construction contract to be
determined expeditiously pending any further dispute processes and determination in
arbitration or litigation.”
Resident owners should be caught
Another submitter argued that contracting parties should be able to claim under the Act and
also that resident owners should also be caught by its provisions.62
The dual system
One adjudicator stated in their written submissions:
“I am personally not in favour of claims for damages made by respondents against claimants
to be adjudicated under the Act. However, if XXXX favours the expansion of the Act to allow
respondents to make claims against claimants, I think that the dual system of adjudication
proposed by Philip Davenport ought to be adopted.”
Support for status quo
Submissions raised in opposition to the broadening of the legislative scheme
included:
“The BCIPA should remain true to its object”
61
62
Several written submissions to the Review were to the same effect
Written submission to the Review
60
In its written submissions, a national building contractor said:
“The object of the Act is to ensure that a person who has undertaken construction work or
the supply of related goods and services is able to recover progress payments and this
should remain.
…
-
The Act is aimed at overcoming the imbalance of power between the respondent and
the claimant and its advantage in its current form is its simplicity.
Opening the Act to additional complexity due to cross claims and counter claims is
against the intent and purpose of the Act.”
One ANA opposed to the suggested amendments argued in its written submissions:
“The BCIP Act should not be amended to compromise the intent of the BCIP Act and
facilitate inadequate contract formation and management from the purchaser.
The BCIP Act should remain a bottom-up scheme noting one strength of the BCIP Act is that
it forces parties to discuss their differences and, it is suggested, in most cases the dispute is
settled without going to adjudication or soon after adjudication commences.63
An adjudicator, opposed to the broadening of the legislative scheme said:
“The Act is in relation to a construction contract. This makes the scope clear and easy to
define. I do not believe that the Act should allow other types of payment claims. I consider in
allowing other types of payment claims such as by purchasers is not in keeping with the
object of the Act to provide progress payments. I would however support the inclusion of
domestic building in the scope of the BCIP Act. [Emphasis added].
One law firm in its written submissions stated:
“The objects of the BCIP Act are clearly to promote cash flow within the industry. To allow
principals to serve claims would be contrary to that policy and furthermore would shift the
purposes of the BCIP Act from ‘cash flow’ focused to a more general form of alternative
dispute resolution. Such an alternative dispute resolution model has been used with some
success in the UK where any ‘dispute’ (not necessarily a payment claim) can be referred to
adjudication. If this model was to be adopted, the BCIP Act would require wider
amendments. If the BCIP Act is to remain in its current form, its purposes should not be
confused.”
Unwelcome complexity
A quantity surveyor in his written submissions stated:
“…a wholesale change to include two-way claims would add a layer of complexity and
contractual and legal jousting that is more likely to create more disputes than reduce them.
63
Written submission to the Review
61
Such a change would also re-set the power imbalance towards purchasers with large
fighting funds.”
In one written submission to the Review, it was argued:
“No. XXXXXX submits that the BCIP Act should not be amended to allow any other types of
claims, including claims by purchasers. To do so would:

be contrary to the objectives of the BCIP Act to reduce the power imbalances
inherent between small subcontractors and head contractors, to ensure that a
subcontractor (not a purchaser) receives prompt payments, and to facilitate speedy
recovery of payments owing to claimants; and

increase the volume and complexity of claims heard by adjudicators, which is not
desirable given the short statutory time frames and limited rights of review for
respondents.
The BCIP Act should not (in line with the policy of the Western Australian Act) unduly restrict
the normal commercial operation of the building and construction industry.”
Contracting parties already receive adequate protection under the law
“XXXXX does not support the expansion of claims to include purchasers of building work.
Those parties already receive protection under the purchase contract, the Queensland
Building Services Authority Act 1991 (Qld) (s72) and the Fair Trading Act 1989 (Qld).”64
Too much power to those holding the purse strings
In its written submissions, the Queensland Major Contractors Association argued:
“Nearly all Members do not believe that the Act should allow other types of payment claims,
including claims by purchasers, to be subject to adjudication.
Many Members expressed a concern that such an amendment would give too much power
to those already holding the ‘purse strings’, which goes against the intent of the Act. As one
Member articulated, purchasers ‘invariably have an entitlement to set off, have possession of
the money … and have recourse to security’.”
It is important to recognise that members of the Queensland Major Contractors
Association would not only be entitled to use the BCIPA against their principals who
engage them, they would also have the Act used against them by a multitude of
smaller, and in some cases quite large subcontractors.
64
Written submissions to the Review by a law firm
62
Consideration
There is little doubt that the suggested amendment is not in keeping with the current
object of the BCIPA. However, that is not of and in itself a reason not to amend the
BCIPA if it is considered desirable. The objects of an Act can be amended in
appropriate circumstances just as any other provision can be.
A number of submitters referred to what has been described as a “dual scheme”. In
“Proposal for a ‘Dual Scheme’ model of statutory adjudication for the Australian
building and construction industry”65, Michael C. Brand and Philip Davenport
suggest:
-
-
-
-
-
That a ‘dual scheme’ could act to harmonise the existing security of payment
legislation based on the New South Wales model (‘the Defined Scheme’) with
the model adopted by Western Australia and the Northern Territory which is
more aligned with the model adopted in the United Kingdom established
under the Housing Grants, Construction and Regeneration Act 1996 (UK)
(‘the Non-Specific Scheme’).
The ‘Defined Scheme’ is so named because it only provides for claims to be
made by one party, and only for defined money claims, namely progress
claims in respect of construction work performed or related goods and
services supplied.
The ‘Non-specific Scheme’ is so named because it does not specify that only
one party can make claims and it is not limited to a specific type of money
claim under a contract.
The ‘Defined Scheme’ results in a “serious imbalance” because only one party
can refer a claim to adjudication and recover money. The authors note that
the Victorian Legislature sought to solve this imbalance by making an
adjudication determination void to the extent that it includes ‘excluded
amounts’ which are defined to be claims for delay costs and damages and
some variation claims.66
The ‘Dual Scheme’ proposes the retention of the ‘Defined Scheme’ for purely
progress payment claims and to allow the ‘Non-specific Scheme’ for other
payment disputes.
However, the ‘Dual Scheme’ whilst maintaining the current objects of the Act,
would also adopt the objects of the ‘Non-specific Scheme’ adopted by New
Zealand which provides “for the speedy resolution of disputes arising under a
construction contract” and to provide “remedies for the recovery of payments
under a construction contract”.67
Progress claims would be redefined to exclude claims for other than the value
of the work actually carried out or the related goods and services supplied.
Claims for reimbursement for delay damages and claims for other damages or
the release of a bank guarantee would have to be made by a “separate
money claim”. Equally, the purchaser would be entitled to make a “money
claim” for damages for delay or other breach of contract.
65
(2011) 3(3) International Journal of Law in the Built Environment 252
Section10B of the Building and Construction Industry Security of Payment Act 2002 (Vic)
67
Section 3 of the Construction Contracts Act 2002 (NZ)
66
63
-
-
Only a supplier could make a progress claim, but a money claim could be
made by a supplier against a purchaser and vice versa;
The authors note that under the ‘Dual Scheme’ the process of adjudication for
progress claims would be basically the same as it is now, albeit the number of
applications are likely to rise because the purchasers of construction work
and/or related goods and services could bring an adjudication application for
“money claims” against the person who performed the work or supplied the
related goods and services;
The authors concede that the process “may sound complicated” but argue
that the process would mirror the usual process of claim, defence,
counterclaim and reply familiar to arbitrators and courts.
The “Dual Scheme” proposed by Brand and Davenport has some merit in that it
seeks to overcome the current imbalance where a respondent cannot initiate the
adjudication process for monies alleged to be owing under the contract. I note
however, that many submitters to the Review who would fall within the description of
a contracting party, saw this as an unnecessary complication to the existing scheme.
The number and standing of submitters opposed to amending the Act in relation to
this issue cannot be ignored nor taken lightly. Those submitters included the
Queensland Major Contractors Association, the Housing Industry Association, the
Master Builders Association, the Queensland Law Society Committee for
Construction and Infrastructure and the Queensland Law Society Committee for
Mining and Resources to name just a few. The opposition of these groups to the
suggested amendments to enable a form of “dual scheme” do not suggest to me that
there is a strong appetite for change within the industry.
Additionally, I have other reservations about broadening the existing scheme.
Many adjudicators are not legally qualified. The issue of the assessment of damages
is not an easy task, even for judges and lawyers. There are many considerations
that must be factored into the assessment of damages including the principles of:
-
Causation;
Remoteness of damage; and
Whether the innocent party has mitigated their loss.
The appropriateness of awarding damages for breach of contract in an interim
process determined “on the papers” is questionable. The “Dual Scheme” process is
likely to demand more of adjudicators than many are likely to be able to competently
deliver within restrictive timeframes.
As will be discussed elsewhere in this Report, there are questions already being
asked by stakeholders about the quality of adjudication decisions being made by
some adjudicators in the current system.68 It seems to me that to introduce another
layer of complexity is not only, not justified, it is not being sought by those who would
stand to benefit by its introduction.
68
Similar concerns were raised by Collins QC in the Final Report of the Independent Inquiry into Construction
Industry Insolvency in NSW, November 2012, at p. 370
64
I am of the view that to introduce a dual scheme process is likely to lead to more
judicial intervention being sought from disaffected parties and hence will result in
greater costs for stakeholders.
I shall deal with the submissions regarding the introduction of a form of domestic
adjudication in response to Question 14 below.
After carefully weighing up the case for and against adjudication expansion as
envisaged in Question 2 of the Discussion Paper, I have formed the view that the
current objects of the BCIPA, and the present nature of the adjudication scheme,
should be preserved. The BCIPA does not lend itself well to a process where
contracting parties can initiate the recovery of money alleged to be owing under the
contract from a contracted party. In any event it appears from the submissions that to
introduce another layer of complexity is not only not justified, it is not being sought by
those who would stand to benefit from its introduction.
Suggested Legislative Amendments
Nil
Q3 - Recommendation
6.
The BCIPA should NOT be amended to allow other types of payment claims,
including claims by purchasers, to be subject to adjudication.
65
Question 4: Should the BCIP Act be amended to allow an
adjudicator to direct payment in favour of the respondent for an
amount greater than the claim?
Background
Questions 3 and 4 were posed together in the Discussion Paper and many
submitters also dealt with them simultaneously.
A common criticism of the BCIPA is that no matter how valid a respondent’s reasons
for refusing to pay a claimed amount, a respondent cannot recover under the Act
monies that it is entitled to under the contract, even when the set-off amount
exceeds that of the claimed amount.
At best, a respondent to an adjudication application may be able to reduce the
claimed amount by way of a contractual set-off or an entitlement to liquidated
damages for example, so that the adjudicated amount is nil. Under the current
provisions of the BCIPA, an adjudicated amount of “nil” is the best outcome that a
respondent can hope for.
Some submitters argued that the current legislative process encourages claimants to
make ambit or questionable claims, knowing the worst outcome for them is that they
may have to meet the costs of the adjudication process if they are entirely
unsuccessful.
Feedback outcomes
Of the written submissions provided to the Review, 25% agreed that respondents
should be able to have an amount decided in their favour if the quantum of its
contractual set-off exceeds that of the claimed amount, whilst 35% rejected the
suggestion and 37% did not directly respond to the question.
Relevant legislative provisions
Pursuant to s.14 of the BCIPA, an adjudicator assessing the value of a payment
claim can take into consideration the:
(a) contract terms; or
(b) if the contract does not provide for the matter, the adjudicator may have regard to:
(i) the contract price for the work; and
(ii) any other rates or prices stated in the contract; and
(iii) any variation agreed to by the parties to the contract by which the contract price,
or any other rate or price stated in the contract, is to be adjusted by a specific
amount; and
66
(iv) if any of the work is defective, the estimated cost of rectifying the defect.
It is common for construction contracts to provide a purchaser with an entitlement to
set-off against a progress claim the costs associated with:
(i) rectifying defective and/or incomplete work;
(ii) liquidated damages incurred as a result of delays to the contract works; and
(iii) backcharges.
Support for change
Those submissions in favour of expanding the operation of the BCIPA included:
Discourage abuse of process
In its written submissions, a national building contractor argued:
“Yes, the adjudication process is to determine the interim amount due as determined by the
terms of the contract. This should not be restricted to the ability to only nullify the claimed
amount, but to adjudicate an amount in favour of the Respondent where applicable. Such an
amendment is supported as it will enable the Respondent to receive consideration for the
amount of its counterclaim and discourage an abuse of the process by Claimants.”
More comprehensive and balanced approach
In written submissions made by a law firm, it was suggested that:
“In order to effectively determine the amount properly due to a claimant, respondents to a
payment claim should be entitled to fully defend the claims brought against them by
counterclaiming, claiming variations or set-off of monies owing to them during the relevant
payment period to the extent the BCIP Act presently permits this. To allow respondents to
fully defend any claim brought against them is clearly in the interests of justice.
Further, the ability of adjudicators to allow payments in favour of respondents for larger
amounts than those claimed is necessary to ensure fairness in the process and may reduce
unfounded claims because claimants will be required to face a more comprehensive and
more balanced approach to the application of the BCIP Act because of the risk of a finding
that they have actually been overpaid (as may often be the case in practice given the
industries practice of paying on account).
This ability could be considered as a half-way measure to allowing principals to make claims
(see section 3 above) in as far as it is consistent with the current intent of the BCIP Act for
the claims to be made by persons seeking payment. However, it balances what is currently
the somewhat one-sided nature of the BCIP Act by allowing the principals or head
contractors to fully defend any claims brought as they would be entitled to in any other
dispute resolution process…”
67
In a written submission to the Review, it was contended that:
“Yes, but in limited circumstances. It seems somewhat absurd that, as is the current
situation, an adjudicator must value the works undertaken and where that valuation exceeds
the amount claimed (which is not uncommon because of arithmetical errors in the claimant’s
calculations) the adjudicated amount cannot reflect this. This issue is even more in need of
rectification if counterclaims are to be permitted. In the interests of equity, the true valuation
found by the adjudicator needs to be reflected in the decision and the adjudicated amount.”
A government department provided written submissions which argued:
“… Accordingly, it is submitted that the legislation should more clearly provide that
adjudicators recognise off-set payments owing from a claimant to a respondent. In the event
that a claimant owes a debt to a respondent, the adjudicator should be in a position to make
a decision that nothing is owing from a respondent to a claimant, an example is defective
works rectified by the respondent or contractually provided for set-offs for debts owed by the
claimant to the respondent. It is not appropriate for the legislation to recognise payment
down the supply chain but overlook or fail to acknowledge a claimant’s contractual
obligations to a respondent or a respondent’s contractual entitlements.”
A bet each way
The Queensland Major Contractors Association submitted that:
“A slight majority of Members did not agree with such an amendment. These Members
generally cited the same reasons as those given in response to question three (above).
However, a number of Members did believe that adjudicators should be able to direct
payment in favour of the respondent for an amount greater than the claim. Reasons given for
this view included the following:



such an amendment might be a useful way to ensure that suppliers only make claims
which they consider to be genuine, as suppliers would be less likely to just 'have a
go' if there was a possibility that they might be directed to pay the respondent; 
the adjudication should be viewed as a 'quick and dirty arbitration', in which case the
decision should recognise not only the claimant's but also the respondent's rights
under the contract; and 
if the intent of the Act is to improve cash flow, then this should work both ways.” 

Support for status quo
There were other submitters who were opposed to the suggestion. Their arguments
included:
68
Proposal contrary to principles of natural justice
“No payment should be envisaged that flows up the contracting chain. To allow a sum
greater than that claimed would be contrary to the principles of natural justice as the
Respondent (sic) could be at (sic) required to make a payment greater than that they
understood to be at risk.”69
Contrary to object of the Act
A quantity surveying firm responded that:
“The object of the Act is to ensure that those who undertake work can recover progress
payments. To allow cashflow to be maintained to those in the contractual chain, the
provisions of the Act should not be amended.”
An ANA in its written submission argued that:
“It is suggested that if Government allows the adjudicator to award payment to the
respondent or allow the respondent to make claims against the claimant the very basis of
BCIP Act will be undermined and shift the bargaining power back to the way it was [pre –
BCIPA].”
The Queensland Law Society, Mining & Resources Committee also provided written
submissions which argued:
“No. The Committee submits that, although there may be some perceived advantages with
this proposal (such as that it may create a more even playing field and introduce an element
of risk for contractors who are using the BCIP Act to make ambit claims), this proposal
should not be accepted because to do so would enable a purchaser to potentially claim and
recover money in excess of the amount originally claimed by a contractor. This would not
only be contrary to the original purpose of the BCIP Act but it would only serve to increase
the volume and complexity of claims heard by adjudicators, which would not be desirable
given the short statutory time frames and limited rights of review for respondents.”
Unfavourable “costs orders” for frivolous claims
In written submissions provided by the Electrical Contractors Association and Master
Electricians Australia, it was suggested that:
“Subcontractors are in an inherently inequitable bargaining position in relation to head
contractors, with far fewer resources available to them. An adjudicator’s decision requiring
payment to a respondent head contractor could potentially cripple a subcontractor who had
not anticipated an adverse financial judgement (sic).
69
Written submission to the Review
69
The BCIP Act is intended to address the bargaining imbalance between a head contractor
and subcontractor, not deepen it. In light of this, we would oppose the inclusion of such an
amendment in the BCIP Act.
However, if vexatious claimants are of concern, a possible means to deter the making of
such claims would be giving adjudicators the authority to award costs to respondents who
have been subject to claims of this nature. The possibility of an unfavourable costs order
would likely discourage a claimant seeking to take advantage of the system by making a
frivolous claim.”
Proposal would further impact power imbalance
The Major Subcontractors Group represents almost 100 major subcontractors who
work with larger national and international building contractors on commercial
projects for the government and private sectors. They submitted on behalf of their
members:
“Similarly, MSG members do not believe the BCIP Act should be amended to allow an
adjudicator to direct payment in favour of the respondent for an amount greater than the
claim. It is their experience that contracts are already strongly weighted toward respondents
and this amendment would further impact the underlying power balance.”
Process would become “arbitration-like”
The Housing Industry Association represents over 43,000 builders, contractors,
manufacturers, suppliers and building professionals nationwide. On behalf of their
members, it also rejected the proposal saying:
“HIA is of the view that the BCIP Act should not be amended to allow for an adjudicator to
direct payment in favour of the respondent. This view is formed on the premise that any such
allowance would liken the process to that of arbitration rather than adjudication, and as such,
the process becomes concerned with much more than the recovery of progress payments.”
Similarly, the Master Builders Association, representing some 8,500 building-related
businesses across the State argued:
“The purpose of the Act is to assist in the payment of monies owed for work completed. The
Act has not been designed as a form of mini-arbitration and the more ‘other’ issues are
allowed to be considered, the more complex the arguments and the less likely the legislation
will deliver the objectives of the Act.
Opening up the legislation for cross-claims and ‘damages’ claims defeats one of the central
pillars of the Act. The deliberate restrictions and timeframes have been designed to assist
parties to get paid. If the legislation is broadened to include all sorts of issues and disputes
then the chances of positive outcomes will be less likely. The Act simply cannot be the
panacea for the industry. The current scope (save for some minor amendments proposed in
this submission) is satisfactory.”
70
Consideration
There is a danger that the adjudication process enshrined in the BCIPA may be
viewed by some as the panacea for the many significant problems encountered in
the dispute resolution sector of the building and construction industry. For instance,
there are significant pressures to extend the ambit of the operation of the BCIPA to
include contracts involving “resident owners” as that term is defined in s.3(5) of the
Act. I will return to this issue below.
The “Dual Scheme” envisaged by Brand and Davenport discussed in relation to
Question 3 above, is another example of industry looking to expand upon the
successes of adjudication in its various forms throughout the world to provide a more
extensive almost all encompassing dispute resolution mechanism other than the
progress payment valuation scheme the BCIPA was originally intended to be. That
objective is not in itself misplaced, as I have previously observed, the Act fulfills a
multi-faceted role in that regard.
The enthusiasm to expand the adjudication process is not difficult to understand
given the prohibitive costs and delays involved in finally litigating building disputes in
Courts and Tribunals. It is nigh impossible to determine how many civil proceedings
have been averted by the introduction of the BCIPA in Queensland. No such
records are kept by the BCIP Agency, nor the registries of the court. However, the
attraction of the “pay now, argue later” scheme is such that it is hardly surprising that
the use of the Act has been as significant as it has.
Notwithstanding this success, the cautionary words of both the Housing Industry
Association and Master Builders should not be ignored in my view. The success of
the BCIPA may very well be put at risk if industry tries to make it all things to all
people. As I see it, whilst there is an attraction to balance the scales to allow
payments in favour of respondents when contractual set-off entitlements exceed the
claimed amount, the risk in so amending the Act is that adjudication procedures are
likely to become a form of “cheap and dirty” arbitration. The “half-way” measure as it
was described by one law firm, has the potential in my view, to do more harm than
good.
There is also the concern that contracted parties may not pursue their legitimate
claims for payment under the BCIPA for fear that a much better resourced superior
contractor will be able to mount a more forceful counterclaim and set-off. The
suggested amendments in my view may have the effect that could create a tension
with s.99 of the Act.70
That is not to suggest that some legislative intervention should not be introduced
which dissuades a claimant from making ambit claims. In my view, this issue can be
more beneficially addressed by a re-consideration of the adjudication fee provisions
as was suggested by the Electrical Contractors Association and Master Electricians
Australia.
70
“No contracting out” provisions
71
Adjudication fees
Claimants may very well be lodging “ambit claims”, although the term itself is
somewhat emotive. Simply because a contracted party was not able to convince an
adjudicator that it is entitled to all or any of the claimed amount, may not necessarily
mean that the claim is “ambit”. Whilst, at least in my own experience, the number
of such claims are relatively low, I agree with the submissions of a large national
developer who argues:
“The worst case scenario for a claimant is that it will not receive anything, and it might be
required to pay the adjudicator's costs. In relation to the latter, it is fairly rare in practice for a
claimant to be required to pay 100% of the adjudicator's costs. Indeed, the cost regime
under the legislation is often unfair to respondents, because even where the claimant is
largely unsuccessful, a 50/50 sharing of costs is commonly adopted by the adjudicator.
Indeed, sometimes the respondent bears 100% of the costs, despite the fact that the
claimant was unsuccessful with the bulk of its claims.
Responsibility for the adjudicator's costs should depend upon the claimant's relative
success, and the present situation could be improved by providing further guidance to
adjudicators in the exercise of their discretion on costs.”
I am of the view that ss.34 and 35 of the BCIPA should be amended to ensure a
more just and equitable outcome is achieved in relation to the apportioning of
adjudication fees. These provisions deal with an adjudicator’s discretion in deciding
which party should bear the costs of the adjudication process.
Unless there are extraordinary circumstances, it is in my view, unacceptable that a
claimant who is wholly unsuccessful in its application does not have to pay 100% of
the adjudication fees. There would in my view have to be very compelling reasons to
justify such a decision.
An adjudicator’s discretion in relation to the apportionment of adjudication fees
particularly in the larger applications, can if exercised reasonably, constitute a
deterrent to the filing of ambit claims.
Suggested Legislative Amendments
While I maintain that an adjudicator’s discretion in the apportioning of the
adjudication fees should remain discretionary, I believe the following amendments
will provide adjudicators with the necessary guidance required when considering
how to exercise their discretion:71
71
Modeled on the costs provisions contained in s.457 of the Sustainable Planning Act 2009 (Qld); The wording of
proposed s.35A(1) may require amendment dependent upon Government’s approach to Question 8 of the
Discussion Paper
72
35A Discretionary considerations for the apportionment of fees
(1) In deciding proportions of the parties’ respective liability for the Authorised
Nominating Authority’s fees72 and the fees of the adjudicator under ss.34(3)(a) and
35(3), the adjudicator may have regard to any of the following:
(i) The relative success of the parties in the adjudication process;
(ii) Whether a party commenced or participated in the adjudication process for an
improper purpose;
(iii) Whether a party commenced or participated in the adjudication process without
reasonable prospects of success;
(iv) Whether a party has acted unreasonably leading up to the bringing of the
adjudication application;
(v) Whether a party has acted unreasonably in the conduct of the adjudication
process;
(vi) Whether a party should have taken a more active part in the adjudication process
and did not do so; and
(vii)The time taken by the adjudicator in dealing with the discrete aspects of the
claimed amount and the reasons given for non-payment in the payment
schedule.
(2) Subsection (1) does not limit the matters to which an adjudicator may have regard in
deciding the apportionment of adjudication fees.
Formal offers to settle
No submissions were made to the Review regarding the benefits or otherwise of
introducing a formal process of offers to settle into the adjudication process. It
seems to me that any mechanism that may assist the parties to reach an agreement
amongst themselves is worthy of consideration.
The Government may consider adopting a similar scheme in respect to adjudication
costs as is provided under Chapter 9, Part 5 of the Uniform Civil Procedure Rules, or
alternatively a similar scheme to that provided under Division 3 of the Queensland
Civil and Administrative Tribunal Rules 2009 (“QCAT Rules”) which relevantly
provide:
65 Offer must be written and may be open or closed
(1) An offer to settle a proceeding—
(a) must be made in writing; and
(b) may be—
(i) an open offer, meaning that any party may mention the offer, or any terms of
the offer, at any time during the proceeding; or
(ii) a closed offer, meaning that the tribunal should not be told the offer has been
made until after it has made its final decision in the proceeding.
(2) If an offer does not state it is an open offer or closed offer, the offer is taken to be a
closed offer.
66 Expiry of offer
(1) An offer to settle a proceeding may be made at any time before the tribunal makes its
final decision in the proceeding.
(2) An offer to settle a proceeding made before a hearing starts expires on the earlier of
the following—
72
Subject to Recommendations 17 and 18
73
(a) the day the hearing of the proceeding starts;
(b) the expiry date stated in the offer.
(3) An offer to settle a proceeding made after a hearing starts expires on the earlier of
the following—
(a) the day the tribunal makes its final decision in the proceeding;
(b) the expiry date stated in the offer.
67 Acceptance of offer
(1) A party to a proceeding may accept an offer to settle the proceeding by giving written
notice of the acceptance, before the offer expires, to the party who made the offer.
(2) A party to a proceeding may accept an offer even though the party has made a
counter offer.
Note—
See rule 86 for a consequence of not accepting an offer.
86 Additional power to award costs if particular offers to settle rejected
(1) This rule applies if—
(a) a party to a proceeding, other than a proceeding for a minor civil dispute, makes
another party to the proceeding a written offer to settle the dispute the subject of
the proceeding; and
(b) the other party does not accept the offer within the time the offer is open; and
(c) in the opinion of the tribunal, the decision of the tribunal in the proceeding is not
more favourable to the other party than the offer.
(2) The tribunal may award the party who made the offer all reasonable costs incurred
by that party in conducting the proceeding after the offer was made.
(3) If a proceeding involves more than 2 parties, this rule applies only if the acceptance
of the offer would have resulted in the settlement of the matters in dispute between
all the parties.
(4) In deciding whether a decision is or is not more favourable to a party than an offer,
the tribunal must—
(a) take into account any costs it would have awarded on the date the offer was
given to the other party; and
(b) disregard any interest or costs it awarded relating to any period after the date the
offer was given to the other party.
Not all of the above provisions are relevant for the purposes of an adjudication
process. If Government were to introduce a formal offer to settle process, the QCAT
model would require appropriate amendments.
I would suggest that to give effect to s.100 of the BCIPA, the legislation would need
to expressly state that the offer is only in respect to the adjudication process and that
the offeror’s entitlements under s.100 remains unaffected. Section 100 of the BCIPA
provides:
100 Effect of pt 3 on civil proceedings
(1) Subject to section 99, nothing in part 3 affects any right that a party to a construction
contract—
(a) may have under the contract; or
(b) may have under part 2 in relation to the contract; or
(c) may have apart from this Act in relation to anything done or omitted to be done
under the contract.
(2) Nothing done under or for part 3 affects any civil proceedings arising under a
construction contract, whether under part 3 or otherwise, except as provided by
subsection (3).
74
(3) In any proceedings before a court or tribunal in relation to any matter arising under a
construction contract, the court or tribunal—
(a) must allow for any amount paid to a party to the contract under or for part 3 in any
order or award it makes in those proceedings; and
(b) may make the orders it considers appropriate for the restitution of any amount so
paid, and any other orders it considers appropriate, having regard to its decision in
the proceedings.
It is important to note that as is the case now under the BCIPA, an adjudicator would
not have the power to award costs (being legal costs). That is, the offer to settle
provisions would only impact upon the apportionment of the adjudicator’s fees.
Q4 - Recommendations
7.
The BCIPA NOT be amended to allow an adjudicator to decide an amount in
favour of a respondent in circumstances where the respondent’s contractual
entitlement to set-off exceeds the value of the claimed amount.
8.
The BCIPA be amended to ensure more just and equitable outcomes be
achieved in relation to the apportioning of adjudication fees by providing:
(c) Legislative guiding principles that an adjudicator may consider when
apportioning adjudication fees between the parties;
(d) Legislated procedures for the making of formal offers to settle (for the
purposes of adjudication only) and subsequent consequences based on
Part 8, Division 3 and Part 9, Division 2 of the Queensland Civil
Administrative Tribunal Rules 2009.
75
Question 5: Do you believe the type of payment claim under the
BCIP Act should be restricted?
If so, should payment claims under the BCIP Act be restricted to:
contract price for the work; any other rates or prices stated in the
contract; and any variation agreed to by the parties of the contract
by which the contract price, or any other rate of price stated in the
contract, is to be adjusted by a specific amount; and the estimated
cost of rectifying any defects in the work?
Background
The suggested amendments posed in this question have presumably been modeled
on the amendments that were introduced into the cognate Victorian legislation, the
Building and Construction Industry Security of Payment Act 2002 (Vic) (“the Victorian
Act”) by the Building and Construction Industry Security of Payment (Amendment)
Act 2006 (Vic) (“the Amended Victorian Act”).
Philip Davenport notes in his book Adjudication in the Building Industry73:
“Rather than following closely the procedure for making and adjudicating claims under the
NSW Act, as do all other SOP Acts, the amended Victorian Act has many unique provisions
which deter rather than encourage adjudication. The Act is also replete with ambiguities.
The consequence is that there are relatively few adjudications in Victoria.”
The industry use of the Amended Victorian Act will be examined in greater detail
below.
Feedback outcomes
Only approximately 19% of submitters were in favour of amendments to restrict the
operations of the BCIPA whilst 42% were opposed and 38% of submitters did not
directly respond to the question.
Relevant legislative provisions
Pursuant to s.10 of the Amended Victorian Act, when determining the amount of a
progress payment that a claimant may be entitled, an adjudicator may take into
account what the Act refers to as “claimable variations”, but must not take into
account an “excluded amount”.
73
rd
Federation Press, 2010, 3 ed, p.20
76
For the uninitiated, it is worth extracting the subsequent relevant provisions of the
Amended Victorian Act which define “claimable variations” and “excluded amounts”.
10A Claimable variations
(1) This section sets out the classes of variation to a construction contract (the
claimable variations) that may be taken into account in calculating the amount of a
progress payment to which a person is entitled in respect of that construction
contract.
(2) The first class of variation is a variation where the parties to the construction contract
agree—
(a) that work has been carried out or goods and services have been supplied; and
(b) as to the scope of the work that has been carried out or the goods and services
that have been supplied; and
(c) that the doing of the work or the supply of the goods and services constitutes a
variation to the contract; and
(d) that the person who has undertaken to carry out the work or to supply the goods
and services under the contract is entitled to a progress payment that includes an
amount in respect of the variation; and
(e) as to the value of that amount or the method of valuing that amount; and
(f) as to the time for payment of that amount.
(3) The second class of variation is a variation where—
(a) the work has been carried out or the goods and services have been supplied
under the construction contract; and
(b) the person for whom the work has been carried out or the goods and services
supplied or a person acting for that person under the construction contract
requested or directed the carrying out of the work or the supply of the goods and
services; and
(c) the parties to the construction contract do not agree as to one or more of the
following—
(i) that the doing of the work or the supply of goods and services constitutes a
variation to the contract;
(ii) that the person who has undertaken to carry out the work or to supply the
goods and services under the construction contract is entitled to a progress
payment that includes an amount in respect of the work or the goods and
services;
(iii) the value of the amount payable in respect of the work or the goods and
services;
(iv) the method of valuing the amount payable in respect of the work or the goods
and services;
(v) the time for payment of the amount payable in respect of the work or the
goods and services; and
(d) subject to subsection (4), the consideration under the construction contract at the
time the contract is entered into—
(i) is $5 000 000 or less; or
(ii) exceeds $5 000 000 but the contract does not provide a method of resolving
disputes under the contract (including disputes referred to in paragraph (c)).
(4) If at any time the total amount of claims under a construction contract for the second
class of variations exceeds 10% of the consideration under the construction contract
at the time the contract is entered into, subsection (3)(d) applies in relation to that
construction contract as if any reference to "$5 000 000" were a reference to "$150
000".
77
Example
A building contractor enters into a construction contract. The consideration (contract sum)
under the contract at the time the contract is entered into is $3 million. The contract contains
a dispute resolution clause. The contractor undertakes work at the direction of the other
party. The contractor claims (the new claim) that the work is a variation to the contract. The
other party does not agree that the work constitutes a variation to the contract (disputed
variation). The contractor has already made a number of claims for disputed variations
under the contract. The new claim brings the total amount of claims for disputed variations
under the contract to $350 000. This amount exceeds 10% of the contract sum. As the
contract sum exceeds $150 000 and the contract contains a dispute resolution clause, the
disputed variation in the new claim and all subsequent disputed variations under the contract
will not be claimable variations under this Act.
10B Excluded amounts
(1) This section sets out the classes of amounts (excluded amounts) that must not be
taken into account in calculating the amount of a progress payment to which a
person is entitled under a construction contract.
(2) The excluded amounts are—
(a) any amount that relates to a variation of the construction contract that is not a
claimable variation;
(b) any amount (other than a claimable variation) claimed under the construction
contract for compensation due to the happening of an event including any
amount relating to—
(i) latent conditions; and
(ii) time-related costs; and
(iii) changes in regulatory requirements;
(c) any amount claimed for damages for breach of the construction contract or for
any other claim for damages arising under or in connection with the contract;
(d) any amount in relation to a claim arising at law other than under the construction
contract;
(e) any amount of a class prescribed by the regulations as an excluded amount.
Support for change
The arguments in favour of restricting the operations of the BCIPA include:
BCIPA does not accommodate complex disputes
A national building contractor argued:
“Yes, typically claims for breach of contract, damages, latent conditions, time related costs
and claims arising at law should be excluded as per the Victorian model. These claims are
often highly technical (requiring evidence from programming and other professionals) and
legally complex and given the short time frames contemplated by the Act and the varying
experience levels of Adjudicators they are not suited to Adjudication (sic) process.
78
We believe any such claim can only be dealt with procedural fairness under the dispute
resolution provisions of the contract and if required, it can ultimately progress through the
judicial system.”74
A project management company involved in the resources sector argued:
“Claims for disruption, prolongation/EOT/delay costs, damages, breach of contract and
contested variations, should be excluded. These matters routinely require extensive expert
evidence, statutory declarations, determinations of credit between competing witnesses and
consideration of complex contractual and legal issues. The BCIP Act process is not
designed to accommodate or address these matters – nor should it be. Such matters add to
the complexity of a payment dispute and are not appropriate given the short BCIP Act
timeframes, consequences of not serving a sufficiently detailed payment schedule, the time
available to adjudicators and their qualifications and expertise in some instances.”75
In its written submissions the Queensland Resource Council submitted:
“The QRC submits that the type of payment claims made under the BCIP Act should be
expressly restricted to amounts claimed for the progress of construction work, or related
goods and services supplied.
These amendments could be achieved by amending section 14 of the BCIP Act so as to
adopt the language of sections 10, 10A and 10B of the Building and Construction Industry
Security of Payment Act 2002 (Vic) (Victorian Act) as set out below.
These amendments would:



provide contracting parties with a greater level of certainty as to what types of claims
may or may not be made under the BCIP Act;
reduce the number and complexity of claims and simplify the decision making
process for adjudicators (who are not judicial officers), thus facilitating an underlying
objective of the BCIP Act to provide speedy resolutions; and
improve procedural fairness for respondents by reducing the element of surprise
created by large and complex claims, and the associated burden and unfairness to
respondents that is created by the tight statutory time frames.”
Another national building contractor in its written submissions, stated that:
“In our view, the types of payment claims that can be made under the BCIP Act should be
restricted to the straight forward and readily assessable claims made in accordance with the
terms of the contract. Payment claims should be restricted to claims for items in the
preceding month to ensure that claimants make claims for work in a timely manner.
Maintaining proper cash flow being the key driver behind the BCIP Act, the practice of
submitting claims at the end of the project which relates to works in earlier months (and
sometimes earlier years) is counter intuitive to this purpose. Such practices expand the
operation of the BCIP Act, providing an inappropriate commercial lever.
74
75
Written submission to the Review
Written submission to the Review
79
Further, claims for prolongation, disruption or delay that often require detailed consideration
of contractual rights and expert evidence or determinations as to weather and other impacts,
should be excluded.
Such evidentiary matters are not properly the subject of an interim process. The limited
timeframes for responses and decisions under the BCIP Act are not conducive to either
responding to or determining complex claims. Section 10B of the Building and Construction
Industry Security of Payment Act 2002 (Vic) provides some guidance as to what should be
"excluded amounts" in a payment claim.”
A national property developer argued that:
(a) claims based on delay, disruption or acceleration should be excluded; and
(b) claims should be capped at $5,000,000.76
Contract terms not adequately considered
In a written submission to the Review, one solicitor/adjudicator commented:
“… Adjudicators need to have more regard to the contractual rights and obligations assumed
by parties to contracts. With non-legally qualified adjudicators at least, the terms of the
contract seem to be of little or no importance in certain circumstances.”
Inadequate timeframes
Another law firm in their written submissions argued:
“Yes. The statutory timeframes and the adjudication process in the BCIP Act are not suitable
for complex payment claims.
Complex claims generally require the consideration of extensive documentation and, in
some cases, the evidence of witnesses in order to make a fully informed decision. The
short timeframe for response by a respondent to an application under the BCIP Act and the
time by which the adjudicator must consider the material and make a decision does not allow
sufficient time to fully consider these matters. The chances of the adjudicator making the
right decision are limited. However, the consequences for the respondent if a wrong decision
is made can be devastating to its business.
In our view, complex disputes are more appropriately resolved in the court system where
evidence can be fairly tested and obligations of disclosure exist.
We support adopting a system similar to that contained in the Victorian legislation, namely
sections 10A and 10B of the Building and Construction Industry Security of Payment Act
2002 (Vic).”
76
Written submission to the Review
80
Act should not circumvent the contract
In its written submissions to the Review, a government department argued:
“… it is inappropriate to create legislation which avoids the contractual avenue of dealing
with claims and dispute resolution and therefore the legislation should only allow for the
prompt payment for work supplied. The focus of the legislation should be on cash flow.
Payment claims should be restricted to the contract price for the work, other rates or prices
stated in the contract taking into account the estimated cost of rectifying defects in the work.
Agreed variations should also be able to be claimed however disputed amounts under the
contract including unapproved variations and damages claims should be excluded. The
legislation should not provide a means of circumventing the contractual agreement between
the parties. The legislation should recognise the contractual agreement and where such a
contract is neither illegal or invalid it should uphold its terms.”
Monetary cap
The Mining and Resources Law Committee of the Queensland Law Society argued
in favour of restricting the Act by placing a monetary cap on the operation of the
BCIPA as a whole, rather than seeking to restrict a claimant’s ability to recover
certain aspects of a contested claimed amount.
Support for status quo
However, those opposed to restricting the operation of the BCIPA cited the following
reasons:
“It is the contract which empowers claimants to claim disputed variations etc.”
In detailed written submissions, one ANA wrote:
"The Act does not give a claimant an entitlement to include in the calculation of the progress
payment disputed variations, delay costs or damages for breach of contract unless the
parties have agreed that in the calculation of the progress payment the value of variations,
delay costs or damages should be included. The Act should not interfere with the contractual
agreement of the parties if a stakeholder is concerned by this issue the remedy lies in the
drafting of the contract.”
Subcontractors rely on the BCIPA rather than the court process
The Electrical Contractors Association and Master Electricians Australia in their
written submissions stated:
81
“If any restriction on payment claims is considered, we urge regulators to continue to allow
for extras and variation claims to be included. Being able to make such claims is of critical
importance to subcontractors, particularly electrical contractors working in the construction
industry, who rely on such payments to keep their businesses afloat. Many subcontractors
would be put under severe financial stress if forced to pursue extras and variation claims
through the court system as opposed to the BCIP Act.
The time and resources that would need to be dedicated to legal action would be prohibitive
for many small business owners. This would only exacerbate the inequitable bargaining
position that already exists between head contractors and subcontractors.”77
Victorian Act – a failed model
In another written submission it was argued that:
“ … the Victorian legislation is a failed model with the amendments restricting time and
variation values leaves parties with part of the dispute considered and other elements
excluded. It generates flawed outcomes where for example:


A Respondent can structure a contract for a modest sum or for part of the work (even
a separable portion) and then direct the Claimant to undertake larger portions of work
as a variation. That work would exceed the value of a variation relative to the original
contract value and thus if a dispute arises it cannot be considered.
Respondents are also disadvantaged as if the Claimant progresses the works slowly,
no time based claim for liquidated damages can be submitted to reduce the sum
otherwise payable.”
Amendments to the Victorian Act reduces the prospect of achieving its object
An adjudicator in his written submissions to the Review, argued:
“The Victorian Act in its current form limits a claimant’s entitlements by restricting what can
be included in payment claims. However this does not make the Victorian Act more user
friendly. It has the unintended consequence of reducing a respondent’s claim for liquidated
damages. It also means that in many cases, a claimant cannot claim what it is entitled under
the construction contract. The exclusions in the Victorian Act reduce the chances of
achieving the object of the Act.”
Another adjudicator argued:
“The amended Victorian Act tried similar amendments and has been a failure in that
progress payment disputes are not being referred to the adjudication process. Anecdotally,
the level of disputation through VCAT, Expert determination, arbitration and court processes
remain at levels that predated the first iteration of the Victorian BACISOPA.
77
Similar submissions were made by the Master Plumbers Association of Queensland
82
Most genuine payment disputes include disputes as to whether or not there were changes to
the work under the contract and, if there are changes, whether there is an entitlement to an
adjustment (positive or negative). Valuation differences and setoffs are significant elements
in the majority of disputed progress payments.
Estimated cost of rectifying defects is presently a problem in that it allows respondents to
provide little quantification in support of defect rectification set offs or counterclaims.
It is suggested that a claim for a set off or withholding for defects when raised in a claim,
counterclaim or payment schedule must have similar provisions to those in s17(2)(a) and (b)
of the BCIPA.”
Complex claims should remain under the BCIPA – extended timeframes
The Queensland Major Contractors Association made the following submissions:
“Nearly all Members are of the view that the type of payment claim under the Act should not
be restricted. Members consider that the entitlement under the Act should continue to be on
the basis of amounts calculated under the contract. While many Members recognise the
issue of technically and legally complex claims falling within the jurisdiction of the Act, there
was a concern that many cash flow problems do involve complex claims such as unagreed
variations. Even if such claims are complex, to the extent they are valid claims under the
contract, suppliers should be entitled to make the claim and receive payment for it.
Some Members suggested that the appropriate way to address this issue would be to enable
timeframes to be extended or to require that the adjudicator be selected based on the
adjudicator's experience and the issues raised in the claim (see response to question 14
below).”
In demonstrating the independence of the committee system within the Queensland
Law Society, the Construction and Infrastructure Law Committee took an opposing
view to Question 5 than their colleagues in the Mining and Resources Law
Committee.
The Construction and Infrastructure Law Committee suggested that the difficulties
experienced by respondents in more complex matters could be counteracted by
allowing a respondent to apply to the adjudicator for an extension of time to provide
the adjudication response “up to twice the current time frame”.
The Committee considered that such a legislative amendment would provide a “more
level playing field for the respondent (given the time generally available to an
applicant) in a high value, high complex matter.”
A bet each way
Some submitters had “an each way bet” in accepting that some aspects of claims
should be included and others excluded:
83
“An adjudication should be able to cover the types of matters claimable under a progress
claim, including the ability to claim for variations and other costs allowed for under contract.
However, given the limited time and often limited evidence that is available to an adjudicator,
rapid adjudication has the potential to neglect natural justice and may result in errors in the
adjudication determination, if the claim hinges on a complex scenario.
Accordingly, claims for breach of contract or breach of legislation and claims for latent
conditions should not be included as disputes, as these types of issues quite clearly were
not intended to be included in a rapid adjudication model.
It is equally inappropriate to adjudicate amounts based upon equitable claims or rights.”78
Similarly, Master Builders in their written submissions stated:
“As stated previously, Master Builders strongly supports the principle of 'primacy of contract'.
The Act has been deliberately designed to manage progress claims and other claims within
strict limitations. Master Builders does not support the cart blanche opening up of the Act to
all forms of contractual claims. The Act should include progress claims and variations (the
previously repealed provisions of Part 4 A of the QBSA Act - section 67H dealing with
variations should be re-examined as it provided a legislative basis for variation claims) as
well as amounts calculated under the contract.
Provided the contract is clear (e.g. daily delay rates) then the adjudicator should be able to
consider them as part of the adjudication decision. Assessing the validity of those delay
claims is a different matter and may require further clarification either under contract or
under the Act. Where the provisions and evidentiary requirements can be easily established
under the contract (e.g. bill rates for the pricing of variations, agreed hourly labour rates,
etc.) then the adjudicator should have the jurisdiction to handle those types of claims.
General damages claims and complex extension of time (EOT) claims without clear
evidentiary material should not be considered by the adjudicator. The delay and complexity
of deciding those claims goes beyond the fundamental role and purpose of the Act.
Clarifying exactly what can be considered by an adjudicator under the legislation is
supported by Master Builders. The Act should make it clear exactly the types and form in
which claims will and will not be considered.”
Consideration
When compared with what is loosely referred to as the “Security of Payment”
legislative schemes established in New South Wales, Queensland and to a lesser
extent Western Australia, it is clear that the Amended Victorian Act has significantly
less patronage by the industry. Graph C demonstrates very clearly that during the
period 2006/07-2011/12, the Amended Victorian Act performed poorly in industry
uptake by comparison with its northern States.
78
Written submissions of the Housing Industry Association
84
NSW, 1112
QLD, 731
Graph C:
2006/07
2008/09
QLD
NSW
VIC
VIC, 186
NSW, 779
QLD, 553
VIC, 134
LODGED
QLD, 674
2010/11
1200
1000
800
600
400
200
DECIDED
DECIDED
LODGED
QLD, 519
2009/10
WA, 197
VIC, 93
QLD, 887
LODGED
WA, 99
VIC, 70
WA, 172
VIC, 85
WA, 90
VIC, 63
DECIDED
LODGED
DECIDED
QLD, 720
QLD, 999
QLD, 754
WA, 105
VIC, 74
QLD, 529
LODGED
2007/08
WA, 68
VIC, 58
QLD, 395
WA, 86
VIC, 64
WA, 49
VIC, 47
DECIDED
LODGED
DECIDED
WA, 22
VIC, 29
WA, 36
VIC, 35
QLD, 404
QLD, 467
Interstate Comparison Total Applications Lodged & Total Applications Decided
0
2011/12
WA
Source: Building and Construction Industry Payments Agency, April 2013
(The figures for NSW prior to 2011/12 are not available as accurate records prior to this time were not kept by the NSW
Government. The figures for WA post 2010/11 were not available at the time of publication)
The extent of the lack of industry patronage of the Amended Victorian Act is
highlighted by the value of non-residential construction work in the various
jurisdictions as identified in Graph D.
Graph D:
Source: Building and Construction Industry Payments Agency, April 2013
Data for WA for 2011/12 does not include figures for April & May 2012 as they were not available at time of publishing.
Submissions made on behalf of a resource sector company that the lack of industry
utilisation of the Amended Victorian Act may suggest that it is appropriately confined
to the resolution of smaller less, complex payment disputes, the suggestion being
that ss.10A and 10B may appear to be having their intended effect.
85
Graph E below examines the average value of claims in Qld, NSW, Victoria and
Western Australia during the period 2006/07 to 2011/12.
Whilst the number of adjudication applications in Victoria have been comparatively
low, the value of the average claim has been historically high, although the average
value is now trending down.
For instance, the average claim in 2006/07 in Victoria was $547,695.00 compared
with the average for the corresponding period in Queensland was $305,554.00.
Similarly, the average claim in 2007/08 – in Victoria was $669,576.00 whilst for the
same period in Qld, the average claim was $352,239.00. More recently, in 2011/12,
the average value of claims in Victoria had reduced to $177,674.00 whilst the
average value of claims in Queensland had increased markedly to $540,001.00.
Graph E:
$200,000
VIC, $547,695
QLD
QLD, $305,554
QLD, $352,239
VIC, $621,096
WA, $341,324
QLD, $234,800
VIC, $351,372
QLD, $252,493
VIC, $259,707
QLD, $258,996
$400,000
VIC, $177,674
$600,000
NSW, $201,259
$800,000
QLD, $540,001
$1,000,000
VIC, $669,576
$1,200,000
NSW
VIC
WA, $442,726
$1,400,000
WA, $1,142,116
$1,600,000
WA, $1,356,198
WA, $1,566,262
Interstate Comparison of Average Claimed Amount
$1,800,000
WA
$0
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
Source: Building and Construction Industry Payments Agency, April 2013
These figures may suggest that the Amended Victorian Act is being utilised more
recently in lower value contracts. It may also mean that the existence of the larger
infrastructure projects in that State in more recent years has declined as
governments reduce public spending.
However, given that the value of non-residential construction in Victoria has
consistently tracked that of New South Wales and Queensland over the past six
years, it is likely that many building contractors are simply unable to recover what are
likely to be significant claims for “excluded amounts” under the Amended Victorian
Act. This would leave those Victorian contractors with having to rely upon the Courts
or the Victorian Civil and Administrative Tribunal (“VCAT”) as their only means of
debt recovery.79
79
Aside from other forms of alternative dispute resolution
86
Primacy of Contract Argument
There is a fundamental flaw in the ‘primacy of contract’ argument progressed by
those that seek to restrict the Act. These submitters argue that the Act should not
seek to impose legislative provisions upon parties who have entered into a
commercial contract, presumably at arm’s length.
The Act does no such thing.
Section 14, once again, provides:
14 Valuation of construction work and related goods and services
(1) Construction work carried out or undertaken to be carried out under a construction
contract is to be valued:
(a) under the contract; or
(b) if the contract does not provide for the matter, having regard to:
(i) the contract price for the work; and
(ii) any other rates or prices stated in the contract; and
(iii) any variation agreed to by the parties to the contract by which the contract
price, or any other rate or price stated in the contract, is to be adjusted by a
specific amount; and
(iv) if any of the work is defective, the estimated cost of rectifying the defect.
…
Section 14(2) deals in identical terms with the valuation of ‘related goods and
services’ supplied or undertaken to be supplied under a construction contract.
Pursuant to s.14 of the BCIPA, construction work and related goods and services are
valued first and foremost in accordance with the terms of the contract. It is the
contract that establishes a claimant’s entitlement to seek payment for variations,
latent conditions, time-related costs and in some cases pre-determined damages for
breach. Without these provisions being contained within the contract, adjudicators
would be required to value the works in accordance with ss.14(1)(b) and (2)(b) of the
BCIPA, neither of which allow a claimant to receive payment for:
-
variations; (other than agreed variations)
latent conditions;
time related costs; and
pre-determined damages for breach of contract.
To a very great extent, s.14 of the BCIPA puts the power of the parties’ destiny in
their own hands.
Dispute resolution clauses
One Government department argued as did numerous other contracting parties, that
the Act should not run “rough shod” over the agreed dispute resolution mechanisms
within a contract.
87
That submission holds some force, particularly considering the ‘primacy of contract’
argument. However, if the parties are left to their own devices in this regard, I am
concerned that the ‘take it or leave it’ contract negotiation approach adopted by
some contracting parties would result in many subcontractors being tied up in a
never ending cycle of long delays and sometimes fruitless alternative dispute
resolution mechanisms.
Even most detractors of the BCIPA would agree that the operation of the Act focuses
the parties minds and attention on the issues at hand. During the course of this
Review, I have heard numerous accounts from stakeholders, lawyers, adjudicators
and ANA’s alike that it is this ‘focusing of attention’ that often results in a settlement
between the parties before an adjudication decision is handed down. This is not a
lot unlike litigation. It has been said that nothing focuses disputing parties’ attention
like a pending trial date. However, I note that careful consideration must be had to
ensure that parties are not simply settling their disputes because they cannot work
within the constraints of the Act, or because they may have lost confidence in the Act
and those that work to achieve its objects.
Inadequate timeframes
Additionally, if Government accepts all of the Recommendations contained within
this Report, there will be significant changes to the way in which adjudication is
conducted in Queensland.
I accept the submissions of those who seek to restrict the Act, that the BCIPA’s “one
size fits all” approach does not cater well for large and more complex claims.
Further, I accept their submissions that the Act in its current form can lead to unjust
outcomes by virtue of the timeframes which are particularly oppressive in complex
adjudications.
I shall return to the issue of timeframes, when dealing with my response to the
submissions in relation to Question 9 and I shall make other recommendations
below, which I consider will, if adopted by Government, make the adjudication
process significantly more balanced than it is currently.
No carve-out
Further, I do not consider that the objects of the Act would be well served by the
carving out of what can be significant parts of a progress claim, particularly in
relation to disputed variations. Under the Amended Victorian Act, disputed variations
are an excluded amount and therefore non-claimable if:
-
the contract price exceeds $150,000; and
the total of all disputed variation claims exceeds $15,000; and
the contract contains a ‘method of resolving disputes’.
88
The object of the Act would not be satisfied if a claimant was only able to obtain
assistance with some elements of their claim but not others, forcing claimants to
seek redress through civil proceedings, presumably at significant cost. It is difficult
to see how such a fragmented approach would allow monies to flow down the
contractual chain.
Finally, for the reasons I have expressed in relation to Question 1, I do not accept
the submission that the Act should have a monetary cap.
In summary, I have formed the view that to legislatively restrict large swathes of
construction work and related goods and services which are currently claimable
under the Act is likely to have a significantly detrimental impact on the solvency of
many building contractors, subcontractors and suppliers around the State.
Suggested Legislative Amendments
Nil
Q5 - Recommendations
9.
The BCIPA should NOT further restrict the types of payment claims that can
be made under the Act.
89
Question 6: Should BCIP Act be expanded to allow adjudicators to
require the release of a security such as a bank guarantee?
Question 12: Is security of payment an issue for retentions? If so
how do you think this could be improved?
Background
The inter-related nature of these two questions means that they can be effectively
considered concurrently.
The issue of contract security or retentions has been a common recurring theme
throughout the submissions to this Review. How security is raised and held
continues to be a significant topic for lively debate within the industry as it has for a
number of years.
In relation to retention monies, the learned authors in Brooking on Building
Contracts80 said:
“Standard form subcontracts commonly provide for retention sums to be held by the builder
out of payments received by the builder as security for the proper performance of the
subcontract. The provision usually states that the interest of the builder in the money shall
be fiduciary only with the money being held by the builder as trustee for the subcontractor
without obligation to invest or to account to the subcontractor for any income or profit
derived. … Retention moneys are not held properly by the builder as trustee when the
builder pays them from an overdraft account; the general rule is that the moneys should be
kept in a separate account.”
Feedback outcomes
Before considering the issues posed in Question 6 of the Discussion Paper, I will first
address the submission made to the Review in response to Question 12.
In answer to Question 12, 35% responded in the affirmative whilst 27% were of the
view that “security of payment” was not an issue for retentions with the balance
either uncommitted or they did not directly respond to the question.
Relevant legislative provisions
The term “retention” is defined in s.67C of the QBSA Act as:
80
th
Cremean DJ, Shnookal BA, Whitten MH LexisNexis Butterworths Australia 2004, 4 ed at [14.10]
90
67C Meaning of retention amount in pt 4A
For this part, an amount is a retention amount for a building contract if –
(a) the amount is payable as part of the contract price under the building contract, but
under the contract, may be withheld from payment to the contracted party for the
building contract(i) during the progress of the building work the subject of the contract; or
(ii) for a period (a maintenance period) after the completion of the building work; or
(iii) both during the progress of the building work and for a maintenance period; and
(b) the purpose of withholding the amount is to give financial protection to the contracting
party in relation to the need to correct defects in the building work, or otherwise to
secure, wholly or partly, the performance of the contract.
The value of retention or security that can be held under a building contract by a
principal from a head contractor prior to practical completion of the building work is
limited to 5% of the contract sum pursuant to s.67K of the QBSA Act.
The value of retention or security that can be held under a building subcontract by a
contractor from a subcontractor prior to practical completion of the building work is
limited to 5% of the contract sum pursuant to s.67L of the QBSA Act.
Upon the works the subject of a building contract or subcontract reaching practical
completion, the total value of retention held by a principal, or contractor as the case
may be, cannot exceed 2.5% of the contract sum pursuant to s.67N of the QBSA
Act.
Section 67S of the QBSA Act enables a subcontractor to lodge with a contractor a
security in the form of a government bond or valuable instrument from an approved
security provider to take the place of cash security.
Section 67T of the QBSA Act enables a subcontractor to exchange a government
bond or valuable instrument for cash that may be held by a contractor provided the
value of the security is equal to the relevant amount.
A ‘valuable instrument’ is defined in s.67A of the QBSA Act to mean:
(a) a banker’s undertaking;
(b) a bond;
(c) inscribed stock;
(d) a guarantee policy;
(e) an interest bearing deposit.
The two most common forms of security that are widely used in building contracts in
Queensland are cash and bank guarantees.
91
Section 67J of the QBSA Act entitles a principal or contractor to use a security or
cash retention in part or in whole, but 28 days written notice must first be provided to
the contracted party from the time the contracting party became aware or ought
reasonably have become aware of the right to obtain the amount owed. Importantly
however, s.67J does not apply if the building works have been taken out of the
hands of the contracted party or where the contract has been terminated or the
security or retention amount has been used to make a payment into court to satisfy a
notice of claim of charge under the Subcontractors’ Charges Act 1974.
Ordinarily, if cash security is taken by the contractor, the building contract will entitle
the contractor to withhold between 5 and 10% of each progress claim until the
maximum value of retention is reached, namely 5% of the contract sum. The
contract and the QBSA Act require the contractor to pay to the subcontractor 2.5% of
the cash retention at practical completion of the head contract works, with the
balance not becoming payable until the expiry of the defects liability period under the
head contract.
It is common practice for some, but by no means all contractors and principals not to
treat cash retentions as though they were monies held on trust for the benefit of the
contracted party. From the submissions provided to the Review and as reported in
other forums81, it appears that many contractors and principals use retention monies
for their own purposes including for the maintenance of cash flow of their
businesses.
The Collins Inquiry
The importance of withholding retention monies in a separate trust fund has received
significant support in the recent New South Wales Independent Inquiry into
Construction Industry Insolvency (“the Collins Inquiry”).82
The Collins Inquiry Report noted83 a submission from the New South Wales Small
Business Commissioner who proposed the establishment of a “Subcontractor
Retention Funds Scheme” using a central fund similar to the NSW Retail Security
Bond Scheme to be administered by the Dispute Resolution Unit of the Office of the
NSW Small Business Commissioner.
Although preferring a contract based model where parties utilise a joint bank
account, Bruce Collins QC noted the absence of any witness to the Inquiry who was
able to present a cogent case against the idea that retention funds should be held as
a genuine trust fund and that such moneys should be placed in a separate bank
account with two joint signatories84.
81
Independent Inquiry into Construction Industry Insolvency,
Independent Inquiry into Construction Industry Insolvency,
83
Independent Inquiry into Construction Industry Insolvency,
84
Independent Inquiry into Construction Industry Insolvency,
82
Collins QC, November 2012 at pp.106-120
Collins QC, November 2012 at pp.106-120
Collins QC, November 2012 at p.119
Collins QC, November 2012 at p.120
92
The Collins Inquiry recommended85:
a) All retention funds are to be deposited into a trust fund;
b) Upon agreement between the principal and the head contractor and/or the
head contractor and subcontractor as the case may be, the funds be paid out;
c) Retention sums cannot be used by the holder of those moneys for any
purpose other than for the reasons afforded to it under the contract; and
d) The Security of Payment Act (SOPA) deal with disputes relating to bank
guarantees and retention moneys.
On 18 April 2013, the NSW Government released its response to the Collins Inquiry
Report86. In response to Collins QC’s recommendations to have retentions paid into
a ‘Construction Trust account’, the NSW Government announced that it supports
retentions to be held in a trust fund administered by the Office of Small Business
Commissioner under a Retention Trust model to be developed subject to a
regulatory impact assessment and industry consultation. The NSW Government has
indicated that it intends to introduce legislation to enact Australia’s first ‘Retention
Trust Scheme’, among other reforms in the Spring Session of Parliament, 2013. 87
The recent developments in NSW are significant for the reform of how retention
monies are to be held in that State and pave the way for similar protective measures
in Queensland and in other States and Territories across the nation.
Support for change
A sample of some of the submissions to the Review of those who agreed that
security of payment was an issue for retentions follows.
Extend the time to serve a payment claim from the end of the defects liability period
In written submissions from an ANA, it was argued:
“…There could be a case for the inclusion of a provision that makes it clear that, in a
contract where a final retention is due, the 12 month period referred to in section 17 runs
from the end of the defects liability period. This would give Claimant’s ample time to resolve
a final retention dispute, knowing that they can use the Act if it cannot be resolved.
Ultimately the best solution is to abolish retention monies or, follow the recommendation of
the Collins Inquiry and, require the payment of all retention monies into trust accounts.”
85
Ibid; see also Recommendations # 6 and 18
http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf - See Recommendation 18
87
http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-response-summary-for-web.pdf
86
93
A solicitor in his written submissions also suggested extending the timeframe in
which a claimant has under the BCIPA to issue a payment claim for retentions. He
stated:
“It is most commonly an issue in contracts that make no provision for the making of a claim
for the return of retentions.
Difficulties can arise for contractors in those circumstances because of a need to wait for the
expiration of a Defects Liability Period, usually 12 months before a claim can be made. In
those circumstances, the Payment Claim would be lodged more than 12 months after the
last work was performed under the Contract. We would suggest that a specific provision be
inserted into the legislation allowing for a claim to be made for the return of retention moneys
within six (6) months of the end of the Defects Liability Period where the contract makes no
specific provision on the issue.”
Retentions = the 5% discount
Similar submissions were made by members of what is known as “the Adjudication
Forum” which is an Incorporated Association which “promotes adjudication as a
means of rapidly and cost effectively valuing, on an interim basis, progress claims in
Australia”. A representative of the Adjudication Forum, submitted that:
“Retentions are often referred to by dispute‐weary contractors as the “5%
discount”. This is
because there is almost always a fight over getting this money as the head contractor has
spent it. Therein follows arguments over defects, liquidated damages, or other set‐offs as the
Respondent attempts to draw down on the entire retention amount so as not to owe the
Claimant anything.
Adjudication has proved a very useful process for deciding disputes that arise at both
practical completion and the end of the Defects Liability Period. It is often forgotten that
retentions are simply a percentage of the ‘works done’. So the payment is for work carried
out. It is not some separate payment subject to some separate entitlement. Therefore these
can be decided in adjudication like any other part of the work.
The only improvement would be for the BCIP Act to completely articulate the time in which a
claim for a final retention can be made. Final retentions are often due 12 months after
completion. Many Respondents are allowing arguments over this payment to run for months
after the expiration of this period so that they can argue that any payment claim is out of time
and offends against s.17(4)(b) of the BCIP Act. There could be a case for the inclusion of a
provision that makes it clear that, in a contract where a final retention is due, the 12 month
period referred to in s 17 runs from the end of the defects liability period. This would give
claimants ample time to resolve a final retention dispute, knowing that they can use the Act if
it cannot be resolved.”
Cash retentions are often seized when builders go into administration
A building contractor in his written submissions argued:
94
“Retentions are a major issue; they are the “blunt instrument” used by big building
companies to fund cashflow and seek discounts. Most contractors do not have the ability to
put bank guarantees in place resulting in the fall back to cash retentions. Cash retentions are
often seized when builders go into administration.
The perfect case in point was the recent matter of St Hillers Construction and there (sic)
deed of company arrangement. All retentions held against contractors, even well into the
defect liability periods were unlawfully seized. The BSA, QMBA and many others sat idly by
whilst thousands of contractors were trampled. Contractors so affected had only one
recourse ‐ a Supreme Court injunction. The minimum spend to achieve any result would be
$20,000 well in excess of most retentions unlawfully seized. Having protection under BCIPA
will certainly assist in alleviating the abuse of retention but it is treating the symptom not the
cause. The only solution to this is to insure that retentions are equally matched by security
deposits under law.”
It’s our money
A representative of another building contractor was less than complimentary of the
existing retention system adopted by the industry when they stated in their
submissions:
“Yes as retention monies are usually deducted, before payment of claim is paid. As well it
adds up to a lot of money for companies like us and usually eats into the profit margin.
Plus some companies are not around for a year then what are we supposed to do? I think a
caveat should be placed over retention at a minimum.
I also think retentions should be made obsolete contracts already have year–long liability
terms in them to give the builders recourse they, don't need to hold our money as well."
Retentions should be held by independent third party
A number of submissions to the Review advocated for the payment of retentions to
an independent third party, rather than being held by the contracting party or paying
them into a joint account.
“Release of retention amounts can be an issue if there have been disputes during a project.
Retention held by an independent third party could improve this issue.
The trigger to release the retention amount needs to be thought through. The amount may
never be released if it requires the signature of the principal.”88
“Security retentions are totally unfair. The monies owing are used by the head contractor to
provide them with bank interest for the benefit of their own construction company. This
interest should be for the subcontractor. The subcontractor should be liable for faulty
workmanship and be responsible for the cost of any repairs within the 12 months. Usually
the 5% retention would not cover repairs anyway.
88
Written submission to the Review
95
Claiming the retention amounts is a complicated and costly administration process for the
subcontractor. A third party government holding facility would be welcomed as a better
option than what exists now."89
The Electrical Contractors Association and Master Electricians Australia in their
written submission stated:
“In order to overcome this situation and prevent subcontractors being out of pocket for their
work, ECA proposes the creation of a system whereby retention monies go to Escrow
pending completion of the relevant works. This system could be created by the BCIP Act and
enforced by adjudicators. The system would be similar to the process adopted by the
Residential Tenancies Authority (RTA) in which the bond paid by a tenant at the start of a
lease is refunded in full provided no damage or loss has been incurred by the owner. An
industry or government trust style fund could be established for the building industry where
these retention monies could be held pending project completion. Introducing this system
would undoubtedly involve establishment costs, however, it would also create a more
equitable balance between the interests of principal contractors and the subcontractors
engaged on a project who are lawfully entitled to payment for the work they have performed.
As is the case with landlords provided with some security for loss through the RTA, this
system would also continue to protect the rights of consumers by ensuring work is performed
to a certain standard in order for funds to be released.”
I have found the submissions of the Major Subcontractors Group in relation to
retentions, particularly helpful. They write:
“One of the key concerns of MSG members is security of payment with respect to retentions.
As mentioned in q6, a security can be in the form of a cash retention, bank guarantee or
insurance bond.
Current practice is for building contractors to hold such securities throughout the duration of
the subcontractor’s works until the completion of a job or a project and then beyond its
physical completion to ensure they have recourse for any outstanding defects or issues. All
of the subcontractors’ retentions may be held by the building contractor until every defect is
rectified regardless of the specific subcontractor being either defect-free or having already
completed their defect rectification.
It is reasonable that these securities be held for the duration of the defects liabilities period.
However, there are many cases where these securities have been held for an unacceptable
amount of time and/or on the basis of matters not related to the individual subcontractor.
For instance, despite a subcontractor having nil defects outstanding after the 12 months
liability period, the building contractor has the capacity to retain the subcontractor’s retention
for outstanding defects unrelated to that particular subcontractor. As a result, the
subcontractor suffers the penalty of being unable to recover the outstanding retention
amount, while simultaneously the builder or main contractor has the financial benefit of the
retention. If the unrelated defect continues to remain outstanding, then the unrelated
subcontractor continues to have the retention amount held.
89
Written submission to the Review
96
MSG has a number of suggested improvements with respect to retentions:
Consideration could be given to the establishment of a third party entity to support security of
retentions of all forms. MSG members advocate the merit of considering a system much like
that which exists for the Residential Tenancies Authority (RTA), which requires a tenant to
pay a security deposit at the start of a tenancy. This deposit is held by the RTA and is paid
back to the tenancy (sic) provided no money is owed to the lessor or agent for rent,
damages or other costs.
While recognising there would be some initial establishment costs for such an entity, MSG
considers that the scheme should be self-funding with the administration of the fund to be
met by industry; that is by allocating the interest from deposits held to fund administration.”
The Association of Wall and Ceiling Industries in their written submissions state:
“The problem is not BCIP Act – it is retentions. Abolishing retentions would clear up a lot of
issues of payments across the industry. If retentions are to remain, then they must be
moved to a third party to hold rather than leaving with the builder. We would fully support an
independent body being established to manage retentions which resulted in protection of
those funds in the event of liquidation of the builder.”
Master Plumbers also agreed that retentions should be held by an independent third
party. It submitted that:
“Member feedback also suggests that retentions can be as high as 1 - 2% of a company’s
gross annual turnover, which is a considerable amount of cash flow to be withheld from a
business. Further, there are costs incurred each month by subcontractors to maintain bank
guarantees and the alternative of using cash retentions is generally considered an
unacceptable risk, particularly given the frequency of financial difficulty in the construction
industry at present.
We submit that the widespread use of retentions within the construction industry warrants
legislative protection and, given current industry practices, we submit that ensuring security
of payment for retentions is paramount.
We submit that retentions under a construction contract should be held by a third party until
they become payable to promote security of payment and ensure that retention amounts are
ready and available for payment when they become due. Perhaps a trust fund could be
administered by each authorised nominating authority or a law firm or a government body of
some sort to administer this type of program.”
An ANA in its written submissions to the Review said:
“Retention payments are a major issue, not just within the security of payment context for
this submission. Evidence provided at the recent inquiry into the BSA highlighted the major
issues around retention payments throughout the industry.
As XXXX noted in its evidence to this inquiry, an independent third party should be
appointed to ensure a clear process to release money in a timely and prompt manner.”
97
Support for the holding of retentions by an independent third party also came from
small subcontractors and large government departments. In written submissions
from a cabinet maker, it was suggested that:
“Extend the timeframe to allow for the claim for retentions at the end of the defects liability
period to come under the Act. Or better still, require retentions to be held in escrow or by an
independent body similar to domestic rental bonds.
This protects both small subcontractors as well as possibly the Head Contractor from
situations where the developer or Head Contractor goes into liquidation prior to the end of
the Defects Liability Period.”
The government department submitted:
“This is not an issue for [the department] when it contracts in the capacity of Principal.
However, where the security and return of retention moneys to a contractor in accordance
with the relevant construction contract may be impacted by the conduct or insolvency of the
Principal, it may be appropriate for the retention moneys to be held in trust or by an
independent (and fiscally secure) third party.”
Support for status quo
However the Review received a significant number of submissions which argued that
security of payment was not an issue for retentions. A sample of those submissions
follows:
Contractors would find other means of side-stepping a statutory fund
One submitter argued that if a third party was established to hold retentions, then
contractors and principals would find other means to withhold cash from the
subcontractor or contractor as the case may be. It was submitted that:
"If the system as suggested was put in place, it would only worsen the cash situation for the
claimant, as the writer would be inclined to hold a small percentage of the contract value
aside for completion of these matters, these matters being contract works that are not yet
complete."
Government has no place intervening in commercial contracts
Another recurring submission from those opposed, was that Government has no
place to intervene in commercial agreements between two parties who have entered
a contract at arm’s length. Such legislative intervention it is argued will impede the
cash flow of the contracting party and be costly and provide little benefit to
contracted parties.
98
One national building contractor in its written submissions argued that:
“Parties are free to negotiate reasonable, contractual conditions precedent to a superior
party having recourse to security or retention monies. Any imposition of legislated controls in
addition to contractual controls will deprive all parties in the contractual chain of an important
power (limited by their contract and by an established body of case law) to have recourse to
security, where an actual or potential claim arises; and add unnecessarily to the cost of
doing business for principals, head contractors, subcontractors and sub-subcontractors.”
A resources sector company also rejected the proposal arguing that:
“In our view, to amend the BCIPA so that retention amounts are held by a third party would
be a gross interference with the parties freedom of contract. The parties should be at liberty
to agree the method on how the retention moneys will be held. There is no need for the
State government to interfere with the parties' privity of contract.
Further, there appears to be no justification for the BCIPA to be amended so that a third
party must hold retention moneys. There is no major difference between a principal holding a
bank guarantee or other performance bond as security under a contract, and a principal
holding retention moneys as security. Bank guarantees and performance bonds can be
easily converted to cash. Therefore, it is unclear what the justification is for amending the
BCIPA in this respect.
Besides, the Queensland Building Services Authority Act already sets out broad protection
measures for commercial contractors. In particular, under section 67J, a principal must give
a contractor notice of its intention to set-off amounts against security (including retention
moneys) before it has recourse to that security. It also sets out statutory limits for retention
money and timeframes when the retention money must be returned.”
The Housing Industry Association in its written submission argued that:
“Retentions are monies held to secure performance of the contract and not monies yet
earned by the subcontractor. HIA is of the view a retention amount being held by a third
party is not an issue for the BCIP Act.”
Master Builders were also opposed to the introduction of third party retention
scheme. They argued:
“The current provisions that allow for adjudicators to decide on the release of cash retentions
only is supported by Master Builders. While there may be a case for extending the scope of
the adjudicator to award the release of security in the form of bank guarantees, Master
Builders believes such issues are best resolved under the contract and beyond the scope of
the Act. The issue of enabling third parties to hold retention amounts is also opposed by
Master Builders. There is simply no evidence, nor any basis for, establishing another layer of
red tape with any perceivable benefit to the industry. The contract provides for a process in
relation to the release of security and they should be followed.”
The proposed scheme would impede cash flow
Another building contractor stated in his written submissions:
99
“We strongly do not support a requirement that retention monies be held by independent
third parties.
Such a requirement would impede cash flow, and thus operate in a manner contradictory to
the purpose of BCIPA. It will also impede the use of the security where a contractor has a
genuine need to call on retention monies. The inevitable increase in administrative costs
associated with such a requirement, coupled with the inconvenience, would outweigh any
minor benefit to be gained.
It is also noted that the retention moneys is not intended to create a security interest in
favour of the claimant. It is an unpaid part of the contract price, as is the case with the rest of
the contract price throughout the duration of the contract.” (Emphasis added)
Concerns re: administration costs
Concerns were raised by a national building contractor about the costs associated
with establishing and maintaining a third party administered scheme. It argued that:
“Although there may be some issues regarding the security of payment for retentions, the
benefits of a third party administered system would potentially be offset by the additional
administration needed to set up and manage the alternative scheme.”90
Consideration
Does BCIPA entitle a claimant to recover retention?
Some submitters who are opposed to claimants being able to recover retentions
under the BCIPA, argue that the Act does not or should not provide such an
entitlement. To address these submissions, one needs to examine the fundamental
provisions of the BCIPA.
The objects of the BCIPA are set out in s.7, which states:
7 Object of Act
The object of this Act is to ensure that a person is entitled to receive, and is able to recover,
progress payments if the person(a) undertakes to carry out construction work under a construction contract; or
(b) undertakes to supply related goods and services under a construction contract.
Section 12 of the Act provides:
12 Rights to progress payments
From each reference date under a construction contract, a person is entitled to a progress
payment if the person has undertaken to carry out construction work, or supply related
goods and services, under the contract.
90
A number of submissions received raised concerns regarding the costs associated with establishing and
maintaining such a scheme
100
The term “progress payment” is defined in Schedule 2 of the Act as:
progress payment means a payment to which a person is entitled under section 12, and
includes, without affecting any entitlement under the section—
(a) the final payment for construction work carried out, or for related goods and services
supplied, under a construction contract; or
(b) a single or one-off payment for carrying out construction work, or for supplying
related goods and services, under a construction contract; or
(c) a payment that is based on an event or date, known in the building and construction
industry as a ‘milestone payment’. [Emphasis added].
It must be remembered that retention monies held by a principal or contractor are
monies held for work that has been performed by a contracted party. Until the
contract provides otherwise, for all intents and purposes, monies held on retention
belong to the contracted party, but are retained by the contracting party to secure
performance of the contract.
Retention monies should be considered no differently to any other money owing
under the contract. The interim nature of the BCIPA 91 is not affected by the release
of retention any more than any other amount that may be valued under the contract.
In my view, it is clear that the BCIPA does entitle a claim to be made to recover
retention monies.
I turn now to whether the BCIPA should entitle a claim to be made to recover
retention monies.
The Housing Industry Association mounted a similar argument when providing
submissions before the Cole Royal Commission, saying that the draft Uniform
National Security of Payment Bill ought not enable a claimant to recover a final
progress claim. However, Commissioner Cole QC rejected this argument saying:
“The evidence before the Commission suggests that often the most critical time in which
third party adjudication is required relates to the final claim, because it is at that time that the
bargaining position of subcontractors is weakest, as all of the their work on a project has
been completed. The scheme would be too easily circumvented if parties knew that it would
not apply irrespective of their conduct in relation to the final claim.92”
I respectfully agree with and adopt the reasons stated by Commissioner Cole QC.
The corruption of retention funds
It is clear from some of the submissions extracted above that some contracting
parties consider that it is perfectly normal and indeed an acceptable business
practice for retention monies to be used by them to assist the cash flow of their own
91
92
See s.100 of the BCIPA
Final Report of the Royal Commission into the Building and Construction Industry, p.263, Vol 8
101
businesses. That is a fundamental, although apparently common misunderstanding
on their part in my view.
Contracted parties are systematically exposed to the risks of non-recovery of
retentions where contracting parties holding retention become insolvent. In my view,
the securing of these retentions cannot reasonably be considered a ‘minor benefit’
as some submitters suggest.
I accept and concur with the findings of Collins QC where he said in respect of the
evidence before him93:
“The Inquiry accepts the overwhelming evidence provided to it and the findings of past
inquiries that subcontractors frequently do not receive the retention moneys due to them at
practical completion and at the conclusion of the defects liability period.
It has been made clear to the Inquiry, that retention sums have been subject to abuse by
holding parties in a manner that has placed considerable strain on the supply chain,
predominantly on subcontractors and their ability to maintain cash flow to their business.
…
The Inquiry has concluded that in many cases, the true purpose of a retention fund has been
corrupted and made into a ready-made fund that is available to the holding party for
whatever purpose they choose to use it, regardless of the risk of being unable to repay it.
Like ‘cheque book persuasion’ it has become a weapon, not a protection.”
Primacy of contract
Submitters who maintain that the BCIPA has no place in interfering with the rights of
commercial parties in their freedom of contract, have long ‘missed the boat’. I accept
that Government should be loathed to intervene into the affairs of two commercial
parties who have entered into a contract at arm’s length. However, Government has
a public policy obligation to intervene even in commercial contracts where the
behavior of some, has the effect of seriously damaging the rights of others. 94
Why should the builder be able to spend what is not its money?
The provisions of the BCIPA recognise the inequitable bargaining position of some
contracting parties and those whom they deal with. Queensland legislation does
already regulate commercial building contracts via Part 4A of the QBSA Act,
however it is clear from the submissions before me, that Part 4A does not go far
enough to adequately address the risks that many subcontractors face on a daily
basis that they will continue to be deprived of monies that are rightfully theirs. As
Collins QC states95:
“The extraneous use of retention funds by the head contractor, while certainly not illegal in
93
Independent Inquiry into Construction Industry Insolvency, Collins QC, November 2012 at p.115
See for example: Part 4A of the QBSA Act; The making void of “Pay when paid” clauses – s.16 BCIPA; s.
18(1) of the Australian Consumer Law (contained in Sch 2 of the Competition and Consumer Act 2010 (Cth)
95
Ibid at p.112
94
102
NSW, will always place the subcontractor’s money at some risk of not being returned. The
question asked by the Inquiry was, why should the builder be able to spend what is not its
money?”
Removal of retention
Some submitters argued that retention should be outlawed. I do not subscribe to
that view. Retention and security does have a place in the building industry. I accept
that contracting parties should retain the entitlement to withhold the presently
legislated value of retention as security, able to be called upon in the event that the
contracted party does not fulfill its contractual obligations.
Extension of time to provide a claim for retentions
A number of submitters have suggested that the BCIPA should be amended to allow
claimants the opportunity to issue a payment claim for retentions up to 12 months
after the expiry of the defects liability period. For the reasons I have provided in
response to Question 9, I reject those submissions.
Time for release
As detailed above, Part 4A of the QBSA Act governs the maximum amount able to
be retained by a contracting party and when retention or security must be released to
the contracted party.
A common complaint heard from subcontractors by this Review is that very often,
building contracts contain clauses which disentitle the part release of retention or
security until the head contract has reached practical completion. Similarly, many
building contracts do not permit the release of the final retention or security until the
expiry of the defects liability period under the head contract.
It is noted that many subcontractors will have long left the building site by the time
the head contract reaches practical completion. Subcontractors have complained to
the Review that they are often having to pursue information from the contractor to
determine whether the works under the head contract have reached practical
completion or when the defects liability period has expired.
Notification
I acknowledge the importance of maintaining retention and a contracting party’s
entitlement to ensure that the contracted party fulfills its contractual obligations. It is
understood that the contractor’s obligations are not entirely fulfilled with the Principal
until such time as the expiry of the defects liability period under the head contract.
103
Therefore, I decline to make recommendations regarding the variance of the duration
in which retentions may be held. That should rightly be a matter for the parties.
However, I do recommend that Government introduce into Part 4A of the QBSA Act
a provision which requires a contracting party to notify a contracted party in writing
within 5 business days of the following events:
(a) when the works under the head contract have reached practical completion; and
(b) when the head contract defects liability period has expired.
In circumstances where a building contract is between a subcontractor and subsubcontractor, the subcontractor must notify the sub-subcontractor in writing of the
happening of either of the above events within 5 business days of receiving written
notice from the contractor.
A failure to notify a contracted party should become an offence under the QBSA Act
with an appropriate monetary penalty which should escalate with repeat offences
and there should also be an allocation of demerit points against their licence.
Alternatives
I have considered alternatives to the current system of withholding retentions. The
model suggested by Collins QC where retentions are paid into a construction trust
account96 requiring both parties to agree upon its release is in my respectful view
likely to be problematic because the contracted party will retain at least some control
over that money. My concern is that control may be exercised as leverage over the
contracted party if the retention/security is not entirely removed into the hands of a
disinterested third party. As Collins QC notes there is considerable benefit in “taking
the sugar off the table”.97
I see little utility in placing retentions in a trust account administered by a private
organisation such as an ANA, law firm or other private entity. As identified by one
government department, the considerable amount of monies that would be held in
retention should be entrusted to an entity that is ‘fiscally secure’, such as a
government entity with appropriate checks and balances, rather than the private
sector.
Guilt by Association
A director of a large building company expressed his frustration to me during an
individual consultation, that he did not consider it fair, when his company acts
appropriately in dealing with retentions, that it should be disadvantaged by the
implementation of a third party retention scheme because of the actions of some
contractors.
96
See Recommendations 18 and 6
Final Report of the Independent Inquiry into Construction Industry Insolvency, Collins QC, November 2012 at
p.113
97
104
I accept that there are a great many number of contractors that do act appropriately
with the retentions they hold from their subcontractors.
I also accept that to introduce remedial measures brings a degree of inconvenience
upon those who “do the right thing”. However, in my view, the abuse of retentions
appears to border on that of being systemic. It should not be permitted to continue
unchecked.
Costs of the scheme
Many submitters opposed to a third party retention scheme raised the issue of the
costs associated with its administration. I accept that if Government were to
establish a new department or statutory authority or a similar entity to administer a
scheme ‘from scratch’, then there would be considerable establishment costs.
Government is fortunate however in that it could call upon the statewide resources of
the QBSA to create an internal office or division with the responsibility of
administering such a scheme. Whilst there would of course be initial establishment
and on-going costs, I am confident that those costs would be comparatively modest
given the revenue that would be raised from interest earned on retentions held by
the scheme. I would envisage that the income earned from the scheme would be
made available to fund the activities of the QBSA, further securing the QBSA’s status
as one that is entirely “industry-funded” rather than tax-payer funded.
Economic modeling of a retention scheme is outside the terms of reference of this
Review.
Contractors and their member associations will undoubtedly take up the cudgels and
test the Government’s resolve on this issue, but I consider it to be of such significant
importance that Government must act to protect the financial interests of
subcontractors. Those who would argue that such a scheme would place financial
pressure on contractors and “drive up the cost of building” are by default admitting
that retentions are being improperly used and withheld. It must also be remembered
that contractors themselves stand to benefit from such a scheme because their own
retentions would be secured from principals.
The fact that the NSW Liberal National Coalition Government has indicated as
recently as 18 April 2013 that it intends to establish a similar retention scheme98
should signal that the tide is now turning on security of retentions just as NSW led
the nation in the implementation of the Security of Payment legislation.
98
http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf
105
Construction Retention Bond Scheme
I recommend that the most equitable approach to safeguarding monies held on
retention and other forms of security, is by the establishment of a Construction
Retention Bond Scheme.
The Construction Retention Bond Scheme would:
(a) apply to all domestic, commercial, civil and engineering contracts in circumstances
where the contract sum is $100,000 or greater. Given the legislated maximum value
able to be retained under Part 4A of the QBSA Act, this threshold would safeguard
retentions exceeding $5,000 up to practical completion and from $2,500 post
practical completion until the expiry of the defects liability period;
(b) be administered by the Queensland Building Services Authority;
(c) be self-funded by the interest earned off monies held on trust for the benefit of
contracted parties;
(d) allow for the payment of monies or the release of security held by it:
(i) by agreement of the parties;
(ii) by Order of a Court or QCAT;
(iii) by an award of an arbitrator, or by expert determination;
(iv) At the direction of an adjudicator under the BCIPA;
(v) At the direction of a domestic adjudicator under the proposed Rapid Domestic
Adjudication Scheme;
(vi) If the contracted party is an individual and he or she dies, disappears or takes
advantage of the laws of bankruptcy, or in the case of a company, has a
provisional liquidator, liquidator, administrator or controller appointed, or is wound
up or is ordered to be wound up:
(A) the contracting party may make written application to the QBSA for the
release of the retention and/or security;
(B) the contracting party shall provide with the application an accompanying
statutory declaration detailing the reasons for the application;
(C) if satisfied that the contracting party has complied with the terms of this
provision, the QBSA shall notify the parties in writing accordingly within 5
business days of the making of the application and shall release the retention
and/or security to the contracting party within 10 business days of the making
of the application;
(D) if the QBSA is not so satisfied, it shall notify the parties of its decision within 5
business days of the making of the application.
(E) a decision whether or not to release the retention and/or security would be a
‘reviewable decision’ upon application by either party to QCAT or a Court of
competent jurisdiction;
(F) Significant penalties should apply for false or misleading statements made to
the QBSA seeking release of retention/security. A contracting party found to
have made false or misleading statements for the purposes of obtaining the
release of retention/security should have their licence cancelled. Such
conduct may also constitute fraud under s.408C of the Queensland Criminal
Code.
106
Suggested Legislative Amendments
Refer to the Office of the Queensland Parliamentary Counsel
Q12 - Recommendations
10.
Part 4A of the QBSA Act should be amended to make it an offence for a
contracting party not to advise a contracted party in writing upon the reaching
of the contract milestone being, when the contracted party is entitled to claim
for the release of retention/security.
11.
Monies held on retention and other forms of security, should be held under a
Construction Retention Bond Scheme.
107
Question 6 of the Discussion Paper posed the following question:
Should BCIP Act be expanded to allow adjudicators to require the
release of a security such as a bank guarantee?
Background
Presently, adjudicators when deciding an adjudication application do not have
authority to direct the return of a bank guarantee or other form of security under the
BCIPA.99
It is difficult to obtain statistical data on the percentage of the form of security
provided by contracted parties to those above them in the contract chain. As stated
previously, despite what may be contained in the contract, s.67S of the QBSA Act
enables a contracted party to provide security to the contracting party in the form of a
“valuable instrument”, whilst s.67T entitles a contracted party to swap a valuable
instrument for cash security held by the contracting party.
In the absence of such statistical data, I have been advised of a ‘straw poll’ taken by
the Secretary of the Builders Labourers Federation, David Hanna in March 2013 of
twenty small and medium sized subcontractors. Mr. Hanna advised the Review that
70% of respondents to the straw poll opted for cash retention with the remainder
opting to use security in the form of a bank guarantee or bond. I accept that such
data needs to be treated with some caution, but in the absence of any better
information, it can be used as a guide.
Feedback outcomes
In answer to this question, 42% responded in the affirmative whilst 22% were of the
view that adjudicators should not be able to require the release of security with the
balance of 36% not directly responding to the question.
Support for change
The following submissions provide examples of arguments raised by submitters in
favour of allowing an adjudicator the statutory power to direct the release of a bank
guarantee:
99
Spankie v James Trowse Constructions Pty Ltd [2010] QSC 29 at [37]-[42]per McMurdo J
108
Inaccessibility of retention
One subcontractor advised the Review:
“Our company have situations where we have both cash retentions and bank guarantees
being held far beyond the termination of the defects period. We also have a situation where
cash retention is due to be returned and we cannot find the principal contractor. This is an
unacceptable situation which could be alleviated with the use of an independent third party
escrow service.”100
WA and NT Security of Payments Acts permit retention and security return
The Major Subcontractors Group in their written submissions argued:
“Currently, under the BCIP Act, adjudicators are limited to monetary decisions. In Western
Australia and the Northern Territory, adjudicators can decide a payment dispute about the
return of a security held by a party that is due to be returned under a contract.
MSG members support an amendment to the BCIP Act to bring it into line with those states
and allow adjudicators to direct a respondent to release a security of any form, including a
bank guarantee. Consideration should be given to the establishment of a process, possibly linked to the
QBSA Penalty Points Process, should respondents not follow an adjudicator’s decision in
this regard. Under this process it is suggested a 'two strikes and out' approach be adopted.”
Logical for BCIPA to permit release of security
Similar submissions were made by the Master Plumbers Association of Queensland
who said:
“… It would seem logical that the return of a security that is due to be returned under the
contract could be considered a monetary decision (or a necessary result of a monetary
decision) and it would seem practical for an adjudicator to have the power to make this
decision. The decision could then be enforceable by a court if it the respondent failed to
comply, in a similar way to a judgement (sic) debt. Alternatively, failure to comply with an
adjudicator’s order of this kind could be linked to the QBSA Penalty Points Process.”101
An adjudicator in his written submissions suggested that:
“The BCIP Act should be expanded to allow adjudicators to require the release of a security
such as a bank guarantee. The security held covers a proportion of the contract work and
there needs to be a mechanism to require the release of the security at the end of the
contract or defect liability period.
100
101
Written submission to the Review
Written submission to the Review
109
The definition of the reference date should be expanded to include a reference date at the
end of the defects liability period so that a payment claim can be issued to cover the release
of a security.”
In furtherance of the object of the Act
In their written submissions, a quantity surveying firm stated they too were in favour
of expanding an adjudicator’s authority to direct the return of securities. They said:
“The object of the Act is to allow cash to flow. Security and retention guarantees or bonds
are counted as part of a company’s overdraft facility. Thus if a company has a $500,000
overdraft facility and has $250,000.00 in security guarantees resting with clients, their ability
to trade is restricted as their overdraft facility is reduced to $250,000.00.
…
The return of a guarantee is a contract condition and provided the relevant conditions that
trigger the release have been achieved, then the guarantee should be released.
If the retention is in the form of cash, then under the current format of the Act the adjudicator
can make a decision in respect of whether the cash should be released. It seems entirely
reasonable that where the retention or security is in a form other than cash that the
adjudicator can decide that the guarantee be returned.”
Generally speaking the proposal put forward in the Discussion Paper received broad
support from the legal profession, but the support was not universal.
A solicitor in his written submissions gave a resounding vote in support of amending
the BCIPA. He said:
“We wholeheartedly endorse this proposal. Currently to secure the return a (sic) Bank
Guarantee a subcontractor has to bring an action in either the District Court or the Supreme
Court for a mandatory injunction requiring the return of the document. These are of course
expensive procedures.
Many of our clients find themselves at the end of small jobs with Bank Guarantees of, for
example, $10,000 to $30,000 being held over by builders or principals. As the
subcontractors are required to hold with the bank assets or funds sufficient to cover the
amount of the bank guarantee and they incur fees and charges whilst the bank guarantee is
outstanding these can represent a significant burden on the resources of small businesses.
Providing a less expensive procedure for the return of Bank Guarantee would be a welcome
reform for many of our clients.”
A bet each way
Some members of the Queensland Law Society Construction and Infrastructure
Committee argued in favour of a legislative amendment, but then others within the
Committee questioned whether an adjudicator should be given any authority to
110
determine the return of security, be it cash, bond or bank guarantee. They said: 102
“Yes. As the BCIP Act enables the adjudicator to consider retention moneys or a cashed
bank guarantee or bond, there should be no reason why the adjudicator should not be able
to consider the original bank guarantee or bond.”
Whilst those Committee members opposed said:
“The Discussion Paper focuses on a power to order the return of bank guarantees. The
Committee recognises that there appears to be a policy difference in allowing cash
security/retention money to be the subject of a decision but not bank guarantees. First,
perhaps both should not be subject to a claim under the Act. An adjudication decision is an
interim decision. The return of any security (whether in the form of cash or bank guarantee)
is likely to impact on the security holder in a final sense (eg. it is unlikely that a decision to
require the bank guarantee be returned will be reversed and the loss of security can be
significant). One step might be to expand the power in sections 67S and 67T [of the QBSA
Act] to more contracts to allow for a bank guarantee to be lodged to replace security, thus
allowing security to be retained but cash flow facilitated.”
Support for status quo
Submissions were received from various parties who were opposed to giving
adjudicators the power to direct the release of bank guarantees. Among those
submissions the following reasons were provided:
Queensland going it alone
One lawyer in his written submissions argued:
“… bank guarantees are an autonomous contract between a beneficiary (usually the
principal or head contractor) and a bank, independent from the construction contract,
granting such a power would introduce jurisdiction to adjudicators over banks and the
banking system as well, not just construction contracts. This would create a regulation over
the banking system different from other jurisdictions, may be unconstitutional and if anything
will be an embarrassing statutory intervention unique to Queensland. As such, there is no
need to grant jurisdiction to adjudicators regarding bank guarantees given the courts can
and do exercise jurisdiction over the presentation of bank guarantees and can grant
injunctive relief.”
Security is a matter independent of cash flow
A building contractor also argued against any legislative amendments in its written
submissions. They opined:
102
Written submission to the Review
111
“Firstly, it is not central to the purpose of the BCIP Act–which is to ensure that builders get
paid and their cash flow is protected. Security is a matter independent of cash flow. Secondly, it would require an adjudicator to make a determination on the complex issues of
practical completion and final completion. If an adjudicator made a determination in the case
of a disputed final payment claim and released the security, that could have the effect of
being a final determination of rights under the contract (particularly where the claimant is
financially unstable). Adjudication decisions are only ever intended to be provisional.
The courts have recognised that a Superintendent’s issue of a final certificate (or payment
schedule) can in certain circumstances “trump the effect of the adjudication decision”
(Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QCA 329). The Courts
have wisely recognised that the jurisdiction of adjudicators should not extend to matters
where a final decision is made. Put simply, once a security is released the principal cannot
get it back.”
Interim nature of BCIPA is inconsistent with a return of security
Members of the Queensland Law Society’s Mining and Resources Law Committee
were also opposed to amending the BCIPA. They said:
“No. Bank guarantees are usually provided in high value construction contracts, where the
contracting parties are sophisticated and of respectable financial standing.
Further, the BCIP Act is intended to address cash-flow problems in the construction industry
caused by the withholding of progress payments. Bank guarantees are not usually a cashflow issue. They are a performance bond provided by a contractor and are often the only
contractual protection which a principal or purchaser has against a contractor's default under
a contract.
Moreover, the case law relating to calling on security is fairly complex, although welldeveloped. Many adjudicators appointed under the BCIP Act, some of which are not legally
trained, would be ill-equipped (in terms of expertise, experience and available time) to make
determinations on non-monetary matters such as releasing security.
Furthermore, as the relief obtained under the BCIP Act is only interim in nature, so would
any determination on security. It would not therefore reduce the initiation of urgent court
proceedings by parties in relation to bank guarantees (which is the usual course of action
taken) although it might very well increase the amount of urgent injunctive and declaratory
relief being obtained.”
The majority of members of the Queensland Major Contractors Association were
similarly opposed. It submitted:
“The majority of Members believe that the Act should not be expanded to allow adjudicators
to require the release of a security, such as a bank guarantee. These Members emphasised
that an adjudication is intended to be an interim decision whereas the release of security
tends to concern events going towards the finalisation of the contract. 112
However, a number of Members agreed that adjudicators should be allowed to require the
release of a security, provided that the decision is made strictly in accordance with the terms
of the contract.”
Adjudicators systematically lack independence
Similarly, in another written submission to the Review, the submitter among other
things, queried the competence and independence of adjudicators in determining
whether retentions ought to be returned.
It argued:
“ … securities are specifically provided to guarantee the claimant's performance under the
construction contract. Often, they are the only form of guarantee a respondent will have to
ensure the claimant's performance. Allowing adjudicators to make directions with regard to
the release of security when adjudicators systemically lack independence (in favour of
claimants) and are generally unqualified to deal with such matters would be hazardous. Expanding adjudicators' powers in such a fashion is cause for serious concern and would
damage, not improve, the operation of the BCIP Act.”
A matter for the contract
The Queensland Resources Council rejected the proposal saying:
“No. The QRC submits that the scope of the BCIP Act should not be extended to allow
adjudicators to require or decide non-monetary claims (such as the release of a security).
These are contractual issues and should not be decided by an adjudicator for the same
reasons given in response to Question 5 in relation to whether payment claims should be
restricted to certain types of claims. These issues are completely outside the intended
purpose of the BCIP Act, which is to facilitate payment during the course of the works.”
The final word in opposing the suggested expansion of an adjudicator’s authority
goes to one government department, which submitted that:
“Securities held by XXXX are returnable in accordance with the contract. We do not see that
a further direction from adjudicator would be necessary in relation to securities held by the
department. The BCIP Act provides a statutory mechanism for progress payments for work
done. The purpose of securities and bank guarantees held by XXXX are to ensure the
proper performance of the contract and the securities are normally held until the completion
of the contract. They do not relate to payment for work done.
Additionally, if the department was to have additional claims against the claimant which had
not yet been determined or which was subject to appeal, the release of the securities before
a final determination may adversely impact on the department's ability to recover its claim.”
113
Consideration
In my reasons in response to Question 12 above, I have already considered that the
BCIPA does entitle a claimant to recover a final claim under a construction contract
which includes a claim for retention monies. It is not necessary for me to revisit that
issue again.
The issue posed for stakeholders in Question 6 is whether or not it is desirable for
the BCIPA to be amended to allow an adjudicator to direct that security in the form of
a ‘valuable instrument’ to be returned to the contracted party.
Would Queensland be going it alone?
If the proposal were implemented, Queensland would not be embarking on new
territory, although it would be the first State modeled on the NSW legislation to do
so. Both the West Australian and Northern Territory legislation allow for an
adjudicator in those jurisdictions to direct the return of security.
Western Australia
Section 6 of the WA Act provides:
6. Payment dispute
For the purposes of this Act, a payment dispute arises if —
(a) by the time when the amount claimed in a payment claim is due to be paid under the
contract, the amount has not been paid in full, or the claim has been rejected or
wholly or partly disputed;
(b) by the time when any money retained by a party under the contract is due to be paid
under the contract, the money has not been paid; or
(c) by the time when any security held by a party under the contract is due to be
returned under the contract, the security has not been returned.103
Section 31(2) of the WA Act, relevantly provides:
(2) An appointed adjudicator must, within the prescribed time or any extension of it made
under section 32(3)(a) —
(a) …
(b) otherwise, determine on the balance of probabilities whether any party to the
payment dispute is liable to make a payment, or to return any security and, if so,
determine —
(i) the amount to be paid or returned and any interest payable on it under section
33; and
(ii) the date on or before which the amount is to be paid, or the security is to be
returned, as the case requires.104
103
An almost identical provision is contained within s.8(c) of the Construction Contracts (Security of Payment)
Act 2004 (NT) (“the NT Act”)
104
An almost identical provision is contained within s.33(1)(b) of the NT Act
114
Section 36 of the WA Act also provides that:
An appointed adjudicator’s decision made under section 31(2)(b) must —
(a) be in writing;
(b) be prepared in accordance with, and contain the information prescribed by, the
regulations;
(c) state —
(i) the amount to be paid and the date on or before which it is to be paid; or
(ii) the security to be returned and the date on or before which it is to be returned105,
as the case requires;
…
The cognate Construction Contracts (Security of Payments) Act 2004 (NT) (“the NT
Act”) effectively mirrors the provisions of the WA Act.106
Collins QC in the Final Report in the Independent Inquiry into Construction Industry
Insolvency in NSW107 recommended that an adjudicator be entitled to decide (on an
interim basis) disputes concerning:
(1) bank guarantees and whether or not a party was entitled to cash a bank
guarantee; and
(2) the entitlement or otherwise to retain retention sums.
The NSW government has supported these recommendations in principle. 108
It is also worth noting that the draft uniform Building and Construction Industry
Security of Payments Bill 2003 (Cth) (‘the draft Commonwealth Uniform Bill’)
recommended in the Cole Royal Commission Report also entitled a claim to be
made for the release of security. The draft Commonwealth Uniform Bill defined a
payment claim as:
“a claim for payment or release of security made under the provisions of a construction
contract.”109
In the premises, I do not accept the submission that Queensland would be “standing
alone” with such legislative intervention. Nor do I accept that it would in anyway be
unconstitutional. The contributor who suggested as much has not provided any
authority to support the submission, nor could I locate any decisions which have read
down the relevant provisions of the WA Act or the equivalent NT Act. In my view,
enabling an adjudicator to direct that a bank guarantee be released, will have little or
no impact upon finance institutions. No evidence has been provided to me, which
would make me consider otherwise.
105
An almost identical provision is contained within s.38(1)(c) of the NT Act
See ss. 8; 33(1)(b); 38(1)(c)(ii) of the NT Act
107
See Recommendation # 39.1 and 39.2
108
See: http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf
109
See s.4 of the draft Commonwealth Uniform Bill – p.276 of Volume 8 of the Final Report of the Royal
Commission into the Building and Construction Industry
106
115
In the event that Government does not implement the Construction Retention Bond
Scheme and a contracting party cashes a bank guarantee contrary to its entitlement
under the construction contract, I see no impediment to an adjudicator making a
decision as to the value of the amount wrongfully retained by the contracting party,
which sum would form part of the adjudicated amount.
Adjustment of final entitlements
I do not accept the submission that an adjudicator in directing the return of security
has affected the final entitlements of a respondent.
In my view, as was submitted to me by a number of stakeholders, there is no logical
explanation for the differentiation between an adjudicator deciding that a final claim,
or part thereof which may include cash retentions being any different to security held
in the form of a bank guarantee or other ‘valuable instrument’.
The parties’ final entitlements remain protected by s.100 of the Act which provides:
100 Effect of pt 3 on civil proceedings
(1) Subject to section 99, nothing in part 3 affects any right that a party to a construction
contract—
(a) may have under the contract; or
(b) may have under part 2 in relation to the contract; or
(c) may have apart from this Act in relation to anything done or omitted to be done
under the contract.
(2) Nothing done under or for part 3 affects any civil proceedings arising under a
construction contract, whether under part 3 or otherwise, except as provided by
subsection (3).
(3) In any proceedings before a court or tribunal in relation to any matter arising under a
construction contract, the court or tribunal—
(a) must allow for any amount paid to a party to the contract under or for part 3 in any
order or award it makes in those proceedings; and
(b) may make the orders it considers appropriate for the restitution of any amount so
paid, and any other orders it considers appropriate, having regard to its decision in
the proceedings.
In addition, the Queensland Court of Appeal has been very clear about the legislative
intent of the BCIPA and how that intention has shifted the risk of non-recovery on to
that of the contracting party. In R J Neller Building Pty Ltd v Ainsworth110, Keane JA,
as his Honour then was, refused to grant leave for an appeal from the District Court
where Dodds DCJ refused to order a stay of enforcement under UCPR r 800 arising
from an adjudication certificate. At [40] Keane JA said:
“The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may
cause the financial failure of the builder before the rights and wrongs of claim and
counterclaim between builder and owner can be finally determined by the courts. On that
assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the
risk that the builder might ultimately be required to refund the cash in circumstances where
the builder's financial failure, and inability to repay, could be expected to eventuate.
110
[2009] 1 Qd R 390
116
Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be
due to a non-residential owner after a successful action by the owner must, I think, be
regarded as a risk which, as a matter of policy in the commercial context in which the BCIP
Act applies, the legislature has, prima facie at least, assigned to the owner. [Emphasis added].
Complexity of the law in relation to the release of security
I accept that many of the submissions that are raised before adjudicators are
complex in nature. Clearly, many adjudicators are not legally qualified, but equally
there are those that are.
There are registered adjudicators who are experienced solicitors and counsel who
one would hope, be capable of dealing with such issues. This demonstrates another
example of the importance of the appropriate appointment of adjudicators, a matter
to which I refer in response to Question 8 of the Discussion Paper.
That is not to say that non-legally qualified adjudicators should not be appointed in a
brave new world, far from it. One of the strengths of the current panel of
adjudicators is that they are drawn from many and varied disciplines, including:
(1) Quantity Surveyors;
(2) Architects;
(3) Engineers;
(4) Academics;
(5) Building contractors;
(6) Project managers;
(7) Arbitrators; and
(8) Lawyers
It is this depth of experience if properly utilised, can be of significant benefit to the
industry, but to reiterate, it is in my view a matter of having “different horses for
different courses”.
I have also dealt with the issue of the independence of Adjudicators in my response
to Questions 8 of the Discussion Paper.
Increase in court applications
Allowing adjudicators to direct the return of security may well increase the number of
urgent applications for injunctive relief, but then, it may not. If Government accepts
the various recommendations made in this report, my strong inclination is that the
number of applications to the courts will reduce overall.
117
Does security have anything to do with cash flow?
The impact of the effect of bank guarantees upon the cash flow and balance sheets
of subcontractors cannot be understated. Effectively, in order to be eligible to obtain
a bank guarantee, a subcontractor or contractor (as the case may be) must have
valuable security to underwrite it. This would usually take the form of property, most
commonly the family home or other residential or commercial property. Generally
finance institutions will provide a bank guarantee or a number of bank guarantees to
a set percentage of the unencumbered value of the secured property. Depending
upon the type of property, this might range between 60% and 80% of the value of the
unencumbered property. The finance institution will charge a fee for this facility,
generally between 1.5% and 3% of the value of the guarantee over a defined period.
It goes without saying that a contracted party may only obtain as many bank
guarantees as its balance sheet will allow. Put simply, a contracted party can only
have so many bank guarantees out there in the market place. This is important to
recognise because if bank guarantees are held by contracting parties for an
unreasonable period, this will impact upon a contracted party’s ability to contract for
new work. This will obviously have a detrimental impact upon its cash flow.
The purpose of security is to ensure proper performance of the work
One government department argued that the purpose of security is to ensure proper
performance of the work. I accept this submission.111 If however, the contracted
party has completed the work the subject of the contract and the contract terms have
been complied with, then there should be no valid reason to withhold retention or
securities subject to the terms of the contract. Put simply, if the contract permits the
release of security, but that entitlement is contested, an adjudicator in my view
should be able to decide whether the security should be released in part, in whole or
not at all.
Penalties for non-compliance with an adjudicator’s direction
I recommend that a provision be introduced into the BCIPA that makes it an offence
for a contracting party to fail to return a security held under a construction contract as
directed by an adjudicator and that any such failure should attract an allocation of
demerit points against their license, if a contractor is licensed by the QBSA.
Suggested Legislative Amendments
In order to provide for enactment of the proposal, the following legislative
amendments are suggested:
1. Section 7 of the BCIPA to read:
111
See s.67A of the QBSA Act, definition of “security”
118
The object of this Act is to ensure that a person is entitled to receive, and is able to
recover, progress payments and any retention amount and/or security provided, if the
person—
(a) undertakes to carry out construction work under a construction contract; or
(b) undertakes to supply related goods and services under a construction contract.
2. Section 26(1) of the BCIPA to read:
(1) An adjudicator is to decide—
(a) the amount of the progress payment, if any, to be paid by the respondent to
the claimant (the adjudicated amount); and
(b) the date on which any amount became or becomes payable; and
(c) the rate of interest payable on any amount; and if applicable
(d) the retention amount and/or security to be returned and the date on or
before which it is to be returned.”
3. Amend Schedule 2 of the BCIPA to include:
progress payment means a payment or release of a retention amount and/or
release of a security to which a person is entitled under section 12, and includes,
without affecting any entitlement under the section—
(a) the final payment for construction work carried out, or for related goods and
services supplied, under a construction contract, or release of a retention amount
and/or release of a security made under the provisions of the construction
contract; or
(b) a single or one-off payment for carrying out construction work, or for supplying
related goods and services, under a construction contract; or
(c) a payment that is based on an event or date, known in the building and
construction industry as a “milestone payment”.
retention amount see the Queensland Building Services Authority Act 1991, section
67C
security see the Queensland Building Services Authority Act 1991, section 67A
Q6 - Recommendations
12.
The BCIPA should be amended to permit a payment claim to include a claim
for the release of security.
13.
The BCIPA should be amended to empower an adjudicator to direct the
release of security.
14.
In the event that the Government does not implement the Construction
Retention Bond Scheme, the BCIPA should be amended to make it an offence
for a contracting party who fails to return a security held under a construction
119
contract, as directed by an adjudicator; and which will also result in the
allocation of demerit points against their licence.
15.
The BCIPA should be amended to expressly provide that a payment claim
may include a claim for retention and that such retention is recoverable under
the Act.
120
Question 7: Should claimants be required to reference BCIP Act on
payment claims if they want to be entitled to rely on the BCIP Act?
Background
Neither the BCIPA nor its regulations stipulate the manner in which a claimant must
alert a respondent to the fact that a payment claim is being made under the Act
rather than a progress claim under the contract, other than the payment claim must
reference that it is made under the Act. This is commonly achieved by the following
term being included at some place on the face of the document:
“This is a payment claim made pursuant to the Building and Construction Industry
Payments Act 2004”112
There has been considerable debate over the wisdom of maintaining the
requirement of the reference in a payment claim. Some submitters have argued that
the mandatory nature of s.17(2)(c) of the BCIPA leaves contracted parties open to
harassment or intimidation from contracting parties not wanting to be caught by the
operation of the Act. Submissions made to the Review, both written and oral,
suggest that there is a practice amongst some contracting parties within the industry
whereby subcontractors are threatened with contract termination or a refusal to
consider the subcontractor for future work if the subcontractor attempts to use the
Act.
Feedback outcomes
Support for amending the BCIPA to remove the requirement to reference the Act on
payment claims was poor with only 14% of submitters in favour. On the other hand,
50% of submitters were opposed to the proposal whilst 35% did not directly respond
to the question.
Relevant legislative provisions
Section 17 of the BCIPA states:
17 Payment claims
(1) A person mentioned in section 12 who is or who claims to be entitled to a progress
payment (the claimant) may serve a payment claim on the person who, under the
construction contract concerned, is or may be liable to make the payment (the
respondent).
(2) A payment claim—
112
It appears to be well accepted that the endorsement does not have to be exact – Penfold Projects Pty Ltd v
Securcorp Limited [2011] QDC 77 at [113]-[128] per Irwin DCJ
121
…
(a) must identify the construction work or related goods and services to which the
progress payment relates; and
(b) must state the amount of the progress payment that the claimant claims to be
payable (the claimed amount);and
(c) must state that it is made under this Act.
Support for change
The following submissions provide examples of the arguments raised in support of
legislative reform to remove the requirement to reference the Act:
The Act should not be triggered at the claimant’s discretion
A number of submissions argued that it would be beneficial for the industry if the
mandatory reference in s.17(2)(c) of the Act was removed. It was suggested that in
so doing, all progress claims under construction contracts would become payment
claims under the Act. One quantity surveyor in his written submissions argued:
“Since a primary purpose of the Act is to encourage best industry practice it’s use should be
encouraged by the entire industry, including government, clients, contractors at all levels and
superintending consultants.
Sadly, that has not happened. Government client and superintending departments, including
building and engineering client departments, and purchasers, including all the major
contractors, have positively discouraged the use of the legislated process to the point of
intimidation. As a result, suppliers have either bowed to pressure of not positively engaging
with the Act and superintending consultants have not seen it as their role to promote the Act
to their clients, or have bowed to client and contractor pressure.
This leads us to conclude that voluntary invocation of the Act has not worked and that
legislated procedure should be compulsory. The Act should not be triggered at the claimant’s
discretion.
This would encourage proper use of the Act, better process and avoid the charge of
unexpected claims or “ambush claims”.
A novel approach
One ANA offered a novel approach to the issue. They suggested:
“…that the requirement in s.17(2)(c) that a payment claim must state that it is made under
the BCIP Act can safely be deleted if section 18(4)(b) is amended so that the time for the
respondent to provide a payment schedule becomes 10 business days after the claimant
has notified the respondent of the claimant’s intention to proceed under section 19 of the
Act.
122
There is no reason why the notice couldn’t be included either with the payment claim or at a
later date.” This provides a level playing field for a claimant considering to seek the
intervention of the court adopting ss.19 or 20 of the Act.”
Support for status quo
The following submissions provide examples of the arguments given opposing the
removal of the requirement to reference the Act:
Intimidation may stem from attitude of adjudicators towards claimants
In an individual interview, an in-house construction lawyer for a national building
contractor, argued that if there was intimidation perpetrated upon contracted parties
by the requirement to reference the Act, that “intimidation stems as a result of the
overly accommodating attitude of adjudicators towards claimants.”
Intolerable administrative burden
Those submissions which cautioned against the removal of the requirement were
almost universal in their justification. Many submissions were received by the
Review which suggested that the administrative burden for contracting parties would
be intolerable if they were required to deal with each progress claim under a contract
as though it were a payment claim made under the Act.
Intimidation, what intimidation?
Other submitters were uncertain of the “intimidation” that was said to be so prevalent
in the industry. In one written submission it was suggested that:
“It is now commonplace for claims to be submitted under the BCIP Act. It is by no means
considered unusual and I do not know personally of any company being discriminated
against because of it.
…
The workload required to complete payment schedules is significant on the respondent, and
would increase dramatically if there was no requirement to state on a claim that they wanted
to rely on the BCIP Act."
Natural justice requirement
Other submitters argued that the requirement to reference the Act was important
from a natural justice perspective.
123
One ANA in its written submissions stated:
"XXXX considers a warning to respondents that the dispute resolution under the BCIP Act
should exist to encourage parties to negotiate and hopefully settle their disputes under the
contract without using the Act.
…
It can be argued that the removing of the reference will put respondents at a greater risk of
being subjected to court decisions under section 19 of the Act unnecessarily. It is also
considered courts will be required to deal with more BCIP Act disputes than they currently
are subjected to and this should be avoided.”
One building contractor commented that retaining the requirement was an important
warning to contracting parties. He said:
“Yes, this should be a given and it should be held up as an alert to the respondent that the
claimant is working within the act…”
Current requirement is inadequate
One multi-national contractor argued that the required reference under s.17(2)(c)
was inadequate. It suggested:
“… section 17 of the BCIP Act should be amended to impose a requirement that payment
claims contain a standard warning statement on the front page. The inclusion of a warning
notice on the front page of a payment claim would not be unique. It is consistent with existing
warnings required by rule 23 of the Uniform Civil Procedure Rules 1999 (dealing with notices
to defendants of timeframes and consequences of not filing a defence) and section 368 of
the Property Agents and Motor Dealers Act 2000 (dealing with cooling off periods for
contracts).”
Similarly, the Housing Industry Association argued that the ‘warning provision’ in
s.17(2)(c) of the BCIPA did not go far enough. It argued:
“… the current information required to be shown on a payment claim is inadequate giving
recipients no indication of the consequences of a failure to respond to the claim, such as the
default judgement (sic) provisions with respect to s18(5). HIA notes that recipients of
statement of claims issued under the Uniform Civil Procedure Rules have the benefit of a
“Notice to defendant” whilst there is mandatory warning in the text of statutory demands
issued under the Corporations Act.
Alternatively, it is recommended that s18(5) of the BCIP Act (and associated provisions) be
removed, to ensure that the BCIP Act is meeting its objectives through adjudication
procedures, not by way of default.”
Section 18(5) of the BCIPA states:
“The respondent becomes liable to pay the claimed amount to the claimant on the due date
for the progress payment to which the payment claim relates.”
124
One firm of solicitors suggested in their written submissions that:
“Consideration should be given to mandating the size and placement of the notice.”
Other submissions suggested the regulating of a warning statement or setting a
prescribed payment claim form in the Regulations.
When is a payment claim a “genuine” payment claim
A quantity surveyor in his written submissions gave valuable insight into the
mechanical operations of the assessment of payment claims and progress claims.
He said:
“The Act requires that payment claims be endorsed and that should continue to be the case
if claimants wish to use the Act. The issue for contractors is that they have to process a large
number of claims at the end of each month in a short period of time. In most cases the
claims will be endorsed as a matter of procedure rather than it being a case that the claim
really will become part of an adjudication process. The advice given when the Act was
introduced was to endorse your claim regardless of the intent to proceed down the
adjudication route.
This leads to contractors making judgement (sic) calls as to which claims may or may not be
genuine payment claims to enable the volume of claims to be processed in time. This can
disadvantage contractors.
I can understand why contractors would prefer subcontractors and suppliers not to endorse
their claims. I feel the use of the term “pressured” in the discussion paper at para. 2.2 is
misleading. There is no need to endorse a progress claim if there are no issues. If issues
subsequently arise, a payment claim can still be served.
If sub-contractors and suppliers were better educated in the use of the Act they would
understand that it is not necessary to endorse all their claims.
The issue is not so much that the endorsement should be removed but that the wording
should only appear if the claimant is intent on using the Act. This however will mean that the
“ambush” tactic of lulling the respondent into a false sense of security whilst a case is built
may be diluted. However it does mean that the recipient of a payment claim can focus on the
issues.”
Extremely oppressive and potentially debilitating
In a written submission from a solicitor/adjudicator, the submitter summed up the
merits of the proposal in Question 7, in a most succinct and in my view appropriate
manner, when he said:
“… the most compelling argument for maintaining the current system is that the alternative is
that every tax invoice will be a payment claim.
125
The pressure that will put upon respondents is extreme. In order to protect themselves,
every respondent will need to treat every tax invoice as if it is a payment claim that will
proceed to adjudication. Progress payments, particularly during the course of the project
(rather than towards the end) are often only made on account and an amount claimed will be
paid, reduced or rejected by the respondent more because of time pressures at the time
rather than a firm conviction as to the entitlement of the claimant on that claim. When faced
with a formal payment claim, the respondent has to make the effort to address the matter
properly or face the serious consequence of losing their rights of response in the
adjudication. To force the respondents to treat every invoice as if it were going to proceed to
adjudication is extremely oppressive and potentially debilitating to respondents.
If the concern behind this idea is to prevent the so called ambush claims, this proposal would
do nothing to prevent ambush claims and indeed would likely provide an environment where
ambush claims could be more easily concealed until the adjudication application is made.
If the concern is that principals or superior contractors will pressuring (sic) subservient
contractors to not endorse payment claims as being made under the Act, making all invoices
payment claims will do nothing to dissuade such practice. Rather the pressure will just move
to preventing the subservient contractor lodging an adjudication application.”
Consideration
The removal of the requirement to reference the NSW Act was recommended by
Collins QC in the Final Report in the Independent Inquiry into Construction Industry
Insolvency in NSW113. At p.74, Collins QC described the removal of the reference as
one of the two114 most compelling recommendations which received “almost
universal support”. The NSW government has accepted the recommendation. 115 I
note that the “almost universal support” for the removal of the reference has not
been demonstrated in the submissions before me. In fact, the level of support to
remove the reference has been very poor, with only 14% in favour of amending the
BCIPA.
The novel approach
The submission suggested by one ANA that the requirement to reference the Act
can safely be deleted if s.18(4)(b) of the Act is amended so that the time for the
respondent to provide a payment schedule becomes 10 business days after the
claimant has notified the respondent of the claimant’s intention to proceed under
s.19 of the Act does have some merit.
113
See Recommendation # 38
The second of the “almost universally supported” recommendations was the setting of statutorily imposed
maximum payment terms for progress payments. The Review notes that such are already enshrined in ss.67U
and 67W of the Queensland Building Services Authority Act 1991
115
See: http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf
114
126
However, I am not convinced that it will curtail the intimidation, to the extent that it
occurs, complained of by many subcontractors. In my view, the removal of the
requirement to reference the Act from the payment claim and requiring a separate
notice to be issued would only shift the intimidation to the point that a claimant sends
or is threatening to send the separate notice. In any event, in practice I am of the
view that many contracted parties would serve the required notice with the payment
claim and thereby defeat the purpose of the suggested amendment.
The ANA’s submission does have some attraction to overcome what I regard to be
the inequitable position in relation to a claimant’s ability to bring an application to a
Court under s.19(2)(a)(i) of the BCIPA in circumstances where no payment schedule
has been received, without first having to provide a notice pursuant to s.21(2) of the
Act. I shall however, return to this issue when responding to Question 14 below.
Oppressive administrative burden
I find myself in entire agreement with the submissions of the solicitor/adjudicator
extracted above. If the requirement to reference the Act were removed, this would
lead to an oppressive administrative burden being placed on respondents who would
never know whether the payment claim is genuine. I accept that to some extent the
difficulty is happening under the existing provisions, but to remove the requirement to
reference the Act will only magnify the difficulty. In my view, as has been submitted,
the industry should be educated that it is not necessary to reference the Act on every
payment claim. That is perhaps a matter for the QBSA. I also accept the
submission that the removal of the requirement will only delay any intimidatory
conduct, to the extent that it happens to the time for making an adjudication
application.
I am not persuaded by the submissions that the Act should be amended to require
the use of regulated forms for payment claims, nor am I persuaded that the current
requirement is insufficient. In the many adjudication decisions I have performed as
an adjudicator and for those matters of which I have been involved with as Counsel, I
have not once seen what might be described as an overt attempt to conceal the
reference to the Act.
For these reasons, I am not satisfied that the mandatory referencing of the Act
contained in s.17(2)(c) of the BCIPA should be removed or otherwise amended.
Suggested Legislative Amendments
Nil
Q7 - Recommendation
16.
Section 17(2)(c) of the BCIPA should continue to require a payment claim to
state that it is made under the Act. No further amendment is necessary.
127
Question 8: Do you consider the current process of authorised
nominating authorities appointing adjudicators appropriate?
If not, what alternate system would you propose?
Background
There appears to be some confusion within the industry and even within the legal
profession as to how adjudicators are appointed. Contrary to the views of some
stakeholders, claimants do not appoint adjudicators. It is worthwhile setting out
some background and the role of the registrar, the BCIP Agency and Authorised
Nominating Authorities.
The BCIP Agency
The BCIPA is unique in that it is the only “security of payment” legislation in Australia
that provides for the establishment of a registrar. The office of the registrar is known
as the “BCIP Agency”. It has approximately two and a half full-time staff including
the registrar and is part self-funded and part funded by the Queensland Building
Services Authority. In effect, the BCIP Agency is funded by the industry, rather than
from consolidated revenue.
The registrar considers applications for registration from interested persons to
become:
(1) an Authorised Nominating Authority (“ANA”); and
(2) an adjudicator.
There are presently seven ANAs registered in Queensland (listed in alphabetical
order):







Able Adjudication Pty Ltd (“Able Adjudication”);
Adjudicate Today Pty Ltd (“Adjudicate Today”);
Australian Solutions Centre Pty Ltd (“ASC”);
The Institute of Arbitrators and Mediators Australia t/a Adjudicate Australia
(“IAMA”);
Leadr;
Queensland Law Society (“QLS”);
RICS Dispute Resolution Service (“RICS DRS”);
Graph F below identifies each of the currently registered ANAs and their respective
market share in the period 1 October 2004 to 30 June 2012.
128
Graph F:
% o f A p p lica tio n s Lo d ge d to A N A s 1 /1 0 /2 0 0 4 3 0 /0 6 2 0 1 2
IA M A
6%
R IC S
20%
A b le A d ju d ica tio n
5%
A d ju d ica te T o d a y
48%
A b le A d ju d ica tio n
A d ju d ica te T o d a y
A u s tra lia n S o lu tio n s C e n tre
A IQ S
LEA D R
Q u e e n sla n d L a w S o cie ty
5%
LEA D R
3%
Q u e e n sla n d L a w S o c ie ty
R IC S
IA M A
A IQ S
5%
A u stra lia n S o lu tio n s
C e n tre
8%
Source: Building and Construction Industry Payments Agency, April 2013
An ANA may have the following functions or provide the following services:
(1) Accept adjudication applications from claimants;116
(2) Provide advice and assistance to parties regarding the adjudication
process;117
(3) Nominate an appropriate adjudicator to decide an adjudication matter; 118
(4) Issue Adjudication Certificates to claimants upon request;119
(5) Where approved to do so by the Adjudication Registrar, conduct courses for
adjudicators in the prescribed adjudication qualification and upon successful
completion, issue a Certificate in Adjudication to the adjudicator. 120
As can be seen from the above list, registered ANAs come from a diverse
background. There are three what might be loosely called “private ANAs” and four
“membership organisations”. ANAs have their own selection criteria as to the basis
upon which an adjudicator may be appointed, however each ANA as a condition of
their registration must adhere to certain requirements for the selection, training and
monitoring of adjudicators.121 Each ANA performs its role in a relatively unique
manner, but all are bound by the same conditions of registration, 122 although it is
conceivable that the registrar could place specific conditions on a particular ANA 123as
he may also do for a particular adjudicator.124
116 See s.21(3)(b) of the Act
117
http://www.bcipa.qld.gov.au/Information/Pages/FunctionsofanANA.aspx
See s.23 of the Act
119
See s.30 of the Act
120
See ss.43(h) and http://www.bcipa.qld.gov.au/Information/Pages/FunctionsofanANA.aspx
121
See General Condition 2(l) and Schedule 4 of the ANA Conditions of Registration at:
http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/ANAConditionsofRegistration.pdf
122
Ibid
123
s.51(1)(c) BCIPA
124
ss.65 BCIPA
118
129
Some ANAs provide what may be referred to as a ‘full service’ whilst other ANAs do
little more than accept applications, nominate the adjudicator and issue adjudication
certificates.
During the course of this Review, I interviewed representatives of each of the ANAs
and a representative of an ANA which recently chose not to renew its registration,
the Australian Institute of Quantity Surveyors (“AIQS”). I am appreciative of the
efforts and assistance that each of the registered ANAs and AIQS and their
adjudicators have provided to me during this Review.
ANAs that fit within the category of “membership associations” register as an ANA as
a means of generating income for their members who become registered
adjudicators. “Private ANAs” assumedly register to provide returns to their
shareholders.
To be eligible for appointment onto the panel of adjudicators of an ANA that is a
‘membership association’, an adjudicator ordinarily would be required to be a
member of that association. For instance, to join the panel of the QLS, an
adjudicator must be a solicitor. Similarly, to be eligible to join the panel of IAMA, an
adjudicator must be a member of IAMA. “Private ANAs” appear not to have such
restrictions for obvious reasons.
Under the BCIPA, only a claimant can choose which ANA an adjudication application
may be sent to.125 The ANA then appoints the adjudicator. The ability of the
claimant to unilaterally choose the ANA is one of, if not the fundamental issue for
those who are dissatisfied with the current appointment process.
There are various alternatives to the appointment process of adjudicators provided in
the submissions considered below.
Feedback outcomes
Question 8 of the Discussion Paper engendered vibrant debate amongst
stakeholders. Of those who provided written submissions, 28% were in favour of the
current system of appointing adjudicators, 39% regarded the current system as
requiring change, whilst 32% did not directly respond to the question.
Relevant legislative provisions
To become a registered Authorised Nominating Authority (“ANA”), the Registrar
pursuant to s.45 of the BCIPA must be satisfied that the applicant is a “suitable
person”. Pursuant to s.46 of the Act, in deciding whether an applicant is a suitable
person to be registered, the registrar may have regard to the following matters-
125
Section 21(3)(b) BCIPA
130
(a) whether the person, or an individual engaged or employed by the person, has a
conviction for a relevant offence, other than a spent conviction;
(b) whether the person, or an individual engaged or employed by the person—
(i) held a registration under this division, or a licence or registration under a
corresponding law, that was suspended or cancelled; or
(ii) has been refused registration under this division or a licence or registration under
a corresponding law;
(c) whether the applicant represents the interests of a particular sector of the building or
construction industry and, if so, whether this would make the applicant unsuitable to
appoint adjudicators;
(d) the matters stated in the application for registration under section 43;
(e) anything else relevant to the person’s ability to conduct business as an
authorised nominating authority.
Support for change
The Review received some concerning submissions regarding the current
appointment process. It is important to recognise however when reading the
following submissions that they are untested, unsubstantiated assertions that are
based largely on hearsay evidence.
The submissions received by the Review which challenge the current appointment
process, include:
Conflict of interest
In a written submission provided to the Review, it was argued that “private ANAs” are
conflicted by their very position, whereas “membership (or ‘professional’) ANAs”
because they are not for profit do not have the same commercial tensions:
“It seems reasonable then that the parties in an adjudication should be able to agree on the
ANA who appoints the adjudicator or at the very least allow them to agree on a panel of two
or three ANA’s so that the claimant retains its right to elect as in section 21(3)(b).
…
… It follows that an apprehension of bias must attach to any commercial ANA. It seems
strange to me that no one has tested that in court as yet.
…
My view is that a Commercial ANA cannot fulfill the requirements of s46(c) as it will only ever
represent one particular sector of the industry – Claimants. It is from Claimants from whom it
derives its profit.
A Professional ANA is not for profit; its benefit from the process is the maintenance of its
professional standing. By definition the maintenance of that standing can only be achieved
by being scrupulously unbiased.
…
It is my view that central appointment of adjudicators by the Registrar is not desirable
although I am not totally against it."
131
A building contractor in his written submissions said this of the appointment process:
“In our experience there is a common perception in the industry that because the claimant
picks the approved nominating authority (ANA) who appoints the adjudicator, some
adjudicators are anxious to award large sums to claimants in order to attract more business
from claimants (on the basis that claimants will pick an ANA that appoints generous
adjudicators). For this reason it is also the common perception in the industry that
adjudicators mostly take the view that because the BCIP Act is a ‘pay now, argue later’
process, the claimant should get the benefit of any doubt.
Unfortunately there seems to be an inherent conflict of interest in the nomination process
since the ANA and adjudicators are funded by the making of claims and it is obviously
beneficial for them the more claims are made.
In order to ensure there is no bias or conflict of interest possible solutions may include
either:
-
making the system completely independent, for example by establishing an
independent government body which nominates adjudicators on a random basis; or
- encouraging more cooperation and transparency between the parties, for example:
(a) an alternative system could be established whereby the claimant is required to
provide the names of two ANAs to the respondent who then selects one ANA who
then appoints an adjudicator; and/or
(b) the parties to a construction contract have the ability to agree on an ANA or even an
adjudicator.
Perception of bias
A lawyer in his written submissions warned that the current appointment system
encourages bias and is open to corruption. He argued:
“… the current system of ANAs encourages bias towards claimants and bias by adjudicators
because of competition between ANAs (and indirectly by competition between adjudicators
on panels with the various ANAs). The current system effectively promotes “ANA shopping”
and “adjudicator shopping” as the claimant has the right to elect which ANA to choose and
therefore the claimant is likely to choose an ANA whose adjudicators are perceived to be
more favourable to claimants. Simply, opening up a system for determining private rights like
BCIP Act adjudication to a system of appointment of adjudicators based on commercial
competition and is unfair (sic) and open to corruption and abuse. In particular, ANAs who are
private corporations operating for the purpose of profit (and not non- profit professional
organisations) have an incentive to appoint adjudicators who are seen to favour claimants or
who are seen to award the adjudicators costs 100% against the respondent (therefore
reducing the claimant’s costs by making the claimant not liable for the adjudicators costs in
any event, contrary to the 50/50 spirit of the BCIP Act: see ss. 35(2) and (3) of the BCIP
Act). To me, enabling private corporations to be ANAs is one of the fundamental flaws in the
current BCIP Act and such bias is resulting in unfair outcomes.”
…
“ANAs should only be true non-profit professional organisations. Also, parties should be free
to agree the ANA in their contract if they wish to (in the same fashion that parties can agree
which body to appoint arbitrators).
132
Alternatively, the ANA system should be abandoned and adjudicators be registered with,
and appointed by, an independent statutory body such as the Building and Construction
Industry Payments Agency (BCIPA), the Building Services Authority (BSA) or Department of
the Attorney General of Queensland.”
The Electrical Contractors Association and Master Electricians Australia argued:
“While the potential for bias inherent in the current system for appointing adjudicators is
minimal, the perception of bias may be problematic for the effective administration of the
BCIP Act. An alternative may be to appoint an officer in charge of the authorised nominating
authorities. This officer would be responsible for evenly allocating cases to adjudicators to
ensure a fair and equitable resolution process for all parties. Statistics on adjudication
outcomes would need to be compiled in order to ensure that no bias is demonstrated by any
adjudicators.”
A quantity surveyor expressed the following views in very detailed submissions:
“The current system of profit motivated ANA’s appointing adjudicators detracts from the
operation of the Act. It leads to claims, real or imagined, of bias, places undue pressure on
adjudicators and does nothing to facilitate the proper operation of the Act.
Either ANA’s should be impartial non-profit organisations or The BCIP Agency should be the
sole Agency for the certification of adjudicators, nomination of adjudicators for adjudications,
collection, analysis and interpretation of data and the promotion and facilitation of the proper
operation of the Act.
…
We recommend that the BCIP Agency claim facilitation of the Act by becoming the sole
agency responsible for registering monitoring and nominating adjudicators for adjudication
applications made under the Act. Alternatively, ANA’s should be restricted to independent,
non-profit organisations.
The effect of centralising or restricting ANA’s would have many benefits for the industry,
including:
-
Removing the pressure of profit and business success from influencing the outcome of
adjudications;
Removing the pressure on adjudicators to produce “claimant-friendly” decisions;
Focusing more attention on the Act’s primary purpose of creating an orderly payment
process;
Providing access to raw (big) data for better and more detailed analysis that would give
the Agency and the industry better direction;
Giving the Agency the ability to positively influence the industry and become a driver of
change and productivity.”
An adjudicator also recommended changes to the current appointment system. In
very detailed written submissions, he provided advantages and disadvantages of the
current scheme:
“Benefit of preserving the status quo.
133
The present system of authorised nominating authorities (ANA) does mean that the public
purse is not drained by having to provide or fund the functions now performed by ANAs. The
ANA function should be maintained. If minimal changes are to be made, BCIPA should allow
for the contract to specify two or three ANAs from which the claimant may choose where to
lodge an application.
Problems with the status quo
Fees charged – secret or undisclosed commission
Some nominating authorities are gouging on fees charged. The fees charged by ANAs are
real but they are either hidden from parties or not transparently disclosed.
…
Bias
The present ANA system, whereby the ANA is chosen solely by the claimant, is exposed to
the present industry criticism that particular ANAs are preferred as they are claimant friendly.
This may be more a case of sour grapes from unsuccessful respondents, may be more a
perception than a reality or in fact it may have substance. However, a head in the sand
attitude to the perceived problem won’t make the perception go away. It is suggested that
the Collins Report be read with respect to adjudicator selection. The same process for
selecting adjudicators from a particular panel applies in NSW and Queensland.
The present
system sets eligibility criteria for ANA that are too wide. If the ANA process is to continue it
should be restricted to independent professional not for profit bodies.
My view is that, if
there are to be entities that are authorised to carry out functions such as judging a person’s
eligibility to be an adjudicator (not on the basis of whether they are to pay the ANA a
handsome share of their fees), selecting the adjudicator for appointment to a particular
adjudication, issuing adjudication certificates which are stamped by the courts as a
judgment, etc), and training adjudicators then the criteria should be similar to the WA
Legislation or should be as referred to in the Collins Report. This may help remove some of
the impartiality or bias from the process.
Conflicts
The present ANA system is open to and is presently being performed with undisclosed
conflicts of interest.
One of the main problems is with the ANAs maintaining an unhealthy
relationship with what they refer to as preparers. These preparers are recommended to
claimants by the ANA with the expectation that the preparer will direct the application to the
ANA. There is an unhealthy chain of involvement which must inevitably one day end up with
a Court action once someone is sufficiently aggrieved and has sufficient liquidity to run the
case. The reputation of the BCIPA process will be shattered if this is allowed to continue.
In some cases adjudicators on the ANA panel are also preparers for applications that go to
the ANA. An example is where an adjudicator on the ANA’s panel is also the lawyer that
advises on the application and assists with the application to the ANA. An ANA must be
impartial and must be seen to have no possible conflict interest. Being on a panel of
adjudicators with an ANA also brings with it a responsibility not to leave the BCIPA process
open to criticism on the basis of conflicts of interest.
…
A further requirement could require adjudicators to declare each and every involvement in
the BCIPA process that may lead to any perception of bias. This could require any person
who is on the panel of adjudicators of an ANA, or employed by the ANA, to disclose in
writing to the ANA whenever they assist or advise an entity in respect of preparation of a
payment claim or an adjudication application that they have been so involved. The ANA
must then disqualify itself in respect of the relevant adjudication application if it is made.
134
Similarly, it should be a condition of registration that adjudicators will not knowingly advise or
assist in preparing payment claims or adjudication applications unless they disclose to each
ANA for which they are included on the panel of adjudicators that they have prepared or
assisted in preparation of the payment claim and likewise for adjudication applications.”
Non-delegable duties of the registrar
On the issue of “in-sourcing” one stakeholder raised the following concerns in
relation to what it considered to be the non-delegable duties of the Registrar in the
appointment of suitable adjudicators:



the time pressures which would inevitably follow if the Registrar were the only
person able to appoint an adjudicator;
the significant and undue pressures that would be placed on the Registrar to
be seen to be appointing fairly and transparently;
the significant and undue pressure on the Registrar to not only "get it right"
but to be seen to be getting it right.
The submitter opined that the registrar would fall victim to criticism in the event that a
decision of an adjudicator was poorly made and would himself struggle with the
same sorts of practical challenges in determining who is an appropriate adjudicator
to be nominated.
Lack of procedural fairness
A number of submissions made to the Review argued that the current appointment
process resulted in a lack of procedural fairness to respondents. In one such
submission it was suggested that:
“… the current process of authorised nominating authorities is not appropriate as it is open
to potential allegations of bias in favour of claimants, resulting in a lack of procedural
fairness. This perceived prejudice against respondents can lead to increases in litigation and
associated costs as respondents may feel they were treated unfairly throughout the
adjudication process. To address these issues, XXXX submits that the BCIP Act should be amended to remove
the authorised nominating authority’s power to appoint adjudicators and:


126
authorise an independent government body126, such as the Queensland Building Service
Authority, to appoint adjudicators; or
permit parties to agree on an adjudicator at the outset of a project or when a dispute
arises, and if no adjudicator is agreed to by the parties, the claimant may appoint a
prescribed appointer. Prescribed appointers should be independent bodies who are
active in the industry, to avoid potential bias and ensure the independence of the
adjudicator, in line with the object of BCIP Act.”
Similar submissions were made by Thiess
135
Parties should decide which ANA or adjudicator the application should be referred to
A national building contractor argued that the current appointment process has
“fundamental problems” suggesting that:
“1. Claimants can select the authorised nominating authority (ANA) to best suit their Claim.
…
2. There is a commercial imbalance in the way in which the current system works. ANA's
survive on the engagements from their Claimant customers. The ANA's have an incentive to
appoint claimant friendly adjudicators to support their ongoing business.
Adjudication Application process needs to be amended to allow the parties to agree to the
respective ANA at the creation of the contract.”
Similarly, another adjudicator suggests that the choice of ANA should be left to the
parties to decide in the contract. He said:
“I consider parties to a construction contract should be permitted to agree and nominate in
the contract either the ANA to which Adjudication Applications are to be submitted, or the
name of the Registered Adjudicator to whom Adjudication Applications are to be submitted.
This would mirror the NT and WA Acts and should, in my view, virtually eliminate any claim
of bias.
I do not consider the appointment of Adjudicators should be made by a Government entity
unless that was part of a much broader responsibility for a grading system for Adjudicators
and the monitoring of the performance of Adjudicators.”
The Australian Institute of Building submitted that a “consensus approach” was
preferred over the current appointment process. They said:
“Rather than the current process of authorised nominating authorities chosen by the
claimant appointing adjudicators, AIB would prefer a consensus approach where both
parties agree on an adjudicator. This would reduce perceptions that authorised nominating
authorities chosen by the claimant have a tendency to appoint adjudicators which have a
history of making decisions in favour of the claimant. Thus, it would be the same as under as
AS4000 contract, where both parties agree. The Institute of Arbitrators or similar, rather than
the Government, should appoint an adjudicator if one cannot be agreed upon.”
The Queensland Law Society Construction and Infrastructure Law Committee made
the following suggestions:
“The Committee submits that the parties should be allowed to nominate the ANA in the
construction contract as is available in Western Australia and the Northern Territory or
alternatively nominate 2 or 3 ANA's from which the claimant may select.
Another option is to allow parties to agree an adjudicator for an adjudication. Proposed
names could be submitted at any time, by either party after the payment schedule is
submitted. If an adjudicator is not agreed at the time an adjudication application is delivered,
either party can apply to a court "on the papers" (using only standard forms/procedure), for
an adjudicator to be appointed.
136
This would remove the current perception within the industry of "claimant friendly"
ANAs/adjudicators. The industry's "perception of bias" in adjudications in favour of claimants
is not something which would be tolerated in relation to the judicial system. The proposed
system of appointment would result in the use of adjudicators who produce "quality
decisions", as they would be agreed by both parties or appointed by an independent judicial
body (using a streamlined and standard process)." [Emphasis added]
The Queensland Major Contractors Association also favoured a contractual
nomination of ANA’s over the current system. They argued that:
“The vast majority of Members do not consider that the current process of authorised
nominating authorities (ANAs) appointing adjudicators is appropriate. The current structure
of the Act encourages claimants to seek ANAs that have a bias towards the claimant's
interests. Whether or not there is actual bias among ANAs is not a matter that the QMCA
wishes to comment on, however the Members' perception that there is a risk of bias due to
the structure of the Act is enough to make this a significant issue. One Member described
this risk as being the 'fundamental flaw' of the Act. [Emphasis added]
The majority of Members believe that the parties should be able to nominate an ANA (or a
procedure for choosing an ANA) in the construction contract. The Discussion Paper raised another option for reform being a government entity with the
sole responsibility for the appointment of adjudicators under the Act. Nearly all Members
were against this option.
Members expressed a strong preference for the ANAs to remain in the private sector, as a
government entity potentially would not be able to offer the same level of access, flexibility
and resources as a group of private entities.” [Emphasis added]
Registrar should appoint Authorised Nominating Authorities
One law firm argued in their written submissions that the following alternative
approach to appointment was preferable:
“The Adjudication Registrar should be given greater power to regulate pricing and the timing
of decisions, hear complaints about adjudicators including the fees charged or time taken
and most importantly to nominate Authorised Nominating Authorities to “deal with individual
adjudication applications in the event that the parties have not agreed to an [ANA] either in
their contract, or at the time of the adjudication application.”
The lawyers argued that its proposed alternate approach would lead to:
(i) Increased transparency and accountability of Authorised Nominating
Authorities and adjudicators;
(ii) The removal of commercial influences and conflicts of interest in the process
for selection of Authorised Nominating Authorities and adjudicators; and
(iii) Potentially an increase in the quality of decisions including reasons that the
parties receive.
137
Should adjudicators be able to work as claims preparers?
One submitter queried whether adjudicators would still be able to work as
consultants to industry stakeholders. He said:
"It would be presumed that adjudicators would retain their rights to be able to work directly
for companies as private consultants and advisors."
Need for greater transparency – single ANA
The Housing Industry Association considered that the current process should be
overhauled to ensure greater transparency. It argued:
“HIA supports a move towards a centralised system of appointment of adjudicators by way of
a sole ANA, being a privatised agency. In terms of appointing the sole ANA, HIA is of the
view that the ANA agency position is annually put to tender by the Building and Construction
Industry Payments Agency, with the requirement to meet the application criteria as currently
applied.” [Emphasis added]
Competence of adjudicators
In submissions prepared by one law firm, serious issues were raised in relation to
the competence of adjudicators. It was submitted that:
“There needs to be a more stringent review process by the government regulatory authority
that oversees the various nominating bodies. If an adjudicator’s decisions are being
consistently challenged and overturned in the Courts, this should raise serious questions as
to the suitability of that individual to be an adjudicator. At the moment there is no transparent
process as to how an individual’s performance as an adjudicator, or a nominating body’s
performance, is reviewed. Such transparency is essential if there is to be confidence in the
system. …
If the Victorian approach is adopted and nomination of an adjudicator can be by agreement,
it has to truly be ‘by agreement’. The concern is that in most instances, the principal will
nominate the adjudicating authority and then the parties will have to go along with the
principal’s determination. [Emphasis added]
Adjudicators should be encouraged to take a more active role in the adjudication process.
Generally, adjudicators make their determination solely on the submissions the parties have
lodged. There is provision given in the legislation for adjudicators to do more, but they often
fail to do so.”
As well as supporting the establishment of an independent nominating authority, one
national building contractor also recommended the implementation of:
138
“… a system of grading and quality control for adjudicators whereby more experienced
adjudicators are allocated to more complex or financially significant claims. We would also
submit that adjudicators who have multiple decisions overturned in a set period should be
required to undergo further training on the BCIP Act before being appointed for
adjudications.”
Apprehension of bias
The Queensland Law Society Mining and Resources Law Committee also reject the
current system of appointment. It argued that:
“[Any] process which allows one party to unilaterally appoint a decision-maker (or in this
case, an ANA) is open to abuse and may lead to the apprehension of bias and prejudice
against respondents. This may, in turn, lead to increases in litigation and associated costs.
The test for apprehended bias in Australia as established by the High Court is that:
[the] principle is that a judge should not sit to hear a case if in all the circumstances the
parties or the public might entertain a reasonable apprehension that [the judge] might not
bring an impartial and unprejudiced mind to the resolution of the question involved in it.127
This test comes from the long standing principal that "not only must justice be done; it must
also be seen to be done."128 It is unnecessary to consider actual bias (which is a higher and
more difficult standard to establish) when the test for apprehended bias has been
satisfied.129
The test for apprehended bias applies not only to judicial decision-makers, but also to
statutory decision-makers.130
The current process for selection of adjudicators may, or may be seen to, promote
impartiality (sic), in light of the following:
-
ANAs and adjudicators are paid a fee for their time;
as such, they have a vested pecuniary interest in having payment disputes referred
to them, over other ANAs;
a reputation for using "claimant-friendly" adjudicators will more likely than not result
in further referrals;
many ANAs have developed relationships with contractor organisations and actively
promote their services to them.
The Committee submits that the BCIP Act should be amended to:
-
remove an ANA's power to appoint adjudicators
require a claimant to (in line with section 26(1) of the Western Australian Act) serve a
payment claim:
if the parties to the contract have appointed a registered adjudicator and that
adjudicator consents, on that adjudicator
if the parties to the contract have appointed a prescribed appointer, on that appointer
otherwise, on a prescribed appointer chosen by the claimant
Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 293-294
R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256
129 Minister for Immigration and Multicultural Affairs v Jia (2001) 205 CLR 507 at 541
130 McGovern v Ku-ring-gai Council (2008) 72 NSWLR 504
127
128
139
-
require prescribed appointers to be independent bodies to avoid potential bias and
ensure the independence of the adjudicator, in line with the objective of the BCIP
Act.”131
Oral submissions
Part of the individual consultations with the Review involved interviewing a number of
adjudicators from each ANA panel. Adjudicators were chosen randomly by the
Review Secretariat with the only stipulations being that I wished to interview at least
two adjudicators from each ANA panel of varying experience, who preferably serve
on the panels of multiple ANAs. In addition, I interviewed project managers,
builders, lawyers, industry associations, mining company executives, academics,
subcontractors and QBSA staff to name just a few.
During those discussions, allegations were made by stakeholders that:






At least one adjudicator felt the “commercial tension” between the interests of
the ANA and the interests of the claimant;
There was flagrant “adjudicator shopping” occurring. Namely, claimants
and/or their advisors were demanding that ANAs appoint a specific
adjudicator or conversely that specific adjudicators not be appointed. These
requests were being allegedly met by some ANAs;
An employee of an ANA had directly attempted to convince an adjudicator to
alter the adjudication decision before it was published to the parties;
A more senior adjudicator who had nothing to do with the subject adjudication
decision had attempted to convince the adjudicator that the adjudication
decision should be amended before it was published to the parties and that
the amendments were “substantive”. A similar account was recounted by a
different adjudicator about his experiences with a different ANA;
There was an informal practice whereby adjudicators who made decisions not
to the liking of an ANA were “rested”; and
An employee of an ANA asked a claims preparer which adjudicator the
application should be referred to.
Support for status quo
Given that this aspect of the Discussion Paper reflects directly upon the activities of
the ANAs it is appropriate that I identify their submissions, or at least a snapshot of
the ANAs’ submissions. If I have not specifically referred to the submissions of a
particular ANA it does not mean that I have not taken their submission into account,
it may simply be that the submission was dealt with by another ANA, or the
submission may have been of limited utility.
All ANAs primarily argued for the maintenance of the status quo in relation to the
adjudicator appointment process.
131
Identical submissions were made by the Queensland Resources Council
140
The representatives of one particular ANA argued that:
(a) Under the previous legislative regime in NSW, the parties were free to
nominate in the construction contract their chosen adjudicator but this led to:
(b)
(c)
(d)
(e)
“an outpouring of complaints from claimants and industry bodies such that
government amended the provision to the current SOPA section 17(3), which
provides an adjudication application must be made to an ANA chosen by the
claimant.”
“A proposal for a government entity (or a single ANA chosen by tender) to replace
the competitive ANA model has not been previously published. In the absence of
evidence of market failure, it is a strange issue to raise following the election of a free
market and small business oriented government. Replacement of a free market
solution by government (or other) should only be considered if there is evidence of
massive breakdown of the market such that the Adjudication Registrar’s statutory
powers have not been able to address. There is no such evidence. Based on XXXX
internal costs, we estimate the cost to government of moving from the existing model
will exceed $4 million per year.”
The ANA takes matters of governance very seriously. It ensures that all adjudicators
sign a conflict of interest declaration prior to their appointment.
The Registrar audits the operations of each ANA to ensure that the ANA complies
with its conditions of registration.
Perceptions of bias may arise from the fact that there is an argument that
adjudicators are not entitled to claim for the costs of the adjudication if they reach a
conclusion that they do not have jurisdiction to determine the matter. In the
premises, there is a concern that some adjudicators may find that they have
jurisdiction out of economic necessity. In the premises, this ANA recommended that
s.26 of the Act be amended to specifically require an adjudicator to decide
jurisdiction and be entitled to charge a fee even if the adjudicator decides that the
adjudication application is void.” [Emphasis added]
Burden to tax-payers
Another ANA argued against the in-sourcing of the ANA role to Government citing
the additional burden to tax-payers. However, the ANA acknowledged that there are
a number of improvements that could be made to the current system. It suggested
that:
-
-
“There should be more stringent audits performed on ANAs by the registrar to ensure
that ANAs are complying with the terms of their registration;
The most appropriate model to deliver the services provided by an ANA is via a
‘professional body’:
 With ‘strict codes of ethics, rules of conduct a public interest mandate and a
transparent appointment process, based on guidelines and processes,
independent of those receiving appointments and free from conflict of interest’;
and
 That accordingly, there should be a “streamlining” of the number of ANAs.
A higher standard of adjudicator needs to be appointed with greater industry
experience;
Compulsory Professional Development should be implemented for all adjudicators.”
141
Allowing the parties to agree on the ANA or adjudicator has failed in other states
Another ANA provided extensive submissions in support of the status quo. Its
representative submitted:
“XXXX strongly disagrees to allow parties to contractually agree at contract formation of the
ANA to be used when and if adjudication is used. This was removed from the original New
South Wales and Victorian Acts for a number of reasons including pressure on subordinate
contractors to use ANA’s which the senior contractors were affiliated with such as industry
and membership dispute resolution associations.
Additionally standard form contracts automatically nominated a particular ANA and at the
time of contract formation the parties were not overly fussed who the ANA was. Thus that
ANA was virtually mandated all the adjudication applications.
The system should not allow parties to a construction contract to be able to contractually
agree on the authorised nominating authorities at contract formation."
Whilst not derogating from its primary submission, the ANA also identified the
following ten models which could be used to provide ANA services:
1. “Fully in-sourced ANA to the Registrar with Adjudicator Administration Services
2. Fully in-sourced ANA to the Registrar with no Adjudicator Administration Services
3. Fully in-sourced ANA to the Registrar with Outsourced day-day administrative duties
only
4. Fully in-sourced ANA to a Statutory State Owned Corporation (SSOC)
5. Fully in-sourced ANA to a Statutory State Owned Corporation (SSOC) with
independent Registrar
6. Outsourced ANA as Currently in Place (Status Quo Prequalification)
7. Outsourced ANA as Currently in Place with standard processes and procedures.
8. Outsourced ANA as Currently in Place - Registrar has Adjudicator selection only
9. Outsourced ANA as Currently in Place - Registrar has Adjudicator management &
selection
10. Outsource ANA through tendering (rather than prequalification).”
As part of the ANA’s submissions, the representative provided a risk profile of each
of the models attributing a risk factor to twenty-four equally weighted items of criteria.
That is, the representative identified whether for instance the current model had:
(a)
(b)
(c)
(d)
an insignificant risk;
low risk;
medium risk; or
high risk.
The 24 equally weighted items of criteria included:
1. Government oversight & control;
…
5. ANA processes influenced by Government Fiscal Risk and Return;
…
142
11. Fees – consistency etc;
…
17. Adjudicator performance and monitoring
…
23. Adjudicator selection potentially influenced by adjudication agents.
According to the ANA’s Risk Profile Table, the current model came in last, that is
with the highest risk profile of all ten models. The model with the least risk
incorporated a fully in-sourced ANA established as a statutory owned corporation
with an independent registrar.
I have considered all ten models identified by the ANA. Those that I have
considered worth pursuing further, I have addressed below in my considerations.
In another ANA’s written submissions, it seems to reject the possibility of the
existence of “claimant friendly adjudicators” on the basis of the “probity of the ANA
and the probity of adjudicators”. It submitted that:
“The process that XXXX uses is transparent and consistent. XXXX offers adjudicators on a
rotation basis to adjudicators (registered under the BCIP Act) on the XXXX panel, subject to
checking for conflicts of interest, identifying special knowledge or experience requirements
and adjudicator availability. XXXX maintains its role strictly as administering the adjudication
service and refraining from comment on adjudicator’s determinations.”
Neither of the remaining three other ANAs provided written submissions to the
Review.
Oral Submissions of ANAs
As part of the individual stakeholder interviews conducted during this Review, I
spoke with representatives of each of the ANAs either in person, or because most of
the ANAs are based in NSW, over the telephone.
Representatives of some of the ANAs interviewed (each of whom wished to remain
anonymous) told me of their misgivings about the Act and in particular, the
appointment process. Their comments included remarks such as:



There is a perception within the industry that certain ANAs are “claimant
friendly”;
There are concerns about the qualifications and experience of many
adjudicators; and
There needs to be greater care in the nomination process to identify the “right
adjudicator” for each adjudication application.
143
Another representative of a different ANA told me:






There is considerable concern about the working relationship between ANAs
and entities who assist parties during the adjudication process, often referred
to as “claims preparers”;
That it is becoming increasingly difficult for ANAs not to become compromised
by claims preparers;
The problem with the current system is that an ANA tries to develop a client
base or patronage to ensure repeat referrals, but such repeat referrals are
dependent upon claimants being successful in their adjudication applications;
That preparers have “suggested” what adjudicators they would like to be
appointed to a particular application and conversely, adjudicators that they do
not want;
In one case, a claims preparer told the ANA that “If we come to you again and
Adjudicator “X” is chosen we will withdraw [the adjudication application]
immediately”;
The practice of “adjudicator shopping” was not uncommon.
ANAs were not the only parties in favour of maintaining the status quo.
In-sourcing will do nothing to resolve concerns
One adjudicator in his written submissions remarked:
“Stakeholders have expressed concern that adjudicators may be biased towards the
interests of a particular stakeholder group. Providing that a Government entity is to have
sole responsibility for the appointment of adjudicators would do nothing to resolve that
concern. If the Government were to pay adjudicators then the concern might be diminished.
However, the stakeholders concern would be better met by the dual scheme of adjudication
proposed above and by giving adjudicators power to decide jurisdictional issues and charge
a fee even when they find that the adjudication application is void and they don’t have
jurisdiction.”132
Appointment process should remain in the private sector
A national property developer argued that the current system was appropriate
provided that there are no conflicts of interest where the ANA is involved in the
preparation of the payment claim. Although they offered the following suggestions
for improvement:
“There are no problems in principle allowing parties to a construction contract contractually
agreeing on the ANA, but in reality, it is generally the respondent who prepares the contract
document and the ANA could effectively be imposed on the claimant.
132
This issue is considered in response to Question 14 of the Discussion Paper
144
It should not make any difference as the adjudicator should not be biased.
ANA’s should be kept in the private sector. The private sector is able to offer more flexibility
in response to industry demands and workloads.”
One adjudicator supported the current appointment process, saying:
“From my experience on the panel of XXXX, I believe the process of appointing Adjudicator's
is appropriate.
XXXX offer consistent and professional administrative, training and mentor support.
I think it should remain in the private sector as it provides much more flexibility to respond to
fluctuating markets across state borders and pay competitive salaries to retain appropriately
qualified staff.
…
I am apprehensive about drafting it [the choice of ANA] into the document [the contract] as it
is generally the respondent who prepares the contract document and it would mean that in
reality, the ANA could effectively be imposed on the claimant.”
Pros and cons
Another adjudicator provided detailed submissions on the advantages and
disadvantages of the current appointment process. He suggested that:
“There are pros and cons of the process of ANA appointments. On balance I believe ANAs
provide a value adding service in standing between the adjudicator and the parties in
dispute. They have systems to ensure that claims are correctly submitted and dealt with in a
timely manner. The ANA provides a useful accounting service to the adjudicator ensuring
payment of fees. They also facilitate ongoing training and provide information and updates
on court cases and other relevant information.
On the negative side adjudicators are limited to the ANAs that appoint them and, as such,
are potentially open to commercial influence by an ANA. While I have no direct experience
of these practices, there are rumours in the industry that some ANAs do put undue influence
on adjudicators.
It was mooted last year that there should be a separation between the ANA and adjudicators
and claims preparers. I strongly believe that an ANA should not also be an adjudicator.
This sends a signal to the industry that the adjudicator is not acting as a separate and
independent entity from the ANA. Separation of the ANA and adjudicator would remove any
possible perception that an ANA could manipulate the decisions reached by an adjudicator.
I also believe that an adjudicator should not act as both a claims preparer and adjudicator for
the same ANA. This relationship could lead to potential accusation of commercial deals
arising where a claims preparer directs business to an ANA in the expectation of receiving
future appointments as an adjudicator. This arrangement could undermine the
independence of the adjudicator to make a decision and potentially raise perceptions in the
industry that commercial arrangements are influencing the adjudication decision.
145
While I have respect for the role that the BSA plays in administering the Act I do not believe
that the BSA would be an appropriate alternative to the current independent ANA structure.
The BSA must remain an independent auditor of the conduct of the ANA and adjudicators.
It would be difficult for the BSA to fulfil (sic) all of the support functions that the current ANAs
provide while at the same time also providing an overarching regulatory role. The
separation of powers and responsibilities under the current arrangement seems to be
working well with the few exceptions noted above.” [Emphasis added]
Registrar should not get involved
Another adjudicator argued that the registrar should not become involved in the
appointment of adjudicators, preferring that position to be quarantined, as it is now,
so that the registrar may “pursue any accusation of bias against any [ANA]”.
Concerns of bias can be addressed by appropriate supervision and management
A lawyer/adjudicator argued that there were a number of improvements that could be
made to the current appointment process. In providing helpful and detailed
submissions, they said:
“While I am unaware of any attempt to have a decision set-aside on this basis [of bias],
these concerns are, in my view, valid concerns, but are readily be addressed (sic) by the
appropriate supervision of ANAs and the appropriate management of adjudicators.
As ANAs do not decide applications, the perception of bias (and the risk of actual bias)
arises from the power ANAs have over the flow of work to adjudicators. In supervising ANAs,
it is therefore important to ensure that there is an acceptable system for training, appointing
and allocating work to adjudicators, that this system involve as little unfettered discretion as
possible (so that it is auditable), that it be audited (preferably by the Auditor-General), that it
be made known to adjudicators (so they know there is no point in them currying favour with
an ANA) and that it be published (as an aid to developing and maintaining public confidence
in the system).
…
Once the flow of work to individual adjudicators is sufficiently systematized, a large part of
the incentive to be or become claimant-friendly disappears. The only remaining risk is then
the possibility that adjudicators as a group may be or become claimant-friendly in an attempt
to maintain or increase the total volume of applications across all ANAs in the expectation
that they might then benefit, albeit indirectly, from that increase. The risk of this type of
behavior will, of course, only exist where adjudicators don't otherwise have the volume of
work they want at rates they are happy with. It is suggested that this should therefore be
managed by monitoring how well ANAs meet adjudicator expectations in respect of work
flow and other conditions.
Two alternative models are suggested in the Discussion Paper: that parties be permitted to
agree an ANA and, alternatively, that adjudicators be nominated by some arm of
government. The major problem with the former suggestion is that, except where the parties
have comparable bargaining strength, it fails to address the possibility of bias; it just makes it
more likely that those complaints will come from claimants rather than respondents.
146
The latter suggestion, on the other hand, removes the risk of bias on the part of ANAs but,
without the same sorts of controls detailed above, fails to address the risk that adjudicators
as a group will try to increase the number of adjudication applications by being "claimantfriendly", and is itself susceptible to allegations of corrupt conduct.”
Irregularity in the marketplace
Another lawyer/adjudicator dismissed the suggested in-sourcing model. He said:
“The situation as suggested in the discussion paper, that is, a natural monopoly where the
government restricts the playing field to one ANA or that the government in fact becomes the
ANA itself, is an intervention on the part of the government which appears to be based on
economies of scale.
However, economies of scale have not been identified in the paper at all.
The suggestion in this regard, if the suggestion is followed through with a change as
suggested in the discussion paper, becomes intervention on the part of the government to
impose an irregularity into a marketplace which otherwise appears to be working efficiently
under the existing structure of more than one ANA.
For the Minister to move in the direction being suggested, that is, where there is no
competition, no natural selection of the efficient, and no competitive pricing, the principles of
an efficient marketplace would be substantially and materially undermined, which becomes
an important negative consideration adversely effecting the policy of the legislation.”133
Adjudicators are alive to their responsibilities to the parties and the process
Members of the Adjudication forum, which is constituted by adjudicators,
adjudication submission consultants (aka “claims preparers”), lawyers and industry
representatives134 submitted that the current process of ANAs appointing
adjudicators was appropriate. They argued that:




“The idea that there are ‘claimant friendly’ adjudicators is incorrect.
Adjudicators take the responsibility to carry out their duties very seriously.
Many adjudicators come from the construction industry and understand that the BCIP
Act is important to the survival of many companies. They would not do anything that
would ‘damage’ its operation.
Based on our information ANAs have procedures and processes that minimise
conflicts of interest between preparers of adjudication applications and adjudications.
While it is sometimes impossible to tell who has prepared an adjudication application,
it is our understanding that if the ANA is aware that a certain preparer is familiar with
a certain adjudicator that adjudicator would not be given the adjudication application
to decide.” 135
133
Written submission to the Review
Page 1 of the Submissions of Adjudication Forum, dated 22 February 2013
135
Written submission to the Review
134
147
Consideration
Informal Adjudicator Peer Review
During the course of the Review allegations were made about a number of instances
where other adjudicators (other than one deciding the application) have allegedly
involved themselves in some form of unsolicited informal peer review before a
decision has been published and has sought to influence adjudicators to change
aspects of their decisions. If this is correct, this behavior is totally unacceptable. How
the unpublished decisions came to be in the possession of other adjudicators is not
known. Whilst I have no qualms in an ANA being able to offer “proof reading” advice
on the decision of an adjudicator awaiting publication, that advice must not extend, in
my view at least to an ANA providing the unpublished decision to another party. An
ANA has no statutory function in the making of an adjudication decision, other than
the appointment of the adjudicator.136
Although the Review has not received any direct evidence of instances where other
adjudicators who have allegedly acted to influence the decisions of adjudicators
being involved in acting for one of the parties to that adjudication, I am concerned
that the practice may be happening. One must ask the question, why else would
another adjudicator involve themselves in such behaviour? I should note, that the
allegations of influence being applied on adjudicators by either an ANA or another
adjudicator on the panel of that ANA are not restricted to a particular ANA, nor a
particular class of ANA.137 In saying that, these comments should not be
misinterpreted that the Review received evidence or submissions that the alleged
problem was occurring regularly. It did not. However the allegation was made more
than once, against more than one ANA and by different adjudicators.
Claims Preparers
The Review received evidence from a number of persons during the individual
interviews where it was alleged that claims preparers have an understanding with
some ANAs that particular adjudicators are or are not to be appointed to applications
brought by them on behalf of their clients. If true, this is nothing less than blatant
“adjudicator shopping”.
I am concerned about relationships which are alleged to have developed between
ANAs and claims preparers. As if the existing appointment process were not subject
to enough commercial pressures, the alleged undue influence that claims preparers
are capable of exerting upon ANAs is unacceptable. A representative of one ANA
advised the Review that it was fielding more and more inquiries from claims
preparers who were unashamedly demanding the appointment of a particular
adjudicator or conversely the non-appointment of particular adjudicators and if the
ANA did not accede to their demand, they would simply go to an ANA that would.
136
137
See s.21(6) of the BCIPA
ie a ‘private ANA’ or a ‘membership ANA’
148
Not a great deal is known about “claims preparers”. Some are legally qualified,
many are not. Those claims preparers who are not legally qualified are not subject
to any regulatory control or professional standards, unless of course they belong to
another profession that is regulated. This lack of oversight may result in some
claims preparers taking a cavalier approach to the work they perform. In my view, it
is likely to be a matter of time before a disgruntled party seeks the assistance of the
Legal Services Commission for work performed by a claims preparer who does not
hold a current practicing certificate. I shall leave for others to determine whether the
work performed by a claims preparer who is not an Australian legal practitioner
constitutes “engaging in legal practice” as that term is used in s.24 of the Legal
Profession Act 2007. However I note that the term “engage in legal practice” was
considered by Daubney J in Legal Services Commissioner v Walter138 where his
Honour applied the decision of Cornall v Nagle139.
In finding that the respondent in Walter was ‘engaging in legal practice’ whilst not an
Australian legal practitioner in contravention of s.24(1) of the Legal Profession Act
2007, Daubney J found that that the respondent engaged over a significant period of
time, in a practice of:
(a)
(b)
(c)
(d)
(e)
advising parties to litigation in respect of matters of law and procedure;
assisting parties to litigation in the preparation of cases for litigation;
drafting court documents on behalf of parties to litigation;
drafting legal correspondence on behalf of parties to litigation; and
purporting to act as a party’s agent in at least one piece of litigation.
It remains to be seen whether the Legal Services Commissioner and ultimately the
Supreme Court would take a similar view of the conduct of claims preparers who are
not Australian legal practitioners whilst acting for parties in an adjudication process.
I do however think it is only a question of time before the issue is ventilated.
Adjudicators acting as claims preparers for the same ANA – conflicts of interest
The Review is aware that some adjudicators act as claims preparers. Indeed it has
been submitted to the Review, that if adjudicators were not permitted to also act as
claims preparers, many would be forced to leave the industry in search of other
work. That is not in my view adequate justification for maintaining the status quo.
Adjudicators who also act as claims preparers may place themselves, the ANA and
indeed ultimately their clients in an invidious position. It is my understanding that
ANAs routinely receive enquiries from potential claimants looking for assistance to
prepare payment claims and adjudication applications. Conversely, it is assumed
they also receive enquiries from respondents.
138
139
[2011] QSC 132 at [15]-[16]
[1995] 2 VR 188 at 207-8
149
I am aware that ANAs will often refer these enquiries to adjudicators on the ANA’s
panel who perform claims preparation work with the understanding that the
adjudication application, if it proceeds to that point, would be made with that ANA.
Whilst I am not aware of any instances or even allegations of an ANA referring an
application to an adjudicator who prepared the claim or the application, there is a
fundamental problem with this arrangement particularly when the claims preparer
operates under a business name or perhaps even their own name. The conflict
arises when the ANA nominates another adjudicator who is to all intents and
purposes a colleague adjudicator of the one who prepared the material. If the claims
preparer is a senior adjudicator the problem is amplified because there is the
potential that the nominated adjudicator may feel pressured no matter how subtly, to
decide the matter in a particular manner. The difficulty occurs when an adjudicator
accepts the nomination and subsequently learns that another adjudicator colleague
or perhaps even friend was involved in representing the claimant or respondent.
Similar issues of the potential for conflict of interest for sessional members who are
lawyers and who wish to practice within the jurisdiction of QCAT was recently
addressed by the President of QCAT, Alan Wilson J, when he issued Practice
Direction No 2 of 2013. The Practice Direction states:
“QCAT Practice Direction No 2 of 2013 Allocating Legal Members to Lists in QCAT Effective:
15 March 2013
1. Practice Direction No 13 of 2010 (‘Allocating Members to a division in QCAT’) is
repealed.
2. The purpose of this practice direction is to enable QCAT’s sessional members and
adjudicators who are lawyers to nominate a list or lists within QCAT in which they will
not sit.
3. It is relevant to those QCAT members who are lawyers and who may wish to appear
in the Tribunal from time to time in some matters, representing parties. By
nominating lists in which they will not sit they avoid the risk of embarrassment or the
perception of a conflict of interest or bias – and, assist the Tribunal in scheduling
Members for hearings. Example: Member ABC, a lawyer, sits regularly as a presiding member or member in
tribunals in Guardianship and other lists within the QCAT human rights division, but
has clients with matters in the Building list whom they may wish to represent there.
Member ABC will nominate the Building list (and any associated lists) as those in
which they will not sit.
4. QCAT is required, under its Rules, to exercise its functions in divisions140 but the
President may, by practice direction, establish lists within each division. Those lists
are established, by the annexure marked ‘Schedule A’.
5. Sessional members and adjudicators wishing to nominate a list or lists in which they
do not wish to sit should advise their intention in writing to:
- [omitted]
2. A proper consideration of the ethical issues which may arise for members and
adjudicators, discretion and good sense will dictate the response of members who
are interested in continuing both to sit as QCAT members in some lists, and to
practice as lawyers in others.
140
QCAT Rules 2009, r 5(1)
150
Guidance may be obtained from: COAT (Council of Australasian Tribunals) Practice
Manual (http://www.coat.gov.au/practicemanual); and the Administrative Review
Council’s Standards Guide for Tribunal Members
(http://www.arc.ag.gov.au/Publications/Reports/Pages/Downloads/AGuidetoStandardsofConductforTrib
unalMembersRevised2009.aspx).
Justice Alan Wilson President
15 March 2013”
It is apparent from the introduction of QCAT PD 2 of 2013, that QCAT acknowledges
the potential for embarrassment of not only the sessional member but more
importantly the embarrassment to QCAT and the loss of public faith in it as an
independent quasi-judicial institution which may arise as a result of a conflict of
interest of its Members.
The Council of Australasian Tribunals Practice Manual for Tribunal Members at p.314 refers to the Administrative Review Council’s Standards Guide for Tribunal
Members. It cautions:
“Members who have other professional and business activities should ensure that people
from whom they accept work in their private practice do not appear in matters before them.”
The caution is consistent with QCAT PD 2 of 2013. It seeks to warn sessional
members that they ought not put themselves in a position where they can be asked
to recuse themselves on the basis of an apprehension of bias because of a
commercial arrangement they may have with someone who appears before them.
In my view, it is somewhat analogous to an adjudicator who also acts as a claims
preparer and who refers his or her clients to an ANA who may then appoint that
adjudicator in another unrelated adjudication application. There is a danger that
what forms is a “web of interdependence” where each of the participants rely on the
other for their income.
It is important to note that the Act through the Adjudicator’s Conditions of
Registration established by the registrar deals with the issue of conflict of interest.
Section 65 of the BCIPA provides:
65 Conditions of registration
(1) A registration [of an adjudicator] is subject to the following conditions—
(a) the adjudicator must comply with this Act;
(b) other reasonable conditions the registrar considers appropriate to give effect to
this Act and that are stated in the certificate of registration or in an information
notice given under subsection (3).
(2) Conditions may be imposed under subsection (1)(b)—
(a) when registration first happens or is renewed or amended; or
(b) at another time if the registrar considers this is necessary to ensure that an
adjudicator effectively performs the adjudicator’s functions under this Act.
(3) If the registrar decides to impose conditions on the registration under subsection
(2)(b)—
(a) the registrar must immediately give the adjudicator an information notice for the
decision; and
151
(b) the conditions take effect when the information notice is received by the
adjudicator or the later day stated in the notice.
The registrar has imposed certain conditions on the registration of all adjudicators 141
it also empowers him to impose further conditions on an adjudicator once they
become registered. Relevantly, General Condition 2(d) of an adjudicator’s
conditions of registration provides:
(1) An adjudicator will be expected to:
…
(d) on each and every adjudication application referred by an Authorised Nominating
Authority (ANA), examine in detail
whether there is any real conflict of interest on
their part in the acceptance of an adjudication application. In the event that an
adjudicator identifies a conflict of interest on their part, they must decline to
accept the adjudication application;
…”
A failure by an adjudicator to comply with a condition of registration may result in the
imposition of a fine,142 or suspension or cancellation of their registration.143
It has been put to the Review that adjudicators should be able to act as “ghost
writers”. That is, they should be able to act for parties provided they do so
anonymously. Unlike advocates who appear for parties in QCAT or solicitors who
would provide correspondence on that firm’s letterhead, it may be possible for an
adjudicator/claims preparer to be able to “fly under the radar”. Whilst this anonymity
may remove a significant aspect of the potential for conflict, there remains the risk
that during the course of an adjudication application, the identity of the claims
preparer could become known. Whilst this of and in itself does not automatically
result in a conflict of interest, one wonders whether it is a perception that the Act can
afford to have portrayed.
In my view, I think the answer is for the registrar to make it a condition of registration
for “Active Adjudicators”144 who have represented a party in the adjudication process,
whether for the claimant or the respondent, to be required to disclose to the ANA or
the registrar145 their involvement at the time the application is made or within 1
business day of being engaged. This disclosure would enable the registrar to alert
the nominee adjudicator of the claims preparer’s involvement and the nominee
adjudicator would then be able to make an informed decision as to whether there
was a conflict or not.
141
A copy of the conditions can be found at:
http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/AdjudicatorsConditionsofRegistration.pdf
142
143
144
145
Section 67(1) BCIPA – maximum 200 penalty units
Section 77(1)(b) BCIPA
See p.165
Depending upon whether the Government accepts Recommendations 17 and 18
152
What steps has the registrar taken to address any alleged impropriety?
I have made enquiries with the registrar regarding what steps if any were taken by
him to deal with allegations of impropriety in relation to the appointment of
adjudicators. The registrar advised me that in an attempt to enhance the regulatory
environment in which ANAs were operating, in September 2011, he prescribed new
conditions of registration for ANAs as he was entitled to so do pursuant to s.51(2)(b)
of the Act. Relevantly, the new conditions of registration incorporated two entirely
new provisions which it was intended would deal with the independence of the
appointment process. These two conditions (t) and (u) provide: 146
(t)a director, secretary, office bearer, employee, or a person who is an influential person of
«ANA» cannot;
(i) participate in any manner in the referral of an adjudication application to a registered
adjudicator in circumstances where they have provided any advice, assistance or
information in the preparation and/or administration of a construction contract being
the subject of the adjudication application directly to:
(a) any of the parties involved in the contract, or
(b) any person acting on behalf of the parties to the contract.
Definitions for Condition t (i);
 an ‘influential person’ means somebody other than a director, secretary, office bearer
or employee who is in a position to control or substantially influence the conduct of
the businesses affairs, including for example a shareholder or financier.
 ‘administration of a construction contract’, includes but is not limited to rights and
entitlements a party to a construction contract may have under the Act.
 a ‘construction contract’ is a defined under the Act.
(ii) have any form of connection or relationship with a company or business that as part
of its business operations, provides advice, assistance or information to any entity on
the adjudication of payment disputes under the Act.
Definitions for Condition t (ii);
 “any form of connection or relationship with a company or business means”;
(i) in relation to a company – a director, secretary, office bearer, employee, shareholder
or an influential person as defined in (i) above.
(ii) in relation to a business – a proprietor, employee or an influential person as defined
in (i) above.

an “entity” includes an individual or company;
(u) «ANA», cannot refer an adjudication application to a registered adjudicator who is also
an:
(i) employee of «ANA» in its operations as an ANA, or
(ii) influential person in the day to day operations of «ANA» as an ANA.
146
http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/ANAConditionsofRegistration.pdf
153
Definitions for Condition u;
an “employee of «ANA Name» in its operations as an ANA”, will include any
employee who performs a function, duty, requirement or obligation of any type,
regardless of frequency, in relation to the operations of «ANA Name».
 an ‘influential person in the day to day operations of «ANA»’ will include but not
limited to;
(i) persons who in the day to day operations of «ANA» provide direct or secondary (via
an employee or influential person of «ANA») advice to parties or persons on the
operations of the Act.
(ii) persons who in the day to day operations of «ANA» are involved either directly or
secondarily (via an employee or influential person of «ANA») in the receiving and
allocation of adjudication applications to adjudicators.


an ‘influential person in the day to day operations of «ANA»’ will NOT include;
(i) a director, secretary, office bearer or shareholder who has no (nil) involvement in the
day to day operations of «ANA»,
(ii) a person who fulfils a role akin to a head adjudicator or chief mentor, freely and
independently of the day to day operations of «ANA», and where on behalf of
«ANA» they are not providing any direct or secondary advice on the Act, or in the
receiving and allocation of adjudication applications on behalf of «ANA»,
(iii)a person who occasionally consults or provides training on any aspect of the Act to
«ANA».
The registrar has advised me that since implementing conditions (t) and (u), there
have been no reported breaches of those conditions by any ANA.
I am also advised by the registrar that he continues to monitor ANAs for compliance
with the ANA conditions of registration by the performance of annual auditing. In
addition to this auditing, the conditions of registration for ANAs were also changed in
relation to the requirements of an ANA to report any complaint made by a member of
the public to the registrar about an adjudicator. Condition (p) provides that an ANA
must:
(p) immediately notify the Registrar of any complaint or allegation made against a registered
adjudicator, relating to the registered adjudicator deciding an adjudication application,
«ANA» referred to them, or the performance of a registered adjudicator against their
conditions of registration under section 65 of the Act in relation to the registered
adjudicator deciding an adjudication application referred to them by «ANA». Upon
notifying the Registrar of any complaint or allegation in this regard the ANA must advise
the Registrar:
(i) how the complaint or allegation will be investigated,
(ii) the findings of the investigation,
(iii) any outcomes or actions from the finding of the investigation.
Prior to September 2011, an ANA was only required to alert the registrar if a
complaint against an adjudicator had been made out.
154
Collins Inquiry Recommendations
Recommendation 39.6 of the Collins Inquiry suggested that the NSW Act be
amended to remove the right of a claimant to choose its own adjudicator. 147 The
NSW Government in its response, gave the recommendation “in principle support”
but importantly noted that the recommendation should refer to an Authorised
Nominating Authority. However, the NSW Government response notes that
recommendation 39 will be considered in a comprehensive review of the NSW Act in
2015.148
Untested Evidence
It is important to note again at this juncture that all of the submissions and
information provided to the Review are untested. The Review did not receive
evidence under oath, nor did it have any powers of compulsion, nor were the
providers of the evidence in the individual interviews thoroughly tested as one would
expect under cross-examination. In the premises, the information provided remains
nothing more than untested allegations.
In those circumstances, it would be quite inappropriate of me to make any adverse
comments or findings against a party without them having had the opportunity to be
heard in response to specific allegations of impropriety. Without the benefit of
receiving evidence under oath/affirmation or the benefit of considering the credit of
witnesses under cross-examination, the untested allegations remain just that.
That however is not the end of the matter. Even if the allegations referred to herein
were proven to be false or if there were insufficient evidence to support the
allegations, as submitted it remains to be determined whether the current
appointment process creates an apprehension of bias.
Apprehended bias
It is uncontroversial that an adjudicator must accord natural justice to the parties.
This includes carrying out his or her work free from actual or apprehended bias. 149
Such bias will amount to jurisdictional error, rendering a decision amenable to a
declaration that the decision is void.150
147
See p.369 of the Final Report of the Collins Inquiry
See: http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf
149
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 per Deane J at 366-7
150
John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 per Applegarth J at [18] – [21] citing Brodyn Pty
Ltd v Davenport (2004) 61 NSWLR 421 at 441 [52], 442 [55]
148
155
I have been unable to locate any decisions concerning alleged bias of ANAs, and
only a few decisions concerning allegations of bias of adjudicators. In Reiby Street
Apartments Pty Ltd v Winterton Constructions Pty Ltd 151, an adjudication decision
was made out of time, and hence no fees were payable under s 29(4) of the NSW
Act. A refund was demanded contemporaneously with the assignment of a fresh
dispute between the same parties to the same adjudicator. Master Macready found
that apprehended bias existed in the circumstances.
At [25], his Honour cited Johnson v Johnson152:
“It has been established by a series of decisions of this Court that the test to be applied in
Australia in determining whether a judge is disqualified by reason of the appearance of
bias... is whether a fair-minded lay observer might reasonably apprehend that the judge
might not bring an impartial and unprejudiced mind to the resolution of the question the
Judge is required to decide.”
Similarly, in Allpro Building Services Pty Limited v Micos Architectural Division Pty
Ltd153, Einstein J at [15] declared an adjudication void where there was an
outstanding fee dispute between a party and the adjudicator, and the adjudicator
remarked in his reasons that (Einstein J's emphasis):
“(B) the respondent’s representative, NPL has a history of requesting disqualification of an
adjudicator. My experience and I understand the experience of other adjudicators confirms
this to be true.
...
(H),This claim for the recovery of adjudicator’s fees is a recent invention, is defective and is
contrived to fit with NPL’s standard process of challenging the adjudicator’s right to
determine the matter.
(J)Whilst I find the NPL tactics unusual I do not believe that there is any personal bias
between the parties and I genuinely believe that challenging the adjudicator’s right to
determine the matter is simply part of the NPL process.”
In Ebner v Official Trustee in Bankruptcy154, the plurality judgment at [58] stated that:
“… in the practical application of the general test to be applied in cases of apprehended
bias, economic conflicts of interest are likely to be of particular significance, and that,
allowing for the imprecision of the concept, the circumstance that a judge has a not
insubstantial, direct, pecuniary or proprietary interest in the outcome of litigation will
ordinarily result in disqualification.”
In the case of an adjudicator or ANA, the interest will be indirect only: other than
receiving the adjudicator’s fees, or part thereof, they do not stand to profit from the
decision itself, but they do stand to profit from future referrals.
151
(2006) 22 BCL 426; [2005] NSWSC 545
(2000) 201 CLR 488 at [11]
153
[2010] NSWSC 474
154 (2000) 205 CLR 337
152
156
Even an indirect pecuniary interest may give rise to apprehended bias: Webb v The
Queen155. However, the disqualification is only automatic in the case of direct
interests.
The case law relating to commercial arbitrators may be of some assistance. In Sea
Containers Ltd v ICT Pty Ltd156, the New South Wales Court of Appeal found
apprehended bias where arbitrators purported to impose 'cancellation fees' on
parties to an arbitration, and demanded payment with threats of action. Sheller JA
said at [11]:
“Parties choose and appoint arbitrators from candidates who are entrepreneurs engaged in
practice as barristers or solicitors or in other fields of endeavour. The candidates compete in
the market place for work, no doubt quoting fees likely to attract it. But once appointed, an
arbitrator is no longer an entrepreneur so far as the parties are concerned. The arbitrator
accepts a quasi judicial position governed by law. Like a judge, not only must the arbitrator
be impartial, the arbitrator must not give the appearance of bias. In Bremer Vulkan Schiffbau
und Maschinenfabrik v South India Shipping Corporation Limited [1981] AC 909 at 980 Lord
Diplock observed that the concept of "arbitration" as a method of settling disputes carried
with it by necessary implication that the person appointed as arbitrator to decide the dispute
should be and should remain throughout free from all bias for or against any of the parties.”
The position of an arbitrator is quite different to that of an adjudicator, although there
have been many submissions referred to in the Review, which suggest that similar
appointment processes could be used, that is to permit the parties to agree upon an
adjudicator or an ANA who would then appoint an adjudicator. An arbitrator’s
decision, subject to any rights of appeal, is final. An adjudication decision does not
finally determine the rights of the parties.157
I do not suggest for a moment that an adjudicator performs the functions of a court or
a tribunal, but adjudicators do determine questions affecting common law and
statutory rights or obligations which can have very significant financial implications
on the parties even if the decision is interim. Adjudicators are required to observe
the basic rules of natural justice by affording persons who might be adversely
affected, a reasonable opportunity of presenting an informed case in opposition and
arriving at the relevant decision uninfluenced by bias or self interest.158
In my view, relying on Reiby Street Apartments and Allpro (cited above), adjudicators
are subject to the principles enunciated by a long line of authority which deal with
apprehended bias.
(1994) 181 CLR 41 at 74
[2002] NSWCA 84
See s.100 of the BCIPA
158
Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd (2006) 22 BCL 285; [2005] NSWSC 1129
per Brereton J at [44]; affirmed generally in Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd
[2007] NSWCA 32
155
156
157
157
Adjudicators must act in good faith
Adjudicators must also act in “good faith”. White JA in Northbuild Construction Pty
Ltd v Central Interior Linings Pty Ltd159 said this of the requirement for an adjudicator
to act in good faith:
“…As the New South Wales Court of Appeal did in Holmwood, the enquiry should focus
more on whether the adjudicator has performed the function demanded by the Payments Act
and less on pursuing elusive synonyms, keeping always in mind that the legislative intent
dictates a person with recognised expertise in the area be selected for the task by an
informed body and this, necessarily, facilitates the rapid decision making required.”
[Emphasis added]
Her Honour also said at [115]:
“… the purpose for the progress claim process in Pt 3 of the Payments Act and the
considerable administrative edifice established by it, is to ensure that only appropriately
qualified persons can be adjudicators and only appointing entities who are registered as
having sufficient understanding of what is required in respect of any particular adjudication
are given the power of appointment. As the adjudicator and the primary Judge recognised, it
is a fundamental mistake to regard the adjudication process as akin to a civil proceeding or
to an arbitration. To do so would defeat the point of the Payments Act.” [Emphasis added]
In my view, the intent of her Honour’s last comment should not be misinterpreted that
adjudicators have a lesser standard of probity and requirement for independence
than say a judge or arbitrator. In my view, the parties to an adjudication application
are entitled to have the utmost faith that the adjudicator is genuinely disinterested in
the outcome. Under the current appointment process where adjudicators are
appointed by third party ANAs all of whom generate income 160 from the adjudication
process and whose best interests are served by appointing adjudicators who may
make decisions which will in effect generate more work and more profit might cause
the fair minded lay observer to reasonably apprehend that the adjudicator might not
bring an impartial and unprejudiced mind to the resolution of the question the
adjudicator is required to decide.
Allegations of corruption
Graph D161 above demonstrates that between 2006/07 and 2011/12, the value of
non-residential construction work performed in Queensland has been between $6b
and $9b each year. Whilst of course not all construction work will end up in
adjudication, the amount of money that can be made and is being made out of
construction dispute resolution is significant.
159
[2012] 1 Qd R 525 at [96]
It is irrelevant in my view that some ANAs are not-for-profit. The adjudicators who serve on their panels are
not and stand just as much to gain, albeit less so than “private ANAs” and those on their panels
161
See p.85 above
160
158
In the written submissions of one solicitor, it was argued:
“[By] [s]imply, opening up a system for determining private rights like BCIP Act adjudication
to a system of appointment of adjudicators based on commercial competition and is unfair
(sic) and open to corruption and abuse.”
Based on the many submissions provided to me during this Review, I consider that
there is a risk that the existing process of the appointment of adjudicators is open to
corruption and abuse. Government should be concerned that the current structure
under the BCIPA of Authorised Nominating Authorities and how they interact with
claims preparers and the appointment process of adjudicators may fall between the
cracks of current public sector accountability measures, because neither ANAs nor
adjudicators ‘hold an appointment in a unit of public administration’ 162 and would
therefore not fall within the jurisdiction of the Crime and Misconduct Commission
(“the CMC”).
Whilst I accept that the registrar has power to suspend or cancel the registration of
an ANA or adjudicator under s.77 of the BCIPA, the registrar does not in my view
have sufficient power to investigate allegations of misconduct that may be leveled
against an ANA or an adjudicator that would be available to the CMC if either held
‘an appointment in a unit of public administration’. Equally, should Government
accept Recommendation 18, it is more appropriate that if allegations of misconduct
are made against an adjudicator, that they be dealt with by a completely independent
investigative body such as the CMC rather than the registrar. I should note at this
point that the registrar and his staff would themselves fall within the jurisdiction of the
CMC because the registrar and the BCIP Agency would be regarded as a unit of
public administration.163
In my view, the fact that ANAs and adjudicators fall outside current public sector
accountability measures augments the submissions that the adjudicator appointment
process should be removed from the commercial sector and brought within
government where more appropriate checks and balances can be properly
implemented. In so doing, I recommend that the Act be amended to ensure that an
adjudicator falls within the jurisdiction of the Crime and Misconduct Commission by
either expressly stating that an adjudicator holds an appointment in a unit of public
administration.
In the event that Government rejects Recommendations 17 and 18, I also
recommend the Act be amended to ensure that ANAs similarly fall within the
jurisdiction of the Crime and Misconduct Commission.
162
163
See ss. 14 and 20(1) of the Crime and Misconduct Act 2002 (Qld)
See s.20(1)(e) of the Crime and Misconduct Act 2002 (Qld)
159
Question 8: Summary
In my view, the nexus between the interests of claimants and their representatives
must be broken from those that appoint adjudicators and of course the adjudicators
themselves. Putting aside all of the untested allegations made to the Review and
applying the test adopted in Johnson v Johnson it is my view that a fair-minded lay
observer might reasonably apprehend that an adjudicator under the current
appointment process might not bring an impartial and unprejudiced mind to the
resolution of the questions that he or she is called upon to decide.
Alternatives to the current appointment process
Option 1 – Contractual choice
Whilst I respect that in a perfect world, the parties should be able to agree upon an
appropriate ANA or adjudicator, I am not convinced that such a process would not be
open to abuse. Given that in most cases a contracting party will be responsible for
the drafting of a building contract, I am concerned that respondents would simply
name “respondent friendly ANAs” or “respondent friendly adjudicators”. The mischief
that many respondents have so bitterly complained of would simply be replicated by
such a process, but this time, in their own favour. As was identified in the
submissions of several ANAs, the Victorian and New South Wales Legislatures saw
fit to move away from this process and no doubt they did so for good reason. For
these reasons, I do not recommend enabling the parties to agree upon the ANA or
the adjudicator in the contract or elsewhere.
Option 2 – Alternate choice
An alternative to the current appointment process is for the parties to agree in the
contract upon a list of three ANAs and if required, the claimant would then have to
choose from that list. The chosen ANA would then nominate an adjudicator and the
application would proceed in the usual course. That suggestion may have some
merit. Although this proposal lessens the prospect of an adjudicator being appointed
that will be “friendly” to either one party or the other, it does not in my view
sufficiently negate the prospect. The alleged complaints as detailed above, are not
confined to one particular ANA or even a “class” of ANA. I do not for instance accept
the submission that all private ANAs should be de-registered leaving only
“professional” not-for-profit organisations to perform the role under the guise of them
being as “pure as the driven snow”. There is in my view just as much opportunity for
conflicts of interest and improper conduct to arise in a not-for-profit ANA as there is
for a private ANA.
160
Ultimately although some ANAs may be regarded as a not-for-profit organisation, the
adjudicators who serve on their panels assumedly do not have similar altruistic
motives. Whilst I can see nothing wrong with an adjudicator making a profit from
providing a service to the parties, adjudicators must be able to independently “ply
their trade” in an environment free of the conflicts of interest and economic pressures
complained of during this Review.
Option 3 – Hybrid – In-source/Out-source
Another alternative to the current appointment process that has been suggested is to
retain ANAs but to remove their role as the body responsible for nominating
adjudicators. I accept that some ANAs do provide a valuable service to industry as
being a “buffer” between adjudication participants and the adjudicator. I also accept
that most if not all ANAs provide a valuable educative role to the industry in assisting
parties during the adjudication process. However, if the decision is made by
Government to assume the function of the nomination process, it would be difficult to
justify maintaining ANAs. Additionally, if the nomination role is removed from ANAs
they would naturally lose all control over their adjudication panel. I envisage
instances where some ANAs would find it quite difficult to work with some
adjudicators. Indeed there may be some constitutional impediments for membership
organisations who would be expected to appoint an adjudicator who is not a member
of that association. Whilst these are not insurmountable problems and whilst I am
not utterly opposed to the option, it is not the preferred option to move forward.
Option 4 – Rotating Tender
The Housing Industry Association submitted that the position of the ANA become
available for tender on a yearly basis. In my view, this suggestion is unworkable.
The procedures and costs involved in establishing the ANA would not be conducive
to a potential 12-month rotation. Even if that period were extended, the uncertainty
that would be created by participants entering and exiting the market would lead to
significant confusion and may ultimately result in the Government having to resume
the responsibilities of the ANA in any event.
Option 5 – Court Appointed Adjudicators
The Queensland Law Society Construction and Infrastructure Law Committee
recommended that if the parties were unable to agree upon a suitable adjudicator,
that an application could be made to the Court. I do not accept this as a viable
option. One of the advantages with the adjudication process is that, by and large, it
keeps or at least it should keep payment disputes out of the court process. It would
seem to me entirely inimical to place such hurdles before parties, even if the
application were “on the papers” particularly in matters involving modest sums of
money.
161
Option 6 - In-source with registrar
In a perfect world, adjudicators would be well remunerated and have tenure, such as
a judge or magistrate. Given economic realities however, governments of all
persuasions search for alternatives to the traditional court and litigation process in an
effort to reduce public expenditure. I do not suggest that a private individual cannot
perform the role of an independent umpire given appropriate environmental factors
and the establishment of proper processes and procedures. It is the process of their
appointment among other things that must be re-considered.
The Discussion Paper flagged the possibility of the appointment process being insourced to Government. Such a process in the main was supported by many of the
submitters although it was by no means universally accepted. Those opposed to the
concept cited the following reasons why in-sourcing should not be actioned:



The cost to the tax-payer;
The inflexibility of Government to be able to deliver appropriate services; and
It is anti-competitive and not befitting of a conservative state government that
promotes the interests of small business.
Funding
Should Government consider an in-sourced model, the cost to the taxpayer should
be nil. The Review considers that this is achievable. The cost to the taxpayer under
the current appointment process is nil.
It is entirely conceivable that under an in-sourced model, that the costs of
adjudication to industry may in fact be reduced, whilst remaining a “user-pays”
process. In the absence of a commercial requirement to derive a profit from the
appointment process, I consider that the overall costs to stakeholders should be
reduced.
Inflexibility of Government/Ability to deliver services
I accept in principle the submission that the private sector is very often able to deliver
better, more innovative services at less cost than its public sector counterparts. As
stated in the Queensland Independent Commission of Audit – Final Report,
Executive Summary164:
“Generally, the history and culture of the public sector is less flexible and it does not promote
entrepreneurial and commercial skills in the way that the private sector competitors promote
and value it. This means private sector operators can move faster and with more agility to
deal with emerging risks and exploit opportunities. Private investors who understand the risk
of an enterprise can assess the risk/reward ratio and trade it for personal gain.
164
At page 7
162
Public sector investors (taxpayers) are not in a position to make those decisions.”
It is acknowledged that a competitive environment amongst ANAs provides stimulus
to improve services and restrains costs, whilst providing an important educative and
marketing roles to the industry. However, in my view, the concerns raised by many
stakeholders as part of this Review simply cannot be ignored for the sake of
maintaining competition amongst ANAs. In fact, it could be argued that competition
is driving the perceived inequities of the current system as each ANA struggles to
improve its market share or perhaps even to remain in business in a difficult
economic environment.
Provided that the deadlines set out in the Act are adhered to by the BCIP Agency,
and I see no reason why they cannot, I consider that Government will be able to
provide innovative service delivery options with an emphasis on electronic
processes. It should also be remembered that the QBSA has offices in:









Brisbane;
Cairns;
Gold Coast;
Mackay;
Maryborough;
Rockhampton;
Sunshine Coast;
Toowoomba; and
Townsville.
The QBSA offices may become agents for the BCIP Agency for the purposes of filing
adjudication applications. If adopted, Queenslanders would have significantly better
access to the BCIP Agency in its role as the appointer of the adjudicator than they
currently have with the current ANAs.
Anti-competitive
Whether it is anachronistic for a conservative government to consider in-sourcing the
role currently performed by a group of private organisations is a policy matter for
others to debate. I note however that in the Queensland Commission of Audit Final
Report—Executive Summary165, the authors note that some services traditionally
provided by governments are better retained in the public sector such as those that
involve the “application of law and relate wholly to the delivery of public goods rather
than private benefit”. Whilst the report refers to the existing privatisation of some
public services traditionally administered by government such as border security
surveillance and private operation of roadside speed cameras, the Report appears to
recognise the sanctity of the independence of police services and those provided by
the courts, that is in respect to “the application of law”.
165
At page 8
163
Probity and Appointment
I am of the view that in-sourcing the role of an ANA to the BCIP Agency, removes
many, if not all of the perceptions of conflict of interest and apprehended bias. A
public servant applying properly considered published procedures has no interest in
the outcome of a payment dispute. It is suggested that a public servant deciding
which adjudicator the matter should be referred to may take the following (nonexclusive) considerations into account:







The size of the claim;
The complexity and nature of the claim;
The location of the site the subject of the payment dispute;
Whether the issues to be considered are of a specialist nature, i.e. legal,
engineering, quantity surveying, architectural etc.;
The availability, experience, qualifications and geographical location of the
adjudicators within the relevant grading class suitable for nomination;
Whether any conflicts of interest exist between a proposed adjudicator and
the parties and/or their representatives, particularly if the representative is an
“Active Adjudicator”;
Any other factor the registrar considers relevant.
Accountability
Taking these considerations into account, and considering the very broad spectrum
of applications, both in terms of monetary claims and complexity, I do not consider
that a simple “cab-rank rule” is appropriate or desirable. To counter any perceptions
of favouring one adjudicator over another, the registrar should be required to publish
in the BCIP Agency’s Annual Report details of the number of applications referred to
each adjudicator during the relevant period. The registrar would also be expected to
scrupulously ensure that BCIP Agency staff are aware of their obligations in this
regard. As a further check and balance, it is recommended that the registrar report
adjudication nomination figures monthly to the Queensland Building and
Construction Commissioner and its Internal Audit and Strategic Governance
Office.166
If Recommendation 19 is accepted, there will be greater oversight of the conduct of
adjudicators. I hasten to add however that the powers of the CMC would only
involve any allegations of misconduct by an adjudicator. If an aggrieved party to an
adjudication decision were dissatisfied, the avenue of redress would of course
remain the Supreme Court.
166
The establishment of the Queensland Building and Construction Commission and the Office of Internal Audit
and Strategic Governance were part of the recommendations made by the Panel of Experts advising the Minister
for Housing and Public Works into the Parliamentary Inquiry into the Operation and Performance of the
Queensland Building Services Authority 2012. At the time of
writing this Report, the establishment of either body is not Government Policy.
164
Non-delegable functions
I do not accept as has been submitted, that the registrar would have to perform all of
the BCIP Agency’s statutory functions. The appointment process of an adjudicator
would be a delegable function able to be performed by an appropriately qualified
member of the staff of the BCIP Agency.167
The Register of Adjudicators
I have been assisted by the submissions of many and varied stakeholders, some of
whom are registered adjudicators with the BCIP Agency. I am informed by the
BCIPA Agency that of the 126 who are registered adjudicators, only approximately
60 of these adjudicators accept or are willing to accept nominations to be appointed
as adjudicators. I accept that some adjudicators may never wish to practice as such,
but may use the qualification to further their own commercial or professional
interests. For example, some solicitors are adjudicators but have never performed an
adjudication, but represent clients during the adjudication process.
I accept that it is desirable for the BCIP Agency which maintains the register of
adjudicators, to classify those who are willing to accept nominations as an
adjudicator to be classified as an “Active Adjudicator”. An “Active Adjudicator” may
choose to remove him or herself from the “Active Adjudicator” roll and similarly an
adjudicator may apply to the registrar to be considered to be classified as an “Active
Adjudicator” provided he or she meets any additional requirements such as the
attainment of the minimum number of compulsory continuing professional
development (“CPD”) points referred to in response to Question 14.
Q8 – Recommendations
17. The current process of authorised nominating authorities appointing
adjudicators is not appropriate and should be discontinued as soon as is
practicable.
18. The power to appoint adjudicators should be restricted to the Adjudication
Registry.
19. The BCIPA should be amended to ensure that adjudicators fall within the
jurisdiction of the Crime and Misconduct Commission. In the event that
Recommendations 17 and 18 are not accepted by Government: the BCIPA
should be amended to ensure that authorised nominating authorities fall within
the jurisdiction of the Crime and Misconduct Commission.
20. The Adjudication Registry should be required to maintain in the adjudicator
register a list of “Active Adjudicators”.
167
See s.39(1) of the BCIPA
165
21. A person who is listed on the adjudicator register as an “Active Adjudicator”
must advise the registrar in writing within 1 business day of his or her
engagement for the provision of advice, preparation of a payment claim or
payment schedule, adjudication application or adjudication response,
submissions or correspondence, or any other representation of a party to an
adjudication.
166
Question 9: Do you believe that the timeframes for the making of
and responding to claims under the BCIP Act are appropriate?
If not, how could the timeframes be changed or otherwise
improved? In considering this issue you may also wish to consider
whether the provisions under the BCIP Act are adequate for the
Christmas and Easter periods?
Question 10: Do you believe the BCIP Act allows persons who
carry out construction work or supply related goods and services
to serve large and complex payment claims in an untimely and
unfair manner?
If so, are changes necessary to address this and what should they
be?
Questions 9 and 10 are interrelated. The submissions in relation to Question 9
relate also to those dealing with Question 10. The recommendations I make in
respect to Question 9 will also impact on Question 10. In my view, it is therefore
unnecessary to consider them discretely.
Background
Most construction contracts allow for a final claim to be made by the contracted party
after the expiration of the defects liability period. The defects liability period in many
construction contracts usually expires 12 months after the date of practical
completion. In many respects therefore, the timeframes in which a payment claim
may be served under the contract, coincide with the timeframes set out in s.17(4)(b)
of the Act. However, the default position under the BCIPA is that if the contract
allows for a period less than 12 months, the Act allows a payment claim to be served
up to 12 months after the construction work to which the claim relates was last
performed. It is this 12-month period in which a payment claim may be served under
the BCIPA which has stirred considerable debate amongst stakeholders.
Another topic of lively debate is the legislative deadlines which are imposed upon a
respondent to provide a payment schedule and adjudication response. The
complaint from respondents, often being that whilst a claimant has up to 12 months
in which to prepare a payment claim, they ordinarily only have 10 business days to
respond to it.168
The consequences for a respondent that does not provide a payment schedule
within the mandated deadlines can be dire. For instance, pursuant to s.18(5) of the
BCIPA, if a respondent fails to provide a payment schedule within the mandated
168
Or the time required under the contract, whichever is the lesser period - See s.18(4)(b) of the BCIPA
167
deadlines contained in s.18(4)(b):
“The respondent becomes liable to pay the claimed amount to the claimant on the
due date for the progress payment to which the payment claim relates.”
Feedback outcomes
In relation to the responses to Question 9, 26% of submitters considered that the
timeframes for the making of and responding to claims under the BCIPA are
appropriate while 39% did not and 35% did not directly respond to the question.
In relation to the responses to Question 10, 39% of submitters considered that the
BCIPA does allow persons who carry out construction work or supply related goods
and services to serve large and complex payment claims in an untimely and unfair
manner, while 24% did not and 38% did not directly respond to the question.
Relevant legislative provisions
Section 17(1) of the BCIPA provides:
(1) A person mentioned in section 12 who is or who claims to be entitled to a progress
payment (the claimant) may serve a payment claim on the person who, under the
construction contract concerned, is or may be liable to make the payment (the
respondent).
Section 17(4) of the BCIPA provides:
(4) A payment claim may be served only within the later of(a) the period worked out under the construction contract; or
(b) the period of 12 months after the construction work to which the claim relates was
last carried out or the related goods and services to which the claim relates were
last supplied.
Sections 18(4) & (5) of the BCIPA provides:
(4) Subsection (5) applies if(a) a claimant serves a payment claim on a respondent; and
(b) the respondent does not serve a payment schedule on the claimant within the
earlier of—
(i) the time required by the relevant construction contract; or
(ii) 10 business days after the payment claim is served.
(5) The respondent becomes liable to pay the claimed amount to the claimant on the
due date for the progress payment to which the payment claim relates.
“Business day” is defined in Schedule 2 of the BCIPA as:
“business day has the meaning given in the Acts Interpretation Act 1954, section 36
but does not include 27, 28, 29, 30 or 31 December.”
168
If a respondent fails to provide a payment schedule in accordance with s.18(4)(b) of
the BCIPA, the claimant may pursuant to section 19(2)(a):
(i) recover the unpaid portion of the claimed amount from the respondent as a debt due
and owing to the claimant, in any court of competent jurisdiction; or
(ii) make an adjudication application under section 21(1)(b) in relation to the payment
claim.
I will return to this, what I consider to be anomalous issue when making
recommendations for “other changes” to the BCIPA in response to Question 14
below.
After being served with a payment schedule pursuant to s.18 of the BCIPA, a
claimant has 10 business days in which to make an adjudication application to an
ANA169. Pursuant to s.21(5) of the BCIPA, a copy of the adjudication application
must be served on the respondent. No timeframe is given in s.21(5) by which the
adjudication application must be served on the respondent, but the time to provide
an adjudication response effectively does not start to run until the claimant has done
so.
After being served with a copy of the adjudication application, the Respondent may
then provide an adjudication response pursuant to s.24 of the BCIPA which provides:
24 Adjudication responses
(1) Subject to subsection (3), the respondent may give the adjudicator a response to the
claimant’s adjudication application (the adjudication response) at any time within
the later of the following to end –
(a) business days after receiving a copy of the application;
(b) 2 business days after receiving notice of an adjudicator’s acceptance of the
application.
(2) The adjudication response(a) must be in writing; and
(b) must identify the adjudication application to which it relates; and
(c) may contain the submissions relevant to the response the respondent chooses to
include.
(3) The respondent may give the adjudication response to the adjudicator only if the
respondent has served a payment schedule on the claimant within the time specified
in section 18(4)(b) or 21(2)(b).
(4) The respondent cannot include in the adjudication response any reasons for
withholding payment unless those reasons have already been included in the
payment schedule served on the claimant.’
(5) A copy of the adjudication response must be served on the claimant.
Some respondents have complained that claimants take advantage of s.17(4)(b) of
the Act enabling them to effectively prepare an adjudication application over a twelve
month period and yet under s.24(1) of the BCIPA, they may have as little as 5
business days to prepare an adjudication response.
169
s.21(3)(c)(i) of the BCIPA
169
Respondents argue that this results in unfair outcomes particularly in matters
involving large quantities of material and where the issues to be resolved are
complex.
There is also, in my view an anomaly in relation to s.24(5) of the BCIPA in that the
provision does not require the adjudication response to be served on the claimant
within a specific timeframe. I will return to this issue below in response to Question
14.
Some respondents also complain that payment claims and adjudication applications
are often strategically served on them over the Christmas and Easter period at times
when they have very few if any staff to deal with them. Many argue that this places
an unfair burden on their staff over what are traditional holiday periods.
Support for the status quo
The submissions received by the Review which argued that the timeframes for the
making of and responding to claims under the BCIPA were appropriate (Q.9 - 26%)
and which also argued the Act does not allow claims to be made in an untimely and
unfair manner (Q.10 – 24%), included:
Poor contract administration?
One submitter argued that the timeframes provided for in the Act are reasonable and
that in his view the majority of complaints in relation to the timeframes result from
poor contract administration. However, the submitter did suggest that the 'nonbusiness day' Christmas period be extended over a two-week period in keeping with
the “industry shutdown”.170
12 month period satisfactory
The representative of one ANA argued that:
-
The 12 month period in which the claimant may serve a payment claim should
remain;
The 10 business day period in which a respondent has to serve a payment
schedule should also remain unchanged;
The Christmas and Easter non-business days should also remain unchanged.
The Master Plumbers Association of Queensland also submitted that the 12-month
timeframe in which a payment claim may be served should be maintained.171
170
171
Written submission to the Review
Written submission to the Review
170
Another building contractor suggested that the 12-month timeframe should be
maintained to retain consistency between the Act and the terms of most construction
contracts.
Calculation of time for service of payment schedule
Another ANA proposed a novel approach to the time permitted for a respondent to
prepare a payment schedule in response to a payment claim for construction work
that has been completed. It suggested that the time for service of such payment
schedules be extended by 5 business days for each 2 completed calendar months
after the last day on which the claimant undertook construction work or provided
related goods and services for which the payment claim was made.172
Ambush claims
A number of submissions were made to the Review rejecting the concept of “ambush
claims”. One submitter argued that the requirement to provide reasons for
withholding payment under s.18(3) of the BCIPA was “not an onerous burden”.173
Adjudication Response timeframe should be 10 business days
A national development company argued in its written submissions that the current
timeframes for the making of payment claims was appropriate but suggested that the
time permitted for respondents to provide an adjudication response should be
amended to 10 business days. It also considered the current Christmas and Easter
shut down periods were adequate.
Christmas and Easter periods satisfactory
A building contractor rejected any proposal to extend the non-business day period at
Christmas and Easter. He argued that construction “rarely stops and creditors never
do”. The submitter was of the view that allowing additional time “simply prolongs the
pain”.174
172
Written submission to the Review; A similar although less prescriptive approach was suggested by Members
of the Adjudication Forum
173
Written submission to the Review
174
Written submission to the Review
171
Support for change
The submissions received by the Review which argued that the timeframes for the
making of and responding to claims under the BCIPA were not appropriate (Q.9 39%) and which also argued the Act does allow claims to be made in an untimely
and unfair manner (Q.10 – 39%), included:
Ambush claims
In a written submission to the Review, it was argued that many adjudication
applications for which the submitter had been involved could not have been
assembled within a 10-day period. He said:
"In large matters I may receive several boxes of lever arch files containing perhaps a couple
of hundred pages of submissions and many, many supporting documents. Clearly that is not
being put together within a 10 day period.”
Reduce the 12-month timeframe
One submitter argued that the Claimant should serve its penultimate payment claim
within 3 months of the date of practical completion with the final claim to be served at
the completion of the defects liability period.175
A national building contractor argued that allowing a claimant to bring a payment
claim up to 12 months after the work has been performed was inconsistent with the
objects of the Act. It provided the following broad ranged time-based submissions:
“This is a gross lack of procedural fairness which seriously disadvantages Respondents.
Industry practice is that most accounts are finalised within 3 months of completing the works
and accordingly the rights to submit a claim under the Act should extinguish at this time.
Responding to a Claim -
No, the Claimant should not have a direct and actionable
entitlement to payment if a Payment Schedule is not served by the Respondent within the
prescribed 10 day period. If no response is received, there should be a further 5 days
allowed following an additional notification by the Claimant. To avoid the Claimant
attempting to disguise the delivery (by, say, delivering to the registered office as opposed to
the site or regional office) the Act should be amended to have the contract state the location
for the delivery of all notices under the Act.
The period of 5 days currently allowed for a further response to an Adjudication application is
too short, given that the Claimant could be working on the Claim for many months. This
period should be increased to 20 business days.
The Adjudicator's response period of 10 business days (sic) is too short and should be
extended to 20 business days to provide a more considered ruling.
175
Written submission to the Review
172
To avoid ambush claims during the Construction industry 2 week Christmas close down
period and Easter week these periods should be excluded in respect to the counting of days
under the Act.”176
Another submitter argued, among other things that:



There should be a reduction in the timeframe within which claimants must
prepare and serve a payment claim to one month after the relevant
construction work (or related goods and services) were last carried out;
The parties should be required to comply with the agreed (or implied)
contractual dispute resolution procedure prior to initiating adjudication under
the BCIP Act; and
The Act should expressly empower the adjudicator to dismiss an adjudication
application without making a determination of its merits if, amongst other
things, he or she is satisfied that it is not possible to fairly make a
determination because of the complexity of the matter or the prescribed time,
or any extension of it, is not sufficient, or for any other reason. 177
The Housing Industry Association made the following written submissions in respect
to the mandated timeframes under the BCIPA:
“Currently under section 17(4) of BCIP Act a claimant is allowed up to 12 months after a job
is completed to issue a payment claim. Allowing such a lengthy time frame for
commencement of a claim does not support the view that the BCIP Act aids in assisting
efficient cash flow. HIA is of the opinion that the Act should be amended to reflect six
months178 rather than twelve months, as it is arguable that if a claimant can wait up to twelve
months for a claim then such proceedings should be commenced in a tribunal or court.
Furthermore, anecdotally HIA has had experiences where claimants allegedly have
knowingly issued a payment claim during a Respondent’s Christmas Shutdown period, to
enable access to default judgement (sic) provisions of the Act. Currently under the BCIP Act,
27-31 December are the only days excluded in terms of ‘business days’ (as well as public
holidays and weekends) with respect to timeframes under the Act. It is suggested that this
timeframe is extended to allow for a week prior and week after the falling of Christmas day.
During this two week period the industry traditionally comes to a halt with suppliers, trade
contractors, and builders having a ‘shutdown’.”
One government department in its written submissions argued that the time that a
claimant is entitled to serve a payment claim under the BCIPA should be limited to
20 business days after the issue of the Final Certificate.
176
Written submission to the Review
Written submission to the Review
178
A similar period of six months was also suggested by a number of stakeholders – referring to s.13(4)(b) of the
Building and Construction Industry Security of Payment Act 2009 (SA)
177
173
No entitlement to summary judgment without “second chance” payment schedule
A representative of a national building contractor argued in his written submissions
that the timeframes in the Act were not appropriate. He said:
“… the purpose of the Act is to facilitate progress payments (with a view to improving cash
flow). An entitlement to make a "progress claim" claim up to 12 months (and more if the
contract permits) after the completion of work is not in keeping with the objectives of the Act.
It has led to what is now an industry-wide practice of modifying contracts to eliminate
reference dates after PC [practical completion] – a behaviour which is the very antithesis of
the act.
In my view, the Act should operate to regulate interim progress claims and do so speedily
while the participants are actively engaged in the project. It is not necessary for the Act to
determine the final claim. I think the definition of ‘reference date’ should be expanded so that
the reference date "worked out under the contract" occurs at least monthly.
Also, the Act should be amended so that the statutory right to progress claim should cease
(say) three months after completion of the work.
Further I believe that a claimant should not have a direct and actionable entitlement under
section 19(2)(a)(i) to payment if a payment schedule is not served within the prescribed 10
day period. Rather, s.21(2)(b) of the Act should operate. That is, if a payment schedule is not
served in time, then the claimant must give notice and allow the respondent a further five
days to issue a payment schedule and then proceed with adjudication at first instance, rather
than making direct application to a court of competent jurisdiction."
Act fails to recognise progress payment claims from final payment claims
A solicitor actively engaged in the construction industry also considered the
timeframes to be inadequate. He said:
“In my opinion, a key failure of the current BCIP Act is that it fails to distinguish between
progress payment claims and final payment claims therefore inappropriate timeframes apply
for complex claims that would normally only form part of a final payment claim under a
construction contract. Because the BCIP Act treats final payment claims (i.e. within 12
months after work ceases) the same as progress payment claims (i.e. monthly payment
claims in account of the contract sum), the BCIP Act is grossly unfair against respondents,
as the claimant has up to 12 months to prepare their final payment claim whereas the
respondent is only granted 10 business days to respond with a payment schedule (s. 18
(4)(b)(ii) of the BCIP Act). To deal with this issue either the scope of payment claims which
may be referred to adjudication needs to be narrowed, the timeframes for the respondent
need to be extended (or both), or a two tier system of different scope and timeframes for
progress payment claims and final payment claims be introduced.
…
As contemplated above, to me a dual system with different timeframes applying to progress
payment claims and final payment claims should be enacted. If such a system is not
enacted, to me the following sections if the BCIP Act should be amended to introduce the
following timeframes:
174




s.18 (4)(b)(ii) (Payment Schedules) – 10 business days increased to 20 business
days
s.24 (1)(a) (Adjudication Response After Adjudication Application) – 5 business days
to 10 business days;
s.24 (1)(a) (Adjudication Response After Adjudicator’s Appointment) – 2 business
days increased to 10 business days.
s.25 (3)(a) (Adjudicator’s Decision) – 10 business days to 20 business days.”179
The obvious response to any extension of the deadlines set out in the Act, as
pointed out by one adjudicator is that it will delay progress payments being paid to
contracted parties.
A quantity surveyor advocated the introduction of extremely restrictive timeframes in
which a payment claim should be capable of being served on a respondent. He
argued that there also needed to be a legislative distinction between the time to
provide a progress claim, a claim for practical completion and a final claim. In that
regard he suggested:



“In the case of Progress Claims - 5 business days from the Reference Date;
In the case of Substantial (Practical) Completion Claims - 3 months from the Date of
Practical Completion;
In the Case of Final Claims - 30 business days from the date of Final Completion.”
The quantity surveyor saw no need to alter the existing periods classified as
“business days” in relation to the Christmas and Easter periods.180
Time for payment schedule should be calculated on sliding scale
Another building contractor suggested in his written submissions that there should be
some form of sliding scale with timeframes permitted to provide a payment schedule
in accordance with the value of the claim.
The Electrical Contractors Association and Master Electricians Australia similarly
submitted that the time to respond to a payment claim should be adjusted in
accordance with the delay in serving the payment claim.181 For instance, they
submitted that a claim “lodged after three months would require a response within 10
days but a claim lodged after 9 months would attract a 20 day response period.” 182
Another adjudicator suggested a similar amendment to the Act when he stated:
179
Written submission to the Review
Written submission to the Review
181
Similar “sliding scale” submissions were made by a contract administrator and the Queensland Major
Contractors Association
182
Written submission to the Review
180
175
“Where the payment claim is made after completion of construction work or supply of related
goods and services (“completion”) allow the respondent 10 business days plus 5 additional
business days for each calendar month or part thereof after completion that the respondent
receives a copy of the application (sic).”183
The Australian Institute of Building made a brief but valuable contribution in relation
to this question. In its written submissions it suggested:
“There is widespread agreement in the industry that 10 business days is not sufficient for
large complex claims. AIB advocates a sliding scale of time to respond to a claim, depending
on the amount of time after the work was completed that the claim is lodged, and the value
of the claim – see Appendix 1. Further, AIB believes that the 12 month period in which claim
can be made needs to be amended, and that 6 months would be preferable.”
Table 1 – Australian Institute of Building: Appendix 1 from written submission:
Number of days claim lodged after completion
30-60
60
90
120
150
180
210
240
270
300
330
360
Number of days to assess claim
10
20
25
30
35
40
45
50
55
60
65
70
Expand the time for payment schedules and adjudication responses
An adjudicator in his written submissions argued:
“The 10 business day time for a Response (sic) under s18 of the Act, or an Adjudicators
decision under s25(3) of the Act, is definitely a problem for a large and complex Payment
Claim, particularly an “ambush” type claim submitted a considerable time after completion of
the work. A Claimant submitting a large or complex claim which has a degree of
questionable or ambush type claims may not be cooperative in agreeing an extended time
for a decision pursuant to s25(3)(b).
The Christmas/New Year time problem could be minimized by the definition of ‘business day’
in the Schedule 2 Dictionary by changing the wording ‘not include 27, 28, 29, 30 or 31
December’ to ‘not include any day in the period 20 December to the following 15 January’.”
The adjudicator did not consider the Easter period to be a problem.
183
Written submission to the Review
176
Whilst making many different suggestions about amendments to the timeframes
contained in the Act, the “consolidated view” of the members of the Queensland
Major Contractors Association was that:
“The Act should be amended to provide respondents with 20 business days to provide a
payment schedule and another 20 business days to provide an adjudication response.
These timeframes would continue to provide a 'quick' process for recovering progress
payments but allows respondents to carry out a more thorough analysis of the issues.
Extending the timeframes for respondents would also address the issue of the 12 month
period for making a claim being excessive (see response to question 10 below).”184
Adjudicator discretion
A small subcontractor in her written submissions suggested that adjudicators should
be able to decide appropriate timeframes for each individual case after an initial
assessment of the material provided.
Extension of time in “complex matters”
A law firm provided valuable suggestions for the improvement of the BCIPA in
relation to the operation of timeframes. In their written submissions, they suggested
that:
(a) “The time frames for making and responding to claims under the BCIP Act are not
appropriate because they require a respondent to respond comprehensively within
10 business days to a payment claim which the claimant has had the benefit of up to
12 months to prepare.
(b) The very serious consequences for a respondent of not giving a payment schedule or
service an incomplete payment schedule mean that the period for service of a
payment schedule should be extended by an extra five business days.
(c) Also, with an increase in the number of large and complex claims, also allowing an
extra five business days for serving adjudication responses would result in the issues
between the parties being more adequately addressed, which in turn would assist the
adjudicators in deciding the claim.
(d) The increase of five business days would help alleviate the time-pressure over the
Christmas and Easter periods and avoid any need to change these.
(e) The current period of 12 months after the construction work, goods or services was
last carried out or supplied is unclear in practice and often disputed by the parties
involved. In the interests of certainty, a
date from which to start the 12-month period
needs to be specified that is easily determinable with reference to the contract. It may
be worth considering this being 12 months from the date of practical completion, or,
where this is not provided for or is not ascertainable from the contract, a statutory
definition of the relevant date should be provided.
(f) Special provision should be made for payment (if any) arising from defects
rectification work or variations to deal with defects if claimants are to be given the
benefit of the BCIP Act in connection with these.”
184
Written submission to the Review
177
One adjudicator agreed that in most instances the timeframes permitted under the
Act were adequate. However, he recognised that in “very large or complex” claims,
the Respondent should be able to apply to the adjudicator for an extension of time to
provide the adjudication response, up to a maximum period of 15 business days and
that such a decision should be at the sole discretion of the adjudicator. 185
Similar submissions were provided by a building contractor who suggested that in
“complex claims” there is a need to allow the adjudicator a discretion to permit the
respondent up to an additional 5 business days to prepare the adjudication
response.186
Again, similar submissions were made by a quantity surveyor who argued that in
“substantial matters” a party should be able to make application to another party to
have the timeframes for the submission of payment schedules, adjudication
applications and responses increased.187
A call for a flexible approach
The Queensland Law Society Mining and Resource Law Committee made the
following very helpful written submissions:
“If there is to be no monetary threshold on the application of the BCIP Act, the Committee
would recommend an amendment to the BCIP Act which creates an extended adjudication
process for large or complex claims. For claims over $1 million and for complex claims the
respondent should automatically have a longer period of time to prepare a Payment
Schedule (35 Business Days instead of the current 10 Business Days).
What amounts to a 'complex' claim would need to be defined. Complex claims would be
those that by reason of the nature of the served material, require a greater amount of
consideration and analysis by a respondent. For example, where a claim includes a certain
quantity of information or the claim relates to certain matters, such as delays, acceleration,
variation or breach of contract.
Allowing an extended adjudication process for large or complex claims would allow the BCIP
Act to better self-regulate the types of claims that are made under the Act. There would be
less incentive for contractors to use the legislation to "ambush" respondents where the time
for submitting payment schedules was extended.
Whilst the creation of a more "flexible" adjudication system (instead of the current "one size"
approach) has its benefits, the Committee is strongly of the view that the introduction of a
monetary (or other type of) cap on BCIP Act claims is a more effective and simple way of
ensuring the legislation is confined to smaller less complex payment disputes.
The difficulty in developing an adjudication system that is flexible enough to deal with the
larger claims is that effectively becomes de-facto arbitration.
185
Written submission to the Review
A similar submission was made by the Queensland Major Contractors Association and several other
stakeholders
187
Written submission to the Review
186
178
Furthermore, the system of appointment and supervision of registration of adjudicators is, in
the Committee's view, not sufficiently robust to ensure confidence in the industry that
adjudicators are uniformly suitable for determining multi-million dollar payment disputes
involving complex matters of fact and law.
It has been suggested that rather than allowing an automatic extension of the adjudication
process for large or complex claims, adjudicators might be given a discretion under the BCIP
Act to grant an extension upon application by the respondent, This is problematic in the view
of the Committee:



Adjudicators are appointed only after delivery of the payment schedule, and only
where a claimant is not satisfied with the Respondent's reasons for withholding
payment. They would need to be brought into the process when before there is the
existence of any actual dispute if they are to make interim determinations on the
timing of delivery of payment schedules;
Any application by a respondent for an extension would in turn require a right of reply
to be given to a claimant, in order to ensure procedural fairness. The whole process
for the exchange of submissions on extension of time applications would need its
own set of procedures;
It would lead to an intermediate class of court applications as adjudicator decisions
on extension applications would inevitably be the subject of application for review in
the Supreme Court, leading to further uncertainty and delays.”
A resources sector company submitted that for contracts over a specified value (the
example given was for contracts over $5 million), the time permitted to provide a
payment schedule should be extended to 20 business days. It also submitted that:
-
a respondent should be able to apply to a Court for an extension of time to
provide an adjudication response; and
the time permitted for an adjudicator to make his or her decision should be
extended for large payment claims due to the likely complexity of legal and
factual issues and the large volume of supporting material.
The submitter relayed a factual example of the difficulties it encountered in dealing
with the timeframes set out in the BCIPA. In its written submissions it stated:
“The inadequacy of the current timeframes is illustrated by XXXX's experience responding to
a payment claim for approximately $87 million received in June 2011. The claim included
complex legal and factual issues relating to alleged delay and variations.
Because the majority of the amount claimed did not relate to work performed under the
contract, XXXX did not have forewarning as to the likely content of the claim and was not
able to commence preparation of its response in advance of receiving the claim.
The claim was accompanied by 25 folders of materials, the majority of which had not
previously been provided to XXXX.
To assess the payment claim, XXXX diverted large numbers of personnel and engaged
lawyers and programming and quantum experts. These experts were then required to
complete a detailed assessment process that would usually take a few months within about
a week. Despite the concerted efforts of all involved, formal expert reports were not finalised
prior to the issue of the payment schedule. While completed prior to the adjudication
179
response, the reports were excluded from consideration at the adjudication.
In all, XXXX believes that the existing timeframes are unfair to respondents, unworkable for
large claims and should be amended.
…
Finally, it is important to recognise that the intense process of responding to a major claim in
such a compressed timeframe imposes unreasonably high levels of personal stress on the
individuals involved in the process.
It is noted that if the jurisdiction of the BCIP Act is limited by monetary caps as submitted in
response to Q1, the issue of timeframes issue could become less significant.”[Emphasis added]
Extension of time for the adjudicator
One solicitor in his written submissions suggested that adjudicators be given the
unilateral ability to increase the time for the making of their decision from the current
10 business days to up to 20 business days, if the parties refuse to grant a request
for an extension.
Amend timeframes generally
The Queensland Resources Council also called for changes to the statutory
timeframes set out in the BCIPA. In its written submissions to the Review, it argued
that the BCIPA should be amended to:




“extend the 10 and 5 business day time frames within which respondents must
respond to payment claims and adjudication applications (given the complex legal
and factual issues inherently associated with large or complex claims);
reduce the time frame within which claimants must prepare and serve a payment
claim to one month after the relevant construction work (or related goods and
services) was last carried out;
require the parties to comply with the agreed (or implied) contractual dispute
resolution procedure prior to initiating adjudication under the BCIP Act. This is in line
with the Western Australian Act; and
expressly empower (in line with section 31(2)(a)(iv) of the Western Australian Act) an
adjudicator to dismiss an adjudication application without making a determination of
its merits if it, amongst other things, is satisfied that it is not possible to fairly make a
determination because of the complexity of the matter or the prescribed time, or any
extension of it, is not sufficient, or for any other reason.”
Adequacy of the Christmas and New Year Period
While the actual period of the suggested “shut down” varied, similar submissions
were made by many contributors to the Review that the current period provided in
the definition of “business day” was inadequate.
180
The representative of a subcontractor submitted that the existing timeframes under
the BCIPA are suitable for “small claims only”.
They also suggested that the current definition of “business days” was inadequate to
take into account the holiday periods at Christmas and Easter. 188
A national development company called for “an embargo on [the service of] payment
claims and adjudications, or at least to extending the period that is not counted as
business days over the Christmas period, so that it extends from the third week in
December to the third in January.”
This was to counter the situation where payment claims and adjudication
applications are served during popular holiday periods where staffing numbers may
be reduced.189
Consideration
One size does not fit all
It is abundantly clear from the submissions received during this Review that the “one
size fits all” approach adopted in the BCIPA leads to unintended consequences. As
referred to in response to Question 1, although I am satisfied that there ought to be
no blanket exemptions for particular contracting parties or for the particular types of
work claimed, I readily acknowledge that the Act should be able to better cater for
the varying needs of those parties which fall within its jurisdiction.
The Act will never be perfect, nor will it ever be the panacea for all of the many
payment problems encountered in the building and construction industry. The
Queensland Legislature chose in 2004 not to adopt the phrase “security of payment”
in the short title of the BCIPA and, in my view for good reason. It was the only
jurisdiction on the eastern seaboard of Australia not to adopt the phrase. The BCIPA
and its equivalents throughout the various states and territories do not, nor can they
ever guarantee or “secure payment” for contracted parties. The term “security of
payment” is a misnomer, if not misleading. Even if a contracted party is successful
in navigating the BCIPA and is successful in achieving an adjudication decision in its
favour, this does not “secure payment” to the contracted party. Similarly, even if the
contracted party obtains an adjudication certificate and a judgment for the
adjudicated amount, this does not “secure payment” any more than any other
judgment debt of any court. The old adage “you can’t get blood out of a stone” rings
ever true in the building and construction industry.
That notwithstanding, the Act has proven itself invaluable for thousands of
contracted parties in assisting them to recover hundreds of millions of dollars since
2004, monies that may never have been otherwise recovered.
188
189
Written submission to the Review
Written submission to the Review
181
Graph G below identifies the total value of adjudicated amounts since the
commencement of the Act in the total sum of $616,588,448.
Graph G:
Source: Building and Construction Industry Payments Agency, May 2013
Based on the submissions provided to the Review, both oral and written, the
following recommendations form the basis of how I consider the Act should be
amended to overcome anomalies or deficiencies in the operation of the BCIPA in
respect to the timeframes included therein.
The “Composite Scheme”
The “one size fits all approach” adopted by the current provisions of the Act whilst
attractive for its relative simplicity, has the potential to result in significant injustice,
particularly to contracting parties in complex matters. After much careful
consideration of the many suggestions and proposals put to the Review, I have
come to the conclusion that the Act requires amendment to allow for two separate
types of schemes. I have not come to that conclusion lightly. The first scheme, will
predominantly remain as is, subject to some important amendments.
It is acknowledged that the BCIPA has been functioning for eight and half years and
is generally understood by many industry stakeholders who have developed their
contract management procedures in keeping with the provisions of the Act. It is very
important then that the integrity of the Act is maintained for the vast bulk of those that
will come into contact with it. For the sake of this Review, I shall refer to the first
scheme as “the existing scheme”. Whether Parliamentary Counsel choose to adopt
such terms is a matter for it, assuming of course that Government accept my
recommendations.
The proposed amendments to the Act will ensure that the existing scheme will
remain the operative scheme in a significant majority of adjudication applications but
will be fairer to all parties. For these industry stakeholders, that continue to fall within
182
the parameters of the existing scheme, save for some important amendments, it will
generally be “business as usual”.
The mechanism which discerns whether a payment claim falls within the “existing
scheme” will be the source of significant debate. There will be those that will argue
that a monetary figure is not appropriate because it is possible to have a high value,
non-complex claim and vice-versa.
I accept that can sometimes be the case. However, it is my experience that in a
significant majority of cases which involve a high value claim, it is more likely that the
parties will be legally represented and the matter is likely to deal with complex legal
and factual issues. Although it is by no means perfect, I have reached the
conclusion that the most appropriate delineation of whether a claim should be
considered under the existing scheme or the “composite scheme” is by among other
things, the setting of a monetary limit on the value of a payment claim.
The value of this monetary limit is also likely to be a source of great debate. Whilst I
am not particularly wedded to the sum, I have concluded that it is appropriate to tie
the monetary limit to that of the civil jurisdiction of the District Court of Queensland,
which is currently set at $750,000.190 Some will argue this figure is set too high,
whilst others will argue it is too low. For claims in excess of this amount, i.e.
$750,001 the parties are likely to be legally represented and I therefore assume well
able to navigate the proposed legislative paradigm.
According to the figures provided to me by the BCIP Agency as demonstrated in
Graph H below, by setting the monetary limit at the civil jurisdictional limit of the
District Court of $750,000, this will mean that approximately 90% of adjudications will
fall within the existing scheme. The “average punter” involved in modest claims will
continue to remain in the “existing scheme”.
Graph H:
Source: Building and Construction Industry Payments Agency, May 2013
In addition to setting the bar at the present limit of $750,000, I am of the view that for
claims involving sums less than $750,000 but which claim for matters such as:
190
See s.68(2) of the District Court of Queensland Act 1967
183
- latent conditions; or
- time-related costs,
these also should fall within the “composite scheme”.
To clarify, a payment claim will fall within the “composite scheme” if it:
(a) is for a sum of $750,001 or greater; or
(b) incorporates a claim for any one of the following:
(i) a latent condition; or
(ii) a time related cost.
If a payment claim falls within the criteria of a “composite scheme” then the times for
various obligations under the Act will be amended from the existing scheme.
I have not reached any conclusions as to how Parliamentary Counsel should
consider drafting the proposed changes to allow for the “composite scheme”. It is
not my place to do so. If Government accepts the recommendation to adopt the two
separate schemes within the Act, Parliamentary Counsel will need to consider
whether the “existing scheme” should be entirely separate from the proposed
“composite scheme” or whether the latter can be incorporated into the existing
provisions with appropriate amendments. That is a matter that is perhaps best left to
the drafting expertise of that Office. Where I have considered that I may be able to
assist Parliamentary Counsel, I have offered my suggested amendments where
appropriate.
Proposed amendments which will affect ALL claims made under the Act191
I shall now consider the submissions which will affect the operation of the Act,
regardless of whether the payment claim falls within the “existing scheme” or the
“composite scheme”.
The 12-month rule
Section 7 of the BCIPA sets out its object. It provides:
7 Object of Act
The object of this Act is to ensure that a person is entitled to receive, and is able to recover,
progress payments if the person—
(a) undertakes to carry out construction work under a construction contract; or
(b) undertakes to supply related goods and services under a construction contract.
The Explanatory Notes of the Building and Construction Industry Payments Bill 2004
(Qld) set out the “reasons for the objectives and how they will be achieved”. In part,
the Explanatory Notes state:
191
That is claims made under the “existing scheme” and the “composite scheme”
184
“The building and construction industry is particularly vulnerable to security of payment
issues because it typically operates under a hierarchical chain of contracts with inherent
imbalances in bargaining power. The failure of any one party in the contractual chain to
honour its obligations can cause a domino effect on other parties resulting in restricted cash
flow, and in some cases, insolvency.
The Bill establishes a statutory based system of rapid adjudication for the interim resolution
of payment on account disputes involving building and construction work contracts.”
[Emphasis added]
In his Second Reading Speech of the Building and Construction Industry Payments
Bill 2004 (Qld), the Hon. R.E. Schwarten said:
“… There are instances in the industry where a claim for payment by a subcontractor or
supplier is disputed by his or her superior contractor resulting in payments being held up for
lengthy periods while the dispute is being resolved. There is potential in the industry for
these payments to be withheld unfairly to the disadvantage of the claimant.
The Bill now further builds on the previous reforms by establishing in relation to construction
contracts, a statutory based system of rapid adjudication for the quick resolution of payment
disputes on an interim basis by an appropriately qualified and independent adjudicator. This
will allow for payments to flow quickly down the contractual chain.
…
The important benefits of the rapid adjudication process are that it allows for a prompt
interim decision on disputed payments, encourages communication between the parties
about disputed matters and provides the parties with a much faster and cheaper alternative
to resolve the dispute without entering the court system.” [Emphasis added].
The legislative scheme established by the NSW Act was described by Palmer J as
“pay now, argue later” in Multiplex Constructions Pty Ltd v Luikens192 – a statement
which has been widely adopted in subsequent decisions on the Act as accurately
expressing the effect of the scheme.193
As the above extracts from the Explanatory Notes and the then Minister’s Second
Reading Speech identifies, the effectiveness of the Act relies on its ability to provide
“rapid” outcomes underlying the significance of the often-coined phrase in the
industry that “Cash is King”. If the overall purpose of the Act is to allow for payments
to flow quickly down the contractual chain to maintain cash flow, it is difficult to
imagine why the original drafters of the legislation allowed a claimant to bring a
payment claim up to 12 months after the work was performed for any other reason
but to bring its final claim at the end of the defects liability period under the
construction contract. I am satisfied that in so doing, the legislature via s.17(4)(b) of
the BCIPA has enabled contracted parties to serve large and complex payment
claims in an untimely and unfair manner.
192
[2003] NSWSC 1140 at [96]
Bezzina Developers Pty Ltd v Deemah Stone (Qld) Pty Ltd [2007] QSC 286 at [16] per Douglas J; Hitachi Ltd
v O’Donnell Griffin Pty Ltd & Ors; O’Donnell Griffin Pty Ltd v Hitachi Ltd & Ors [2008] QSC 135 per Skoien AJ at
[2]; Uniting Church in Australia Property Trust (Qld) v Davenport & Hindmarsh Construction Queensland Pty Ltd
[2009] QSC 134 at [41] per Daubney J
193
185
Although by no means are all payment claims prepared in this way, the BCIPA
permits (some opponents argue that it encourages) the preparation of detailed and
complex payment claims over extended periods, to which a respondent must provide
a payment schedule within 10 business days after being served or face the prospect
of a summary judgment application under s.19(2)(a)(i) of the BCIPA.
Many of the submissions on this issue have sought to persuade me that s.17(4)(b) of
the Act should be amended from anywhere between having to serve the payment
claim “contemporaneously” with having performed the construction work or provided
the goods and services to extending the current 12 month period to commence at
the end of the defects liability period and everywhere in between.
As can be seen from Table 2 below, there is some uniformity across the country with
four of the eight States and Territories adopting the 12 month period.
Table 2:
Jurisdiction
Qld – Building and Construction Industry Payments
Act 2004 (Qld)
NSW – Building and Construction Industry Security of
Payment Act 1999 (NSW)
ACT - Building and Construction Industry (Security of
Payment) Act 2009 (ACT)
Victoria - Building and Construction Industry Security
of Payment Act 2002 (Vic)
Tasmania - Building and Construction Industry
Security of Payment Act 2009 (Tas)
South Australia – Building and Construction Industry
Security of Payment Act 2009 (SA)
Western Australia – Construction Contracts Act 2004
(WA)
Northern Territory – Construction Contracts (Security
of Payments) Act 2004 (NT)
Maximum permitted time under legislation to serve
a payment claim
12 months – s.17(4)(b)
12 months – s.13(4)(b)
12 months – s.15(4)(b)
3 months – s.14(4)(b) & (5)(b)
12 months – s.17(6)(b)
6 months – s.13(4)(b)
28 days – s.26(1)
90 days – s.28(1)
Notwithstanding that the BCIPA shares the 12 month period with the legislation in
New South Wales, the ACT and Tasmania, given the cogency and consistency of
the submissions opposed to the 12 month period, it is not in my view sufficient to
simply retain that period to remain consistent with those other jurisdictions.
During the individual consultations held with stakeholders, I also held interviews with
the responsible government officers for the cognate legislation in New South Wales,
Victoria, Western Australia, Northern Territory and Tasmania. I am informed by the
Review Secretariat that the responsible government officers in South Australia and
the ACT declined to be part of this Review.
Whilst the ‘security of payment’ legislation in Western Australia and the Northern
Territory adopts a model based on the UK legislation and is quite different to that
adopted on the eastern seaboard of Australia, I was informed by the relevant
government officer that the Northern Territory amended its equivalent timeframe
from 28 days to 3 months because the timeframe was simply too restrictive.
186
I was informed that under the 28-day rule in the original legislation in the Northern
Territory, approximately 50% of the applications made were invalid because they
were made out of time. I was informed by the West Australian Building
Commissioner that that State is considering following the Northern Territory and
amending its legislation to 3 months also.
The Amended Victorian Act acknowledges that a payment claim may arise from two
distinct types of progress claims. Section 14(4) and (5) of the Amended Victorian
Act provides:
(4) A payment claim in respect of a progress payment (other than a payment claim in
respect of a progress payment that is a final, single or one-off payment) may be
served only within—
(a) the period determined by or in accordance with the terms of the construction
contract in respect of the carrying out of the item of construction work or the
supply of the item of related goods and services to which the claim relates; or
(b) the period of 3 months after the reference date referred to in section 9(2) that
relates to that progress payment—
whichever is the later.
(5) A payment claim in respect of a progress payment that is a final, single or one-off
payment may be served only within—
(a) the period determined by or in accordance with the terms of the construction
contract; or
(b) if no such period applies, within 3 months after the reference date referred to in
section 9(2) that relates to that progress payment.
Section 9 of the Amended Victorian Act, sets out a claimant’s entitlement to progress
payments and defines the term “reference date” as:
9 Rights to progress payments
(1) On and from each reference date under a construction contract, a person—
(a) who has undertaken to carry out construction work under the contract; or
(b) who has undertaken to supply related goods and services under the contract—
is entitled to a progress payment under this Act, calculated by reference to that date.
(2) In this section, reference date, in relation to a construction contract, means—
(a) a date determined by or in accordance with the terms of the contract as—
(i) a date on which a claim for a progress payment may be made; or
(ii) a date by reference to which the amount of a progress payment is to be
calculated—
in relation to a specific item of construction work carried out or to be carried
out or a specific item of related goods and services supplied or to be supplied
under the contract; or
(b) subject to paragraphs (c) and (d), if the contract makes no express provision with
respect to the matter, the date occurring
20 business days after the previous
reference date or (in the case of the first reference date) the date occurring 20
business days after— (i) construction work was first carried out under the contract; or
(ii) related goods and services were first supplied under the contract; or
(c) in the case of a single or one-off payment, if the contract makes no express
provision with respect to the matter, the date immediately following the day that—
(i) construction work was last carried out under the contract; or
(ii) related goods and services were last supplied under the contract; or
(d) in the case of a final payment, if the contract makes no express provision with
187
respect to the matter, the date immediately following—
(i) the expiry of any period provided in the contract for the rectification of defects
or omissions in the construction work carried out under the contract or in
related goods and services supplied under the contract, unless subparagraph
(ii) applies; or
(iii) the issue under the contract of a certificate specifying the final amount payable
under the contract a final certificate; or
(iv) if neither subparagraph (i) nor subparagraph (ii) applies, the day that—
(A) construction work was last carried out under the contract; or
(B) related goods and services were last supplied under the contract.
Needless to say, the definition of “reference date” in s. 9(2) of the Amended Victorian
Act is both complicated and convoluted. However, it would appear that the drafters
have recognised a need to differentiate between a payment claim that is NOT in
respect of a progress payment that is a final, single or one-off payment and a
payment claim that is. That is an important distinction that is not made in the BCIPA.
However, I return to the 3-month timeframe in the Amended Victorian Act. I am of
the view that 3 months is too restrictive for the claimant. I am of the view that in
many instances, a claimant may not be aware of the fact that he has not been paid a
progress claim, or may be attempting to resolve the payment dispute with the
respondent during this period.
In my view, by limiting a claimant’s ability to provide a payment claim to 3 months
after the work was performed, or the goods and services were supplied would result
in many claimants being time barred.
Equally, I am of the view that the BCIPA should provide the parties adequate time to
negotiate an outcome without recourse to the Act. For those claimants that were not
statute barred, a 3-month time limit would result in parties almost being forced to
utilise the Act prior to the deadline. That is not a preferable outcome in my view.
Parties should always be encouraged to resolve their dispute amongst themselves
without being effectively coerced into using the BCIPA in what may be a premature
manner by an ill-conceived statutory time-bar.194 In my view, such an approach
would only serve to damage or perhaps further damage what is likely to already be a
strained relationship.
The South Australian cognate legislation is in many respects almost identical to that
of the BCIPA. However, s.13(4)(b) of the Building and Construction Industry
Security of Payment Act 2009 (SA) provides:
(4) A payment claim may be served only within—
(a) the period determined by or in accordance with the terms of the construction
contract; or
(b) the period of 6 months after the construction work to which the claim relates was
last carried out (or the related goods and services to which the claim relates were
last supplied),
whichever is the later. [Emphasis added]
194
This concern was raised with the Review by a number of legal practitioners and adjudicators
188
The 12-month rule - summary
In my view, the timeframe adopted by the South Australian Legislature (6 months)
affords a reasonable opportunity for the parties to be able to negotiate an outcome
without recourse to the Act and yet provides a substantially lesser period in which a
payment claim may be prepared. It is in my view, a reasonable compromise to the
competing interests of the parties and it is consistent with many of the submissions
made to the Review. Importantly, I consider such a timeframe to be more consistent
with the object of the Act than the current 12-month provision.
In keeping with s.14(4) of the Amended Victorian Act, to ensure that a claimant may
still provide a payment claim to recover retention or any other contractual
entitlements at the end of the defects liability period, a distinction must be made
between a payment claim for a progress claim whilst the work is being performed
and a payment claim that is made for a final progress claim. Unlike the Amended
Victorian Act, I do not however consider that it is necessary to provide a claimant
with another 3 months to provide its final payment claim. It is likely that the claimant
will have had 12 months to prepare the final payment claim. I see no reason why a
claimant should not be restricted to serving such within 28 days after the completion
of the defects liability period under the relevant construction contract, unless the
contract provides a longer period. If the claimant has not got its house in order
within 13 months after having completed the work, it is doubtful that it ever will.
Suggested Legislative Amendments
That s.17(4) of the BCIPA be amended to read:
(4) A payment claim may be served only within the later of—
(a) the period worked out under the construction contract; or
(b) the period of 12 months 6 months after the construction work to which the claim
relates was last carried out or the related goods and services to which the claim
relates were last supplied; or
(c) if the payment claim is in relation to the recovery of a final progress payment under
the relevant construction contract, including for the recovery of retention and/or the
return of security:
(i) the period worked out under the contract; or
(ii) if the contract does not contain a provision regarding the claimant’s entitlement to
make a final progress claim, the period of 28 days after the completion of the
defects liability period under the construction contract.
Removal of s.18(5) of the BCIPA
Some opponents to the Act have suggested that s.18(5) of the Act be repealed.
Section 18(5) provides that if a payment schedule is not provided in the time stated
in s.18(4):
189
“The respondent becomes liable to pay the claimed amount to the claimant on the due date
for the progress payment to which the payment claim relates.”
I am of the view that the objects of the Act would be almost entirely defeated if
s.18(5) were repealed. Section 18(5) maintains the integrity of the objects of the Act.
Section 18(5) keeps respondents “on their toes”, metaphorically speaking.
Respondents know and understand that if they ignore a payment claim, whether the
matter proceeds to adjudication or court, there will be dire consequences. Without
the threat of those consequences, the Act would in my view become next to
worthless.
Time to make an adjudication application
Section 21 of the BCIPA provides how and when an adjudication application can be
made. It provides:
21 Adjudication application
(1) A claimant may apply for adjudication of a payment claim (an adjudication
application) if—
(a) the respondent serves a payment schedule under division 1 but—
(i) the scheduled amount stated in the payment schedule is less than the
claimed amount stated in the payment claim; or
(ii) the respondent fails to pay the whole or any part of the scheduled amount to
the claimant by the due date for payment of the amount; or
(iii) the respondent fails to serve a payment schedule on the claimant under
division 1 and fails to pay the whole or any part of the claimed amount by the
due date for payment of the mount
(2) An adjudication application to which subsection (1)(b) applies can not be made
unless—
(a) the claimant gives the respondent notice, within 20 business days immediately
following the due date for payment, of the claimant’s intention to apply for
adjudication of the payment claim; and
(b) the notice states that the respondent may serve a payment schedule on the
claimant within 5 business days after receiving the claimant’s notice.
(3) An adjudication application—
(a) must be in writing; and
(b) must be made to an authorised nominating authority chosen by the claimant; and
(c) must be made within the following times—
(i) for an application under subsection (1)(a)(i)— within 10 business days after
the claimant receives the payment schedule;
(ii) for an application under subsection (1)(a)(ii)— within 20 business days after
the due date for payment;
(iii) for an application under subsection (1)(b)—within 10 business days after the
end of the 5 day period referred to in subsection (2)(b); and
(d) must identify the payment claim and the payment schedule, if any, to which it
relates; and
(e) must be accompanied by the application fee, if any, decided by the authorised
nominating authority; and
(f) may contain the submissions relevant to the application the claimant chooses to
include
190
(4) The amount of an application fee must not exceed the amount, if any, prescribed
under a regulation.
(5) A copy of an adjudication application must be served on the respondent.
(6) The authorised nominating authority to which an adjudication application is made
must refer the application, as soon as practicable, to a person eligible to be an
adjudicator under section 22.
One ANA in their written submissions in response to Question 14 suggested that an
amendment be made to the time permitted to make an adjudication application when
a respondent has failed to pay the claimed amount by the due date for payment. In
their submission the ANA argues:
“…that section 21(1)(b) of the Act should be amended to allow the claimant to make an
adjudication application without having to wait for the due date for payment.
That is, once served with the payment claim, if the respondent does not serve a payment
schedule, the claimant should be entitled to assume that payment will not be made and act
accordingly. The claimant ought not to be required to wait until after the due date for
payment as currently provided in s.21(2)(a) i.e. 20 business days immediately following the
due date for payment. The respondent will not be disadvantaged as the payment schedule
can be the simple statement that payment as claimed will be made on the due date of
payment.”
There is some merit in this submission. Considering the object of the Act and the
importance of cash flow to the industry, it seems unusual that despite not having
received a payment schedule, the contracted party may have to wait up to 25
business days195 from serving the payment claim before it is permitted to issue a
notice under s.21(2) of the Act.
Notwithstanding that merit, I have a fundamental concern in requiring a respondent
to have to provide a payment schedule (or face dire consequences if it does not)
when it may in fact have every intention of paying the claimed amount. Requiring a
respondent to notify that it intends to pay the claimed amount before it has to pay it,
is putting “the cart before the horse” and is an unwelcome and unnecessary
administrative burden on respondents. I am not satisfied that the submitter has
made out its case for legislative reform in relation to this issue.
Given the period of time which a claimant has to prepare an adjudication application
compared with the time to respond to it, I am of the view that the provisions
contained in s.21(3)(c) of the Act should remain unaltered.
195
See s.67U of the QBSA Act
191
Time to respond to the adjudication application
In most instances, the Claimant theoretically has 10 business days to prepare an
adjudication application from the day after it is served with the payment schedule or
should have been served with the payment schedule.196 Yet under the current
legislation, the claimant may have been preparing the application for many weeks if
not months beforehand.
The Respondent however, pursuant to s.24(1) of the BCIPA may provide an
adjudication response at any time within the later of the following to end:
(a) 5 business days after receiving a copy of the application;
(b) 2 business days after receiving notice of an adjudicator’s acceptance of the
application.
It is immediately clear that there is a significant imbalance in the period allowed to
the Respondent to provide an adjudication response, compared with the time
permitted for the claimant to prepare an adjudication application.
Generally speaking, there appears to be very broad support for amending the time in
which a respondent may serve an adjudication response from 5 business days to 10
business days after receiving a copy of the adjudication application.197
The Review received very few submissions on extending the timeframe in the
second limb of s.24(1) which is likely to be because if the timeframe in s.24(1)(a)
was extended to 10 business days, subsection (1)(b) would almost become
redundant. However, to ensure that the adjudication application is made to the BCIP
Agency198, so that the respondent is not expected to respond to a purported
adjudication application which is nothing more than a threatening action of the
claimant, it is recommended that s.24(1)(b) be amended to read “7 business days”
rather than the existing “2 business days”.
Suggested Legislative Amendments
(1) Subject to subsection (3), the respondent may give the adjudicator a response to the
claimant’s adjudication application (the adjudication response) at any time within
the later of the following to end:
(a) 10 5 business days after receiving a copy of the application;
(b) 7 2 business days after receiving notice of an adjudicator’s acceptance of the
application.
196
See s.21(3)(c) of the Act
Queensland Major Contractors Association, members of the Adjudication Forum, various ANA’s, law firms,
developers, building contractors and adjudicators
198
Or in the event that Government rejects Recommendations 17 and 18, an ANA
197
192
Christmas and Easter holiday periods
The term “business day” is defined in Schedule 2 of the Act as:
business day has the meaning given in the Acts Interpretation Act 1954, section 36 but
does not include 27, 28, 29, 30 or 31 December.
Section 36 of the Acts Interpretation Act 1954 provides:
business day means a day that is not(a) a Saturday or Sunday; or
(b) a public holiday, special holiday or bank holiday in the place in which any relevant act
is to be or may be done.
I am of the view that the definition of “business day” in Schedule 2 of the Act does
not adequately reflect what is traditionally an almost industry-wide shut down over
the Christmas period. Whilst the provisions of the Act cater for the main holidays
between 25 December and 1 January (inclusive), the evidence before the Review is
that this minimalist approach results in significant resourcing issues for contracting
parties who are expected to respond to payment claims and adjudication
applications during this period.
I accept the submissions that the existing “business day” definition is abused by a
small number of contracted parties and their representatives whereby payment
claims and adjudication applications are strategically served in the days just prior to
Christmas to cause maximum disadvantage to contracting parties. I accept that
some contracted parties and their representatives take advantage of the fact that
most businesses if they have any staff working during this period at all, are usually
operating with a “skeleton staff”.
Whilst I am cognisant of the fundamental importance of cash flow to the industry, I
am satisfied that it is appropriate to exclude the three business days prior to
Christmas Day and the three business days after New Years Day. This amendment
will provide respondents greater flexibility to deal with human resources issues over
the demanding Christmas period without significantly adversely impacting upon the
claimant.
I do not recommend any alteration to the definition of “business day” to take into
account any greater number of days over the Easter period. There is insufficient
evidence to support the need for such amendments.
Proposed amendments which will ONLY affect payment claims made under the
“Composite Scheme”
I have decided that it is appropriate to limit the following considerations to payment
claims which fall under the “composite scheme” because of the importance of trying
to maintain the integrity of the “existing scheme” for as many of its users as is
possible.
193
Time to respond to a payment claim
Many of the submissions provided to the Review recognised the inequitable situation
where respondents are having to provide payment schedules and adjudication
responses in extremely short timeframes. These short timeframes are consistent
with the object of the Act and the Legislature’s recognition that the adjudication
process must be “rapid”.
In considering the submissions and in making my recommendations I have
attempted to remain true to the “fast track” nature of the adjudication scheme, while
recognising that in its unadulterated form, the BCIPA can and sometimes does lead
to unjust outcomes.
In so far as the time to respond to a payment claim is concerned, I have rejected
calls for respondents to be able to seek an extension of time from the courts or an
ANA or the adjudicator. At this point in the “proceedings” neither an ANA nor an
adjudicator is involved.
In addition I do not consider it appropriate for a process which is partly designed in
the interim to divert matters from the court system199 to enable a respondent to delay
matters before the adjudication procedure has even commenced.
As a default mechanism, subject to the times stated in Table 3 below, for claims
which fall within the “composite scheme”, I consider it appropriate that the maximum
timeframe in which a payment schedule should be served is 15 business days after
the payment claim is served. Fifteen business days recognises the difference in
complexity between a claim made under the “existing scheme” and one made under
the “composite scheme”.
Many of the submissions provided to the Review recommended that the time
permitted for a respondent to provide a payment schedule should be based on a
“sliding scale” to the time taken by a claimant to prepare a payment claim. In my
view, these submissions have considerable merit and appear to have some support
from both sides of the ideological divide. In my view, I consider it appropriate for a
respondent to be able to provide a payment schedule within the periods provided in
Table 3, unless the contract provides for an earlier period:
Table 3:
The time taken by the Claimant to provide a
payment claim after the reference date
(maximum period in which the payment
claim can be served is six months after the
construction work was last carried out):
The number of business days permitted
for a respondent to provide a payment
schedule after the business day on
which it was served a payment claim
≤ 90 days
≥ 91 days
15 business days
30 business days
199
Subject to s.100 of the BCIPA; See also the Second Reading Speech of the Bill
194
In my view, the times stated in Table 3 above:
(a) Provide the claimant with an incentive to “get its house in order” as quickly
as possible, thereby resulting in fewer insolvency incidents in the building
and construction industry;
(b) Promotes diligent contract management and bookkeeping practices;
(c) Promotes early conflict resolution;
(d) Discourages claimants from serving “ambush claims”, by allowing
respondents greater time to respond to such claims;
(e) Addresses the current inequitable timeframes afforded to a respondent to
provide a payment schedule; and
(f) In providing only two alternate periods, there is a greater degree of simplicity
for the parties rather than a multi-tiered process, which is likely to lead to
confusion.
Although some opponents to the BCIPA will argue that the timeframes provided in
Table 3 do not go far enough to protect the rights of respondents, it is my view that
the recommended timeframes offer a viable, more equitable approach that
importantly promote sound and timely contract management whilst maintaining the
significance of providing rapid outcomes.
To those who would argue that the timeframes set out in Table 3 simply “extend the
pain” endured by an unpaid claimant, I would suggest that these timeframes
empower the claimant to be the master of its own destiny. It has the choice of
keeping the respondent “on a tight leash” by serving a payment claim within 90
calendar days after the reference date but conversely, if it does not do so, the
respondent is afforded an appropriately extended period in which to provide its
payment schedule.
Suggested Legislative Amendments
I consider it more appropriate that Parliamentary Counsel draft the necessary
amendments to this issue.
Time to respond to an adjudication application
The provision of extending the time to provide an adjudication response from 5 to 10
business days for all respondents should cater for the needs of the bulk of
respondents who choose to provide an adjudication response. However, it is
abundantly clear that the value in dispute and the complexity of adjudication
applications is ever increasing.
There will be instances where the “one size fits all” approach of even 10 business
days to respond to an adjudication application would be inadequate and in a small
number of matters, manifestly so.
195
Given the likelihood of complexity of payment claims that fall within the “composite
scheme”, I am of the view that it is appropriate to set a slightly longer default period
than that proposed under the existing scheme in which a respondent may serve an
adjudication response. Namely at any time within the later of the following to end(a) 15 business days after receiving a copy of the application;
(b) 13 business days after receiving notice of an adjudicator’s acceptance of the
application.
A payment claim that falls within the “composite scheme” may vary in value between
the sum of $750,001 and potentially hundreds of millions of dollars. As a result, I am
concerned that in a short while, it is possible that respondents will be arguing of the
inadequacy of the timeframes set down in the “composite scheme”. Therefore it is
imperative, that the “composite scheme” be provided with appropriate mechanisms
to deal with the potentially significant variance of the type of claims and claimed
amounts. Setting rigid tabular timeframes as I have done in relation to the time to
serve a payment schedule, would not in my view provide respondents with the
desired flexibility of dealing with very different types of claims and monetary
amounts.
A number of submissions to the Review recommended that the respondent should
be able to seek an extension of time from the adjudicator to provide the adjudication
response and that the issue should be for the sole discretion of the adjudicator to
decide.
This approach was criticised by some submitters200 who argued that:


“any application by a respondent for an extension would in turn require a right of
reply to be given to a claimant, in order to ensure procedural fairness. The whole
process for the exchange of submissions on extension of time applications would
need its own set of procedures;
it would lead to an intermediate class of court applications as adjudicator decisions
on extension applications would inevitably be the subject of application for review in
the Supreme Court, leading to further uncertainty and delays.” [Emphasis added].
I accept in principle, the reservations of the Queensland Law Society Mining and
Resource Law Committee, but I do not accept that the concerns act as an
insurmountable hurdle such that the submission should be rejected.
After considering all of the various and competing submissions before me, I am of
the view that allowing a respondent the opportunity to apply to the adjudicator for an
extension of time where a payment claim falls within the “composite scheme” is a
more equitable way of dealing with the issue of ensuring the respondent has a
reasonable time to respond to the adjudication application. Rather than providing a
pre-determined number of business days for an extension as has been suggested in
some submissions, I am of the view that the matter should be left to the discretion of
the adjudicator.
200
Queensland Law Society Mining and Resource Law Committee
196
Provided the application is brought in a timely fashion which would be in the
respondent’s best interests to so do, and provided the claimant has an opportunity to
be heard before a decision is made by an adjudicator, I can see no harm and only
benefit in allowing for such a process.
I accept that in the early days of the implementation of the amendments, there may
be some parties who will feel sufficiently aggrieved to bring an application to the
Court seeking interlocutory or injunctive relief. However, provided the adjudicator
acts reasonably and ensures that the parties are afforded procedural fairness, I am
of the view that the Courts are likely to be loathed to intervene in the adjudicator’s
exercise of the discretion. I have also suggested some legislative amendments
which will give the adjudicator some relevant considerations when determining how
to exercise that discretion.
Competence of the adjudicator
In addition it was also queried by some submitters whether an adjudicator had the
requisite skills, experience and qualifications to not only deal with the issue of
whether the discretion should be exercised, but whether an adjudicator should be
dealing with complex claims and very significant payment disputes in the first place.
In my view, an adjudicator is likely to be the best placed independent person to deal
with the question of whether an extension should be granted. They will or at least
should have received the adjudication application, the payment claim and the
payment schedule by the time the request for an extension is made. They will be
able to peruse the material and affirm or reject the veracity of the respondent’s
submissions regarding the complexity of the matter. Conversely, they will be able to
consider any contrary responsive submissions that may be made by the claimant.
A difficulty that may arise, given the discretionary nature of such a decision is the
differences in the way that various adjudicators may deal with the question of
whether to exercise the discretion. However, I am of the view that such differences
can be minimised by providing legislative assistance to adjudicators by the provision
of relevant factors they may take into consideration when exercising their discretion.
I accept that there are a small number of adjudicators who are properly qualified and
experienced to deal with very large and complex adjudication matters. However, the
proper selection of an adjudicator with the requisite skills and expertise to deal with
the issues in question would be a matter for the competence of the BCIP Agency, its
staff, processes and its selection criteria that it adopts when determining which
adjudicator to appoint201. The selection of appropriate adjudicators will in my view be
complemented by the BCIP Agency’s ability to draw upon the experience of all
registered adjudicators, not just a small number of adjudicators who may serve on
any given panel.
201
Assuming Government accepts Recommendations 17 and 18
197
As a result of many of the proposed amendments to the Act as set out in this report, I
consider it likely that the adjudication process will become more attractive to a
greater number of highly experienced practitioners from various disciplines who for
whatever reason may have resisted becoming an adjudicator in the past. The
possible increase in more experienced persons able to fulfill the role of a senior
adjudicator is likely to increase the pool of available appropriately experienced and
qualified persons able to deal with “complex matters”.
I am also of the view that the advent of compulsory continuing professional
development will increase the levels of expertise, professionalism and ethical
behavior of adjudicators.202
In the premises, I consider it appropriate where a payment claim falls within the
“composite scheme” to set the default period for the time to serve an adjudication
response within the later of the following to end(a) 15 business days after receiving a copy of the application;
(b) 13 business days after receiving notice of an adjudicator’s acceptance of the
application.
A respondent would also be at liberty to apply to the adjudicator to seek an extension
of time for up to an additional 15 business days and the adjudicator would have to
give the claimant an opportunity to be heard on the application. Setting an upper
limit on the length of the possible extension of time will assist an adjudicator in
determining the appropriate duration of extension to be granted.
Suggested Legislative Amendments
For payment claims that fall within the “composite scheme”, I recommend that the
BCIPA be amended in the following terms:
24 Adjudication responses
(1) Subject to subsections (3) and (6), the respondent may give the adjudicator a
response to the claimant’s adjudication application (the adjudication response) at any
time within the later of the following to end(a) 5 15 business days after receiving a copy of the application;
(b) 2 13 business days after receiving notice of an adjudicator’s acceptance of the
application.”
…
(6) The respondent within 2 business days after receiving a copy of the adjudication
application:
(a) may make a written application and provide written submissions to the
adjudicator requesting an extension of time to provide an adjudication response;
(b) if an application is made under subsection (a), the respondent must provide a
copy of the written application and written submissions to the claimant within 1
business day of making the application.
202
I address these issues in detail in response to Question 14
198
(7) If the claimant opposes the respondent’s application made under subsection (6), the
claimant may provide written submissions within 1 business day after receiving a
copy of the respondent’s application and submissions for an extension of time:
(a) to the adjudicator; and
(b) to the respondent.
(8) When determining whether to grant an extension of time for the respondent to
provide the adjudication response the adjudicator may take into account the following
relevant considerations:
(a) the value of the claimed amount;
(b) the value of the scheduled amount;
(c) the volume of material provided by the parties to date;
(d) the expected volume of any material to be provided by the parties;
(e) the existence of any complex legal or factual issues to be determined by the
adjudicator;
(f) the period of time between the reference date and the time taken by the claimant
to serve the payment claim upon the respondent;
(g) the extent of any expert evidence relied or to be relied upon by the parties; and
(h) any other factor the adjudicator considers relevant.
(9) Within 1 business day after receiving the claimants submissions in response or
within 1 business day after the adjudicator should have received the claimant’s
submissions in response, the adjudicator must:
(a) decide whether the respondent is entitled to an extension of time to provide the
adjudication response;
(b) decide the appropriate length of time of the extension granted; such time not to
exceed 15 business days beyond the time permitted in s.24(1);
(c) provide a copy of the adjudicator’s written decision and reasons for granting or
denying the application for an extension of time to the claimant and the
respondent.
The appropriateness of s.24(4) in the “composite scheme”
There appears to be at least some agreement within the industry that the practice of
placing the reference on all progress claims whether a claimant intends to utilise the
Act or not, is having significant unintended consequences upon the contract
management procedures of contracting parties. This is particularly evident for
businesses using large numbers of subcontractors. It was explained to the Review
in a number of individual consultations that, given the volume of payment claims
received by large construction companies, project managers are having to discern
and divine which of the multitude of payment claims received, may proceed to
adjudication. This is a very important consideration for a contracting party because
of the provisions of s.24(4) of the Act which prohibits a contracting party from arguing
in an adjudication response, something which was not raised in the payment
schedule.
Section 24(4) of the BCIPA states:
(4) The respondent can not include in the adjudication response any reasons for
withholding payment unless those reasons have already been included in the
payment schedule served on the claimant.
199
The consequences for a respondent if it misjudges the intent of a contracted party’s
willingness to apply the Act can therefore be significant. One government
department in their submissions argued that a respondent ought to be able to
provide all relevant material before an adjudicator irrespective of whether or not it
was raised in the payment schedule.203
The Victorian Legislature sought to counteract this issue in the Amended Victorian
Act by the introduction of s.21(2B) which provides:
(2B) If the adjudication response includes any reasons for withholding payment that were
not included in the payment schedule, the adjudicator must serve a notice on the
claimant –
(a) setting out those reasons; and
(b) stating that the claimant has 2 business days after being served with the notice to
lodge a response to those reasons with the adjudicator.
There are several difficulties arising from the introduction of s.21(2B) of the
Amended Victorian Act, including:


It relies upon the adjudicator being alive to the ‘fresh issues’ and being able to
bring such to the attention of the claimant to enable the claimant to provide
timely submissions to the adjudicator;
In the event that the respondent raises complex and detailed issues, possibly
relying upon expert evidence which may previously have been unseen by the
claimant, the allowance of two business days for the claimant to respond is in
my view grossly inadequate.
In Adjudication in the Building Industry204 Davenport says this of s.21(2B) of the
Amended Victorian Act:
“[It] gives the respondent in Victoria a most important tactical advantage that does
not exist under any other SOP Act. Under all the other SOP Acts the respondent is
not entitled in the adjudication to raise a reason for withholding payment that was not
included in the payment schedule.”
Section 24(4) of the BCIPA is designed to constrain a respondent in its adjudication
response to the reasons for non-payment identified in the payment schedule. The
rationale behind s.24(4) of the BCIPA is no doubt based on issues of procedural
fairness underpinned by the desire to create a speedy and efficient adjudication
process. However, the principles of natural justice must extend both ways, in that it
must be afforded to both parties. Additionally in my view, the principles of natural
justice should never be sacrificed on the altar of expediency.
The design of the BCIPA scheme has a number of issues which cause me
concern.205 From the submissions received during the Review, it appears that there
is widespread use of the referencing of the BCIPA on progress claims for
construction work or for the supply of related goods and services.
203
Similar submissions were made by the Queensland Major Contractors Association and other stakeholders
The Federation Press, Sydney 2010 at p.22
205
See the Review responses to Question 14 of the Discussion Paper
204
200
From my own experience I am aware that in the early days of the operation of the
BCIPA, the advice given by many lawyers was that all progress claims should
reference the Act. Generally speaking, these advices were subsequently amended
after the decision of Fryberg J in Doolan v Rubikcon (Qld) Pty Ltd206 whereby his
Honour found that a subsequently served identical payment claim “was not capable
of founding the jurisdiction of the adjudicator and consequently the order made by
him was invalid. However, this view was corrected by the Court of Appeal in
Spankie v James Trowse Constructions Pty Ltd207 which permitted the serving of
identical payment claims, provided that they were not served in relation to the one
reference date.208
Since Spankie as far as I can tell, the general school of thought amongst contracted
parties and their advisors has been that all progress claims made under a
construction contract should reference the Act to protect the interests of the
contracted party. As identified above, in practice this has caused a significant
administrative burden upon respondents and project managers.
In these circumstances, it is difficult to accept from an equitable point of view that a
respondent should be prevented from raising any reasons for non-payment in the
adjudication response that were not identified in the payment schedule.
For instance, is it reasonable that a respondent should be put to the costs associated
with obtaining expert evidence from a quantity surveyor or engineer and provide that
expert report in a payment schedule every time it disagrees with a payment claim?
Yet, if it does not do so, s.24(4) of the BCIPA suggests that it cannot raise or rely
upon that expert evidence in the adjudication response. This requirement in my view
places an intolerable cost and inconvenience on a respondent, when they do not
even know whether the referencing of the Act is a genuine prelude to an adjudication
application or whether it is simply company policy of the claimant. I am therefore of
the view that in circumstances where a payment claim falls within the “composite
scheme” there should be some form of legislative intervention similar to that provided
in s.21(2B) of the Amended Victorian Act, albeit with some amendments.
To ensure that a claimant is afforded procedural fairness, the claimant must be
permitted a reasonable time to reply to those reasons in the adjudication response
that were not previously ventilated in the payment schedule. Setting a firm deadline
for the reply is problematic given a respondent’s ability to seek an extension of time
to provide its adjudication response. In the premises, it is appropriate to allow a
claimant to seek an extension of time to provide the reply.
To enable these proposed amendments to have proper effect, the adjudicator may
require an extension of time to complete his or her decision and such consent should
only be required from one of the parties.
It is not proposed to alter the affect of s.24(3) of the BCIPA for payment claims which
fall within the “composite scheme”.
206
[2008] 2 Qd R 117 at 121-2
[2010] QCA 355
208
See the prohibition contained in s.17(5) of the BCIPA
207
201
Section 24(3) provides:
(2) The respondent may give the adjudication response to the adjudicator only if the
respondent has served a payment schedule on the claimant within the time specified
in section 18(4)(b) or 21(2)(b).
Suggested Legislative Amendments – s.21(2B) Amended Vic Act
For a payment claim that falls within the “composite scheme”, I recommend that
s.24(4) of the BCIPA be omitted and the following be inserted in its place:
If the adjudication response includes any reasons for withholding payment that were not
included in the payment schedule:
(a) the claimant may in writing identify those reasons to the adjudicator and provide a
reply in respect to those reasons only, within 5 business days after being served with
a copy of the adjudication response, or such longer period as decided appropriate by
the adjudicator; or
(b) the adjudicator on his or her own motion, may serve a notice on the claimant(i) setting out those reasons; and
(ii) stating that the claimant has 5 business days, or such longer period as decided
appropriate by the adjudicator, after being served with the notice to lodge a reply
in respect to those reasons only, with the adjudicator.
(c) For the purposes of subsections (a) and (b), in exercising his or her discretion in
relation to allowing a claimant an extension of time to provide a reply to the
adjudication response, the adjudicator may take into account relevant considerations
including:
(i) the complexity of the payment claim and the adjudication application;
(ii) the length of time the respondent had to prepare its payment schedule and
adjudication response;
(iii) the complexity of the issues raised by the respondent for the first time in the
adjudication response;
(iv) the volume of the material not previously disclosed to the claimant;
(v) any other relevant factor.
Time to decide an adjudication application
The time in which an adjudicator must decide an adjudication application referred to
him or her is provided in s.25 of the BCIPA, which relevantly provides:
25 Adjudication procedures
(1) An adjudicator must not decide an adjudication application until after the end of the
period within which the respondent may give an adjudication response to the
adjudicator.
(2) An adjudicator must not consider an adjudication response unless it was made
before the end of the period within which the respondent may give a response to the
adjudicator.
(3) Subject to subsections (1) and (2), an adjudicator must decide an adjudication
application as quickly as possible and, in any case—
(a) within 10 business days after the earlier of—
202
…
(i) the date on which the adjudicator receives the adjudication response; or
(ii) the date on which the adjudicator should have received the adjudication
response; or
(b) within the further time the claimant and the respondent may agree, whether
before or after the end of the 10 business days.
A number of submissions have been made to the Review that an adjudicator should
have an extended period in which to decide an adjudication decision, particularly if
the matter is complex or where the claim involves a significant sum of money.
The benefits of extending the timeframe in which an adjudicator has to complete his
or her decision include:
(a) Greater time to consider and deal with all of the issues in dispute, rather than
a selection of those that can be determined within the 10 business days; and
(b) Better quality decisions.
Those that argue against amending the 10 business days in s.25(3)(a) of the BCIPA
suggest that:
(a) Any extension will simply delay the process and result in more financial
distress to claimants; and
(b) It will lead to an increase in costs of adjudication. Some submitters opposed
to the suggestion, argue that the longer an adjudicator is allowed to decide a
matter, the longer he or she may take because adjudicators are paid a flat
rate per hour (unless the matter is a “fixed fee” adjudication209).
In my view and in my own experience as an adjudicator, the bulk of adjudication
decisions can be adequately dealt with in 10 business days after the adjudicator has
or should have been provided with a copy of the adjudication response. I note that
this time is somewhat more generous than the time permitted in the NSW Act where
the 10-business day period commences the day after the adjudicator notifies the
parties of his or her acceptance of the nomination.210
However, I am of the view that in many complex adjudication applications, 10
business days is simply insufficient for an adjudicator to adequately appraise him or
herself of the competing submissions and material and provide a coherent and
sound decision. I have concerns that some adjudicators may seek to justify what
might be regarded as poor attention to detail on the premise that they only have 10
business days to decide a matter. I am also conscious of the consistent complaint
that many adjudicators either do not or will not apply the terms of the contract. In my
view these complaints are not entirely without substance.
On the other hand, I am also cognisant of the damage to the parties and the
operation of the Act if adjudicators are seen to be “gouging” on their fees.
209
210
A number of ANA’s have introduced “fixed fee” adjudications, but these generally apply for lower value claims
Section 21(3)(a) of the Building and Construction Industry Security of Payment Act 1999 (NSW)
203
If s.25(3)(a) were amended to 15 or 20 business days there are concerns that some
adjudicators may seize the opportunity to charge greater fees than what is
reasonable.
It is important to recognise that s.25(3)(b) of the BCIPA provides a vehicle for an
adjudicator to request an extension of time to complete their decision. At times, an
adjudicator’s request for an extension of time is entirely reasonable. In complex
matters it is sometimes nigh impossible to deal with all of the issues in dispute and
provide considered reasons within 10 business days. However, although I am
unaware of any cases on point, s.25(3)(b) is open to abuse by adjudicators who
accept a nomination, knowing that they have other work commitments which will
impinge on their ability to deliver a timely decision.
On balance, I consider it appropriate where a payment claim falls within the
“composite scheme” to allow adjudicators a default period of 15 business days to
decide the adjudication application with an opportunity to seek further extensions of
time.
Given the proposed amendments also discussed above, I am of the view that it is
appropriate for payment claims that fall within the “composite scheme” for an
adjudicator to only require the consent of one of the parties to a request for an
extension of time.
A table demonstrating the various changes to the timeframes required under the
current legislation, the “existing scheme” and the “composite scheme” is attached
and marked Annexure D.
Suggested Legislative Amendments
For a payment claim that falls within the “composite scheme” s.25(3) of the BCIPA
should be amended to read:
Subject to subsections (1) and (2),, an adjudicator must decide an adjudication application
as quickly as possible and, in any case(a) within 15 10 business days after the earlier of(i) the date on which the adjudicator receives the adjudication response; or
(ii) the date on which the adjudicator should have received the adjudication
response; or
(b) within the further time the claimant or and the respondent may agree, whether before
or after the end of the 15 10 business days.
Given the recommendations made and the reasons for those recommendations in
response to Question 9, it is not necessary to separately address the issues
contained in Question 10.
204
Q9 - Recommendation
22.
The BCIPA timeframes should be amended along the following lines for ALL
payment claims and adjudication applications:
 Unless the contract provides a longer period, restricting the time in
which a claim can be made to 6 months after the construction work was
last carried out or the related goods and services were supplied.
 If the payment claim is in relation to the recovery of a final progress
payment including for the recovery of retention and/or the return of
security, a final payment claim may be served within the period worked
out under the contract or if the contract does not provide, the period of
28 days after the expiry of the defects liability period, whichever is the
later.
 Extend the time in which a respondent has to serve an adjudication
response to 10 business days after receiving a copy of the adjudication
application or 7 business days after receiving notice of an adjudicator’s
acceptance of the application, whichever is the later.
 The definition of the term “business day” in Schedule 2 of the Act to
exclude the three business days prior to Christmas Day and the three
business days after New Years Day.
23.
The BCIPA should be amended to reflect new requirements and processes
(‘composite scheme’) for any payment claim which contains a claim for:
(d) a sum greater than $750,000; or
(e) a latent condition; or
(f) a time related cost.
24.
With regard to claims made under the ‘composite scheme’, the following
timeframes and specific requirements will apply:
 A respondent will be able to provide a payment schedule within
prescribed timeframes according to a “sliding scale”, depending upon
the time taken by the claimant to serve its payment claim;
 The default period for a respondent to serve an adjudication response
shall be the later of the following to end 15 business days after receiving a copy of the application;
 13 business days after receiving notice of an adjudicator’s
acceptance of the application.
 A respondent may apply to the adjudicator to seek an extension of time
for up to an additional 15 business days to provide an adjudication
response and the adjudicator must give the claimant an opportunity to
be heard on the application before making his or her decision.
 A respondent shall be entitled to raise reasons for refusing all or part of
the claimed amount in the adjudication response which had not been
raised in the payment schedule and the claimant will be provided a right
of reply.
 Adjudicators should be allowed 15 business days to decide an
adjudication application, unless either of the parties agree upon a
longer period.
205
Q10 - Recommendations
I do consider that the BCIPA allows persons who carry out construction work
or supply related goods and services to serve large and complex payment
claims in an untimely and unfair manner.
The recommendations provided in respect to Question 9, address these
concerns.
206
Question 11: Should the BCIP Act allow claimants at the lodgment
of an adjudication application to place a charge on monies owing
to a respondent head contractor by a principal?
Background
The New South Wales Legislature passed amendments to the Building and
Construction Industry Security of Payment Act 1999 (NSW) (“the NSW Act”) which
commenced on 28 February 2011. By the insertion of Division 2A, the NSW Act
was amended to allow claimants who have made an adjudication application to
require a principal contractor to retain “sufficient money” to cover the claim from
monies owed to the respondent.211
Feedback outcomes
In relation to the responses to Question 11, 28% of submitters considered that the
BCIPA should allow claimants at the lodgment of the adjudication application to
place a charge on monies owing to a respondent head contractor by a principal,
while 32% did not and 40% did not directly respond to the question.
Relevant legislative provisions
The provisions of Division 2A of the NSW Act are set out below:
26A Principal contractor can be required to retain money owed to respondent
(1) A claimant who has made an adjudication application for a payment claim can require
a principal contractor for the claim to retain sufficient money to cover the claim out of
money that is or becomes payable by the principal contractor to the respondent.
(2) Such a requirement is made by serving on the principal contractor a request (a
payment withholding request) in the form approved by the Director-General of the
Department of Services, Technology and Administration.
(3) A payment withholding request must include a statement in writing by the claimant in
the form of a statutory declaration declaring that the claimant genuinely believes that
the amount of money claimed is owed by the respondent to the claimant.
(4) A principal contractor for a claim is a person by whom money is or becomes
payable to the respondent for work carried out or materials supplied by the
respondent to the person as part of or incidental to the work or materials that the
respondent engaged the claimant to carry out or supply.
(5) A person who is served with a payment withholding request must, within 10 business
days after receiving the request, notify the claimant concerned if the person is not (or
is no longer) a principal contractor for the claim.
211
See s.26A(1) of the NSW Act
207
Maximum penalty: 5 penalty units.
Note. A person may no longer be a principal contractor as a result of money owed to the
respondent having been paid by the person before the payment withholding request was
served.
26B Obligation of principal contractor to retain money owed to respondent
(1) A principal contractor who has been served with a payment withholding request must
retain, out of money owed to the respondent, the amount of money to which the
payment claim relates (or the amount owed by the principal contractor to the
respondent if that amount is less than the amount to which the payment claim
relates).
(2) The amount is only required to be retained out of money that is or becomes payable
by the principal contractor to the respondent for work carried out or materials
supplied by the respondent to the principal contractor as part of or incidental to the
work or materials that the respondent engaged the claimant to carry out or supply.
(3) The obligation to retain money under this section remains in force only until
whichever of the following happens first:
(a) the adjudication application for the payment claim is withdrawn,
(b) the respondent pays to the claimant the amount claimed to be due under the
payment claim,
(c) the claimant serves a notice of claim on the principal contractor for the purposes
of section 6 of the Contractors Debts Act 1997 in respect of the payment claim,
(d) a period of 20 business days elapses after a copy of the adjudicator’s
determination of the adjudication application is served on the principal
contractor.
(4) A part payment of the amount claimed to be due under the payment claim removes
the obligation under this section to retain money to the extent of the payment.
(5) When the claimant’s adjudication application is determined, the claimant must serve
a copy of the adjudicator’s determination on the principal contractor within 5
business days after the adjudicator’s determination is served on the claimant.
Maximum penalty: 5 penalty units.
26C Contravention of requirement by principal contractor
(1) If a principal contractor discharges the principal contractor’s obligation to pay
money owed under a contract to the respondent in contravention of a requirement
under this Division to retain the money, the principal contractor becomes jointly and
severally liable with the respondent in respect of the debt owed by the respondent to
the claimant (but only to the extent of the amount of money to which the
contravention relates).
(2) The principal contractor can recover as a debt from the respondent any amount that
the claimant recovers from the principal contractor pursuant to a right of action
conferred by this section.
26D Protections for principal contractor
(1) An obligation under this Division to retain money owed by a principal contractor to the
respondent operates (while the obligation continues) as a defence against recovery
of the money by the respondent from the principal contractor.
(2) Any period for which a principal contractor retains money pursuant to an obligation
under this Division is not to be taken into account for the purposes of reckoning any
208
period for which money owed by the principal contractor to the respondent has been
unpaid.
(3) A claimant who has served a payment withholding request on a principal contractor
in connection with an adjudication application must, if the adjudication application is
withdrawn, give the principal contractor written notice of the withdrawal of the
application within 5 business days after it is withdrawn.
Maximum penalty: 10 penalty units.
(4) The principal contractor is entitled to rely in good faith on a statement in writing by
the respondent in the form of a statutory declaration that:
(a) a specified amount claimed to be due under an adjudication application has been
paid, or
(b) an adjudication application has been withdrawn.
26E Respondent to provide information about principal contractor
(1) An adjudicator may, in connection with an adjudication application and at the request
of the claimant, direct the respondent to provide information to the claimant as to the
identity and contact details of any person who is a principal contractor in relation to
the claim.
(2) A respondent must comply with a direction of an adjudicator under this section.
Maximum penalty: 10 penalty units.
(3) A respondent must not, in purported compliance with a direction of an adjudicator
under this section, provide information that the respondent knows is false or
misleading in a material particular.
Maximum penalty: 10 penalty units.
26F Other rights of claimant not affected
This Division (including any action taken by a claimant under this Division) does not
limit or otherwise affect the taking of any other action by a claimant to enforce a
payment claim or adjudication determination.
Support for change
The arguments relied upon by those in favour of amending the BCIPA include:
Protection against insolvency
A quantity surveyor in his written submissions argued that the Subcontractors’
Charges Act 1974 should be linked to the BCIPA to help protect claimants against a
respondent’s insolvency whilst proceeding through the adjudication process.
Alternatively, he suggested amending the BCIPA Act to include similar amendments
to Division 2A incorporated in the NSW Act.
209
Fosters informal payment outcomes
In the written submissions of one ANA it was submitted that: 212
“This would be an extremely useful amendment to BCIP Act to foster payment. As a result of
recent amendments to the New South Wales SOPA, the claimant can serve a payment
withholding request on a respondent on the day it submits its adjudication application. In
many cases this will be the first time the principal is made aware that the respondent head
contractor has a payment dispute with a subcontractor. This gives rise to exchanges
between the principal and head contractor that can serve to resolve payment quickly. There
is no reason why the same outcomes would not occur in Queensland.
This will either foster an informal outcome whereby the principal pays the claimant directly to
ensure continuity of work, or formally pays the claimant upon receipt of a debt certificate
issued by the court, as occurs now in both the New South Wales and Victorian jurisdictions.
Either way, these outcomes are consistent with the aims of the Act and do not impose any
additional costs on either respondents or principals.
The suggestion in the Discussion Paper that the proposal may result in moneys payable to
the subcontractor being given preferential legal treatment over debts owed by the head
contractor to other persons is based upon a misunderstanding of the law. There would be no
preferential treatment. The BCIP Act cannot override Commonwealth insolvency law.
What is really required is legislation, such as that considered by the Collins Enquiry (sic)
making all moneys received by the head contractor trust moneys until subcontractors are
paid.”
Subcontractors charge to be determined by adjudicator
A firm of lawyers argued in their written submissions that there is no good reason
why a claim cannot be considered under the Subcontractors’ Charges Act 1974 and
the BCIPA. They argued that:
“There is no reason why a BCIPA claimant should not also have the ability to lodge a
subcontractors charge on monies owed by a principal. Indeed, it would be to a respondent’s
benefit to have a subcontractor’s charge determined quickly by an adjudicator, rather than
having the monies tied up in Court while a party slowly takes the subcontractor’s charge
through the dispute process - in the meantime causing financial pressure on the other party
by having monies withheld from it. Arguably, this denial of cash flow is the one of the matters
that BCIPA is trying to overcome.
There is no good reason why the two cannot be dealt with together. The effect of the
adjudication would be to release the monies if any were held.”
212
Similar submissions were provided by the Adjudication Forum
210
Subcontractors’ Charges Act should be repealed
Another written submission to the Review it was suggested that:213
“… the process established in Division 2A of Part 3 of the New South Wales equivalent to
the Act is an excellent process that provides a more efficient system than the
Subcontractors’ Charges Act 1974. This latter legislation is cumbersome, difficult to
understand and expensive for a claimant to pursue their rights. In my view, [the]
Subcontractors’ Charges Act 1974 should be repealed and the Act amended to incorporate
provisions similar to the New South Wales equivalent of the Act.”
Remove the constraint in the BCIPA to allow a Subcontractors’ Charges claim
Another written submission to the Review suggested that the Division 2A
amendments to the NSW Act are poorly drafted and can cause “significant damage
to a respondent”. As an alternative, the submitter suggested that the BCIPA could
be amended to remove the constraint on a claimant’s ability to utilise the
Subcontractor’s Charges Act.
Support for status quo
The arguments relied upon by those opposed to amending the BCIPA include:
The NSW scheme would restrict cash flow affecting subcontractors
A national development company in their written submissions argued that the
freezing of cash flow to respondents would simply limit their ability to pay their
subcontractors.214
Subcontractors’ Charges Act most appropriate mechanism
A law firm in their written submissions resisted the suggested amendments. They
argued that:
(a) “The BCIP Act should not be amended to allow claimants to place a charge on
monies owing to a respondent head contractor by a principal at the lodgment of an
adjudication application.
213
Similar submissions were made by another stakeholder
Similar submissions were provided by a number of stakeholders including the Queensland Major Contractors
Association
214
211
(b) Currently, the Subcontractor’s Charges Act governs charges placed over money
owed up the contractual chain. Given the consequences that can flow from placing
such a charge over money owed to a contractor by a principal, this Act requires
a
claimant to commence court proceedings in respect of their claim within a set
timeframe. The Subcontractor’s Charges Act is the appropriate forum for
consideration of such issues.
(c) Further, given the BCIP Act is based on interim determinations, which aims
to
enable money to move through the contractual chain, it does not seem appropriate
that the BCIP Act should allow the lodgment of charges which, in practice, would
result in large amounts of money being tied up215. This hinders, rather than aids cash
flow, contrary to the intention of the BCIP Act.
(d) In the event that the BCIP Act was amended to enable a claimant to place a charge
on monies owing to a respondent head contractor by a principal, the Subcontractor’s
Charges Act would need to be amended to ensure the two Acts work seamlessly
together. For example, such amendments would need to deal with the situation
whereby a charge is placed over money owing to a respondent head contractor by a
principal, the claimant is successful on its adjudication application but the respondent
applies to the court to have the decision of the adjudicator overturned and is
successful.”
The Queensland Resources Council also rejected the proposal arguing that:
“ … the BCIP Act should not be amended to allow claimants to place a charge on monies
owing to a respondent head contractor by a principal. A subcontractor already has the
protection of the Subcontractor’s Charges Act 1974 (Qld) if they wish to take this step.
If the BCIP Act was amended as proposed above, this would:



unfairly prejudice third party financiers whose loans might be subordinated to monies
payable to the subcontractor. This would be contrary to the objective of the BCIP Act,
particularly given that adjudication decisions are intended to be only interim (and not
final) decisions (in other words, that the decisions are able to be reviewed by the
Queensland Supreme Court);
raise issues as to what the appropriate course of action would be for a principal to
take if they dispute the amount of money payable to the head contractor; and
encourage vexatious and unreasonable claims which would negatively impact on the
effectiveness of the BCIP Act as well as the health of the building and construction
industry.”
Master Builders’ were vehemently opposed to the suggested proposal. They argued
that:
“Subcontractors have access to the SCA if they want the principal to secure funds allegedly
owing to the subcontractor. This process has a number of checks and balances and requires
the claim to be certified, thus minimising the likelihood of exaggerated or inflated claims.
Any proposal to involve the principal and prevent payments to the builder of claims made
under BCIPA on behalf of a subcontractor is completely opposed by Master Builders.
215
Similar submissions were made by a number of stakeholders including the Queensland Major Contractors
Association
212
Previous research conducted by the BSA has revealed that there is a huge difference
between monies claimed under the BCIPA by subcontractors and amounts awarded by the
adjudicator against the respondent. In broad terms, applicants were only awarded 40% of
the amounts claimed against respondents.
Only $78 million was awarded by adjudicators out of a total claims pool of $196 million.
While there are a number of reasons for claims either failing or only receiving partial
payment, the reality is that any system that prevents payment from a principal to a builder
based on the BCIPA amount claimed by a subcontractor would be completely unfair.
…
If the principal was obliged to withhold all monies claimed by a claimant until the adjudication
was resolved, it would dramatically affect the cash flow of the contractor. The monies
withheld by the principal could have a catastrophic impact for the contractor's cash flow, with
implications for other subcontractors in the contractual chain.
This proposal also generates a number of unintended consequences if adopted in its current
form. Contractors do not want principals getting involved in disputes between contractors
and their subcontractors. They do not even want the principals to necessarily know a claim
has been made against the contractor. There are dispute resolution procedures with the
contract as well the BCIPA and contractors pride themselves on managing their own claims.”
Charges up the contractual chain are insidious
A representative of a national building contractor in his written submissions rejected
the proposal saying:
“No, definitely not. That would give subcontractors a course of action that is not open to
contractors. Subcontract claimants have the option of the Subcontractors’ Charges Act or
BCIPA and should not be entitled to both concurrently. The impost of "penalty" interest rates
on overdue payments is a sufficient deterrent/compensation if payment is not made by the
due date. Charge up the contractual chain is insidious and has the effect of destroying cash
flow rather than facilitating it, and as such is contrary to the objectives of the Act."
Contracting parties will be held to ransom
Another national building contractor argued that allowing a claimant to lodge a notice
of claim upon a respondent within the BCIPA would be open to abuse by claimants.
They argued that such an amendment would:
“… give vexatious claimants the ability to tie up the respondent's capital and effectively
permit them to hold the respondent to ransom by making inflated or otherwise vexatious
claims and placing charges of the amounts claimed. Further, such an amendment would
give rights to a subcontractor that a head contractor would not have a similar benefit of.
We respectfully note that there is no similar general entitlement for a litigant to place a
charge on moneys claimed. We submit that this position is wholly appropriate and to adopt
the proposal posed in this Question 11 would have a severe and undue burden on principals
and main contractors.”
213
Scheme inconsistent with the BCIPA
A resources sector company referred me to the Second Reading Speech of the then
Minister for Housing and Public Works, the Hon. R. E. Schwarten who said in
relation to the required election required of a claimant whether to proceed under the
BCIPA or the Subcontractors’ Charges Act:
“... subcontractors will be required to choose which statutory initiative they wish to utilise to
obtain payment for construction work done…There will be nothing to stop subcontractors
switching from one statutory initiative to the other if they believe that due to changing
circumstances, the alternative option will result in a better payment outcome.”
Another resources sector company submitted:
“It appears that it was the intention of government that a subcontractor could not pursue
payment under both statutory schemes. It had to make a choice between the two. If the
proposed amendments were adopted, it would be contrary to that intention. Essentially, not
only would the subcontractor have the right to enforce an adjudication certificate as a
judgment debt (if the adjudicated amount is not paid), it will also have the right to be given
preferential treatment over debts owed by the head contractor to other persons.
The BCIPA was designed to improve the cashflow within the building and construction
industry. It is achieving this. To effectively give a subcontractor another right which would
result in it being paid instead of other subcontractors is going beyond the object of the Act.
In addition, a charge on moneys payable to a head contractor by a principal will give the
subcontractor priority over other debts owed by the head contractor. This could
unreasonably impact on the head contractor's cashflow, causing financial strain. This would
be contrary to the object of the Act.
Further, the proposed amendments would result in a principal having to pay the
subcontractor the adjudicated amount (if the decision is in the subcontractor's favour). This
proposal overlooks the fact that adjudication decisions are interim decisions only. Therefore,
it is unclear what would happen if a court later overturns the adjudication decision or
otherwise determines a lesser amount.
As noted in the discussion paper, it is also unclear what would be an appropriate course of
action if the principal disputes the amount payable to the head contractor (ie. for breaches of
contract or defective work).”
The Queensland Law Society Mining and Resources Law Committee submitted that:
“… to amend the BCIP Act in this way would be problematic as it would draw the principal
directly into disputes between the head contractor and subcontractor. It would effectively
freeze payments from the principal and it could be very disruptive and costly for construction
projects.
It would also unfairly prejudice third party financiers whose loans might be subordinated to
monies payable to the subcontractor. This would be contrary to the objective of the BCIP
Act, particularly given that adjudication decisions under the BCIP Act are interim decisions
only.”
214
A charge could be made on the adjudicated amount cf. claimed amount
Both the Construction and Infrastructure Law Committee and the Mining and
Resources Law Committee of the Queensland Law Society were opposed to
allowing such an amendment to the BCIPA. However the Construction and
Infrastructure Law Committee suggested that such a change could be considered
after the adjudication decision has been provided, subject to the outcome of any
review of the Subcontractors’ Charges Act.
Consideration
Subcontractors’ Charges Act widely criticised
The making of recommendations into the operation, review or amendment of the
Subcontractors’ Charges Act 1974 (“the SCA”) is outside the terms of reference of
this Review. It is however no secret that the SCA is cumbersome, difficult to
navigate for even experienced lawyers and can lead to expensive litigation to
prosecute or defend one’s entitlements. The SCA has been roundly criticised by the
judiciary over the years. In Ex parte Pavex Constructions216, Dunn J noted:
“I am of the opinion that there is an urgent need that the Act be amended in such a way that
its meaning is made clear. The short title of the Act is ‘An Act to make better provision for
securing the payment of money payable to sub-contractors and for other purposes’, yet there
is universal, and comprehensive, uncertainty as to how it makes such provision. Any
subcontractor who seeks to take advantage of it risks a liability for costs which may be
heavy, especially if (as it is quite likely, because of the poor quality of the legislation) his
claim must ultimately be dealt with on appeal. This is a thoroughly unsatisfactory situation.”
In Hamilton Australia Pty Ltd v Milson Projects Pty Ltd217 Pincus JA said:
“I would add only that if the [SCA] is ever replaced by one to similar effect, it is desirable that
great care be taken with the drafting, which seems to me to pose unusually difficult
problems.”218
It is beyond the scope of this Report to examine the intricacies of the SCA. That is
the subject of an entirely separate review in itself. However, for present purposes,
the purpose of the SCA is to provide an ability for a subcontractor to be able to
secure monies owed to it from a respondent, by placing a charge on monies owed to
the respondent by a principal or superior contractor.219
216 [1979] Qd R 318 at 334
217
[1997] 2 Qd R 355 at 359
Similar criticisms of the SCA were discussed in Re Radair Pty Ltd [1998] 2 Qd R 539 at 541 per Thomas J
and 543 per Dowsett J; Ed Ahern Plumbing (Gold Coast) Pty Ltd v J M Kelly (Project Builders) Pty Ltd [2007]
QCA 452 at [15], per Keane JA and [40], per Holmes JA
219
See s.5 of the SCA
218
215
Use of the SCA is particularly advantageous compared with the BCIPA if the
respondent contractor is at risk of insolvency. A subcontractor is able to effectively
“leap frog” the respondent contractor and secure the value of the charge. A charge
is deemed to be extinguished unless the subcontractor duly commences court
proceedings under s.15 of the SCA to enforce it.220
Concerns with the NSW amendments
As a result of the difficulties that parties continue to face when using the SCA, there
is an attraction for the Queensland Legislature to adopt similar amendments to those
contained in Division 2A of the NSW Act. However, I have a number of concerns
regarding these amendments which include:
(a) A claimant’s ability to serve a “payment withholding” request upon a “principal
contractor” is based on the claimed amount, rather than the adjudicated
amount. As submitted by Master Builders’ this will ‘lock-up’ considerable
amounts of money from the respondent, at a time when there has been no
independent assessment by an adjudicator or even a prima facie assessment
of the value of the claim by a person similar to a “qualified person” required
under s.10A of the Subcontractors Charges Act 1974.
Graph I below identifies the total claimed amounts vs. the total adjudicated
amounts since the commencement of the Act. In my view, the data supports
Master Builders’ submission that it would be grossly unfair for respondents to
quarantine the value of the claimed amount before any decision is made as to
the merits of the claimant’s entitlement. It is accepted that this would lead to
greater cash flows difficulties for respondents which would then have negative
impacts upon those subcontractors below them in the contractual chain.
Graph I:
Source: Building and Construction Industry Payments Agency, May 2013
220
Pursuant to 15(1) of the SCA in the case of a claim of charge in respect of retention money only, a proceeding
must be commenced within 4 months after the retention money is payable and in all other cases within 1 month
after the notice of claim of charge has been given pursuant to s.10 of the SCA
216
(b) The wording of s.26B(2) of the NSW Act, requires a principal contractor to
retain money “that is or becomes payable by the principal contractor to the
respondent”. I accept the submissions of the Queensland Resources Council
and other resource sector companies, that this may lead to circumstances
where the amount owed by the principal or superior contractor to the
respondent will be a matter which is subject to its own dispute. The principal
or superior contractor may allege that the respondent is owed nothing
because of alleged defects, liquidated damages, backcharges etc. The
principal or superior contractor would therefore argue that it is not required to
retain any monies for the benefit of the claimant. From a principal or superior
contractor’s perspective, it is suggested that most would prefer to retain
monies rather than having to try to claw them back from a respondent who
may be or become insolvent.
(c) There appears to be very limited judicial consideration of Division 2A of the
NSW Act.221 That may mean that the amendments are not widely used 222 or it
may mean that the provisions are being used successfully. Without any
statistical data evidencing the use and success of the NSW amendments, I
recommend that the Queensland Government adopt a “watching brief” on the
success or otherwise of the amendments.
Could the NSW scheme be amended to suit Qld’s unique statutory position?
I have given consideration to whether the BCIPA should be amended along similar
lines to those contained in Division 2A of the NSW Act, but with the following
changes:
(a) The amount able to be retained would be restricted to the adjudicated
amount;
(b) The claimant would only be entitled to serve the payment withholding request
upon the principal or superior contractor, if the respondent had failed to pay
the adjudicated amount within the time required by the adjudicator pursuant to
s.29 of the BCIPA (normally 5 business days after the date on which the
adjudicator’s decision was served on the respondent);
(c) The claimant had obtained an adjudication certificate pursuant to s.30 of the
BCIPA but had NOT filed the adjudication certificate as a judgment debt in a
court of competent jurisdiction. I consider that to enable a claimant to secure
the value of the adjudicated amount from a principal or superior contractor
from monies owing to the respondent should disentitle a claimant from
obtaining a judgment debt against the respondent because to allow both could
lead to an abuse of process; and
221
Hanave Pty Ltd v Nahas Construction (NSW) Pty Ltd [2012] NSWSC 888; Birdon Pty Ltd v Houben Marine
Pty Ltd [2011] 197 FCR 25
222
It is understood that the NSW Government Procurement – Policy and Services does not maintain statistics of
the use of Division 2A of the NSW Act
217
(d) The principal or superior contractor would be required to pay the claimant the
value of the adjudicated amount, subject to the adjudicated amount being less
than the debt owed to the respondent, within 5 business days after being
served with the payment withholding request and a copy of the adjudication
certificate.
Concerns remain
I accept that the above possible amendments would provide a greater opportunity for
some claimants to be able to recover adjudicated amounts. However, I remain
troubled by the prospect that:
(a) Principals and superior contractors will refuse to retain monies for the benefit
of claimants arguing that they have a legitimate dispute with the respondent
which may reduce or even eliminate the value of the adjudicated amount and
that the determination of this issue may require court intervention;
(b) The Division 2A amendments in the NSW Act, or any variant thereto would
potentially see some subcontractors able to recover the value of their
progress claims, or part thereof, whilst those subcontractors who may serve
payment claims later in time, may be left with little or nothing in the event of
the respondent’s insolvency; and
(c) As argued by one resources sector company, to allow a claimant access to
use both the BCIPA and SCA contemporaneously appears to be inconsistent
with the then Minister’s Second Reading Speech.
As for other submissions made in support of amending the BCIPA to incorporate the
NSW amendments, I am satisfied that:
(a)
(b)
The Collins Inquiry recommendation for the establishment of a
“Construction Trust”223 did not receive wide support from the New South
Wales Government, although it is accepted that the New South Wales
Government intends to trial the process on selected government
construction projects before consideration is given to a broader
application224. The Queensland Government may consider keeping a
“watching brief” on the developments in New South Wales regarding the
implementation of the “Construction Trust”, but I do not recommend its
implementation at this time.
There is some merit in the submissions that an adjudicator ought to be
able to determine whether a claimant is entitled to receive the value of the
claim of charge made under the SCA. However, this would require
significant amendments to both the SCA and the BCIPA. As referred to
previously, the SCA has already been amended on numerous occasions
and is in itself requiring significant holistic legislative attention.
223
See Recommendation # 6 of the Final Report of the Independent Inquiry into Construction Industry Insolvency
in NSW, November 2012
224
See: http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf
218
I do not consider that amendments to the SCA should be contemplated
without a thorough review of the operation of the SCA.
(c)
On consideration of the submissions, I do not recommend the deletion of
s.4 of the BCIPA which requires a claimant to elect which process it
intends to utilise to seek recovery of the unpaid progress claim. If a
claimant were permitted to use the BCIPA and the SCA
contemporaneously, it is possible that a claimant may receive a benefit
from both the principal or superior contractor and the respondent.
Removing s.4 of the BCIPA may lead to claims of abuse of process.
Suggested Legislative Amendments
Nil
Q11 - Recommendations
25.
The BCIPA should NOT be amended to allow claimants, at the lodgement of
an adjudication application, to place a charge on monies owing to a
respondent by a principal or superior contractor.
26.
The Government should adopt a “watching brief” on the success or otherwise
of Division 2A of the Building and Construction Industry Security of Payment
Act 1999 (NSW).
219
Question 13: Do you believe that some respondents are misusing
the legal process by commencing Supreme Court proceedings to
delay the payment of an adjudicated amount?
If so, what if any changes to the BCIP Act should be made to help
address this issue?
Background
There appears to be a perception perhaps on both sides of the ideological divide that
there are many applications made seeking the court to exercise its supervisory
jurisdiction over the decisions of adjudicators. Some claimants argue that the object
of the Act is being defeated by the interference in adjudication decisions by the legal
profession.
Feedback outcomes
In relation to the responses to Question 13, 23% of submitters considered that some
respondents were misusing the legal process by commencing Supreme Court
proceedings to delay the payment of an adjudicated amount, while 34% did not and
41% did not directly respond to the question.
Consideration
I note that the answer to this question is somewhat of a moot point since the decision
of the High Court of Australia in Kirk v Industrial Court of New South Wales.225 At
[99]-[100], the plurality226 held that it was beyond the legislative power of a State to
take away from that State’s Supreme Court its supervisory jurisdiction to grant relief
for jurisdictional error. They stated at [99]:
“There is but one common law of Australia. The supervisory jurisdiction exercised by the
State Supreme Courts by the grant or prerogative relief or orders in the nature of that relief is
governed in fundamental respects by principles established as part of the common law of
Australia. That is, the supervisory jurisdiction exercised by the State Supreme Courts is
exercised according to principles that in the end are set by this Court. To deprive a State
Supreme Court of its supervisory jurisdiction enforcing the limits on the exercise of State
executive and judicial power by persons and bodies other than that Court would be to create
islands of power immune from supervision and restraint. It would permit what Jaffe
described as the development of ‘distorted positions’. And as already demonstrated, it
would remove from the relevant State Supreme Court one of its defining characteristics.”
225
226
(2010) 239 CLR 531
French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ
220
As McMurdo P stated in Northbuild Construction Pty Ltd v Central Interior Linings Pty
Ltd227:
“There is no doubt that an adjudicator's decision under the Payments Act is an
administrative decision over which the Supreme Court of Queensland has a supervisory
jurisdiction, despite s 18(2) Judicial Review Act: Hansen Yuncken Pty Ltd v Ericson; Grocon
Constructors; and Chase Oyster Bar v Hamo Industries Pty Ltd.” [Footnotes omitted].
In a separate judgment, Chesterman JA concluded228 in Northbuild that an
adjudication decision may be impugned on the basis described in Brodyn, that is that
essential statutory pre-conditions have not been met, and by application for a
prerogative writ on the grounds of error of law on the face of the record or
jurisdictional error or any other ground recognised by pre Judicial Review Act
jurisprudence.
Even if the Legislature chose to do so, any attempt to further 229 oust the jurisdiction
of the Supreme Court is likely to be held unconstitutional applying the reasoning in
Kirk230.
Given that an adjudicator’s decision is an interim one and given that it is often made
in a “pressure cooker” environment under extremely tight timeframes, it is entirely
appropriate that adjudicator’s decisions are subject to the supervisory control of the
Supreme Court.
There is simply no evidence before the Review that parties are misusing the legal
process by commencing legal proceedings to delay the payment of an adjudicated
amount. There is evidence since the commencement of the BCIPA in 2004, that
parties have been willing to seek the intervention of the Court if they consider
themselves aggrieved, some of whom have been successful in so doing.
The BCIP Agency has tracked all adjudication decisions which have been brought
before the Supreme Court for review since the commencement of the Act. From 1
October 2005 to 31 August 2012231, 4724 adjudication applications have been made
which have been lodged with the BCIP Agency. Of those, 114 individual
adjudicators were appointed to 4410 adjudication applications. The remaining
adjudication applications were assumedly invalid or the matter was settled.
The BCIP Agency has advised me that up to 31 August 2012, there have been 57
decisions that have been reviewed in the Supreme Court with 33 of those
adjudication decisions “upheld” and the remaining 24 declared void.
227
[2012] 1 Qd R 525 at [6]
At [37]
229
See ss.90 and 91 of the Justice and Other Legislation Amendment Act 2007 which amended Schedule 1, part
2 of the Judicial Review Act to exclude the operation of that Act to decisions made under part 3, division 2 of the
BCIPA
230
See also Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd at [6] per McMurdo P
231
These are the most up to date figures available
228
221
However, care must be taken when considering these statistics for the following
reasons:
(i) The 57 decisions reviewed by the Supreme Court do not take into account all
the applications that have been made to the Court, only those that were
ultimately decided by the Court;
(ii) There may be matters (the number of which is unknown) where the parties
may have agreed that the adjudication decision was invalid before the matter
was challenged;
(iii) The number of matters (again unknown) where the parties reached a
settlement as a result of the decision, rather than seeking to enforce or
overturn it;
(iv)The prohibitive costs of making an application to the Supreme Court when the
amount in dispute is relatively modest.
Whilst acknowledging the four qualifications listed above, the statistics demonstrate
that only .5% of adjudication decisions have been successfully impugned by the
Court.
The commencement of an application to the Supreme Court to have an adjudication
decision declared void is not a process that many parties would enter into on a whim
given the costs associated with doing so. The point however is academic. The
Supreme Court’s supervisory role over inferior courts and tribunals and in this case
the decisions of adjudicators cannot be interfered with.
Improvements
The decision in Kirk does not mean that the process where Courts are called upon to
consider the validity of an adjudication decision cannot be improved.
I was referred by a number of submissions to the recommendations of the Collins
Inquiry232. I have noted that in the commentary to Recommendation 42, Collins QC
referred to the possibility of the NSW Legislature providing a:
“rapid final determination of that particular subcontractor’s claim either by augmenting
SOPA’s powers to enable it to make a final determination or establishing a specialist tribunal
to do so. Either way the disadvantages of a short wait for either result are far outweighed by
the advantages.”
It is not quite clear what Collins QC intended when he referred to a “rapid final
determination”. If the intention is that the adjudication decision is “final” in the curial
sense, such that particular adjudications may be final as are decisions of the courts,
but subject to appeal, then such would represent a significant departure from the
interim nature of the NSW Act.233
232
233
Final Report in the Independent Inquiry into Construction Industry Insolvency in NSW
See s.32 of the NSW Act; s.100 of the BCIPA
222
In recommendation 39.4, Collins QC states that adjudicators should be given “power
to issue a final certificate after hearing both sides to a dispute involving sums less
than $40,000”. (Emphasis added). What is meant by the term “final certificate” is
unclear.
If when referring to a “final determination” or “final certificate” Collins QC is
suggesting that there be no entitlement to a review or appeal of the adjudicator’s
decision in matters of dispute less than $40,000 then one wonders how such an
amendment would work in light of the High Court’s decision in Kirk.
The Court’s ability to sever and/or make an order for remitter
The majority of submitters that specifically addressed Question 13 considered that
parties should be free to commence proceedings in the Supreme Court to have an
adjudication decision declared void. However, a recurring theme through the
submissions was that the Act should expressly provide a Court with the power to
sever an affected part of the adjudication decision with the balance to remain an
enforceable decision234.
In Watpac Constructions (NSW) Pty Ltd v Austin Corp Pty Ltd235 McDougall J found
that it is not open to a court to determine that an adjudication determination can be
severed with part of the determination void and the remainder enforceable when the
determination involves a substantial denial of natural justice.
However, recently, Applegarth J in BM Alliance Coal Operations Pty Ltd v BGC
Contracting Pty Ltd (No.2)236 held that whilst an aggrieved applicant who had
established a jurisdictional error would ordinarily be entitled to an order quashing or
setting aside the decision, the remedy may be withheld as a matter of discretion if
the circumstances make it just to do so if for example, there is a more “convenient
and satisfactory remedy”.
In BM Alliance, Applegarth J found that the adjudicator exceeded his jurisdiction by
including termination costs in the amount of the progress payment to be paid by the
respondent to the claimant. His Honour said:
“[33] … The consequences of his jurisdictional error are readily ascertainable. The error
affected his decision in that the statute requires him to make a single determination, not
many. However, unlike a denial of natural justice or some other jurisdictional error which
might have tainted the whole of the decision-making process, the jurisdictional error in this
case did not affect the determination and quantification of other parts of BMA’s claim. Absent
the jurisdictional error, BGC would have obtained an adjudication decision for an
ascertainable amount in the order of $24M.
234
Including: Submissions from one ANA, various adjudicators, law firms, building contractors and the Australian
Wall and Ceiling Industry (“AWCI”)
235
[2010] NSWSC 347 at [15] – [33]
236
[2013] QSC 67 at [9]
223
[34] The error deprived the parties of an adjudication decision in accordance with law. If
BMA is correct in its contention that there is no scope to remit the matter to the second
respondent (or any other adjudicator) to determine the adjudication application according to
law, then BGC (and indeed BMA) will have been deprived of their statutory entitlement to an
adjudication decision according to law. BGC will have been deprived of its statutory
entitlement to an interim payment of about $24M, with adverse consequences for its cash
flow, contrary to the objects of the Act.”
His Honour remarked at [37] that in many other cases, “jurisdictional error is of a
fundamental kind and ordinarily, an adjudication decision will be quashed or set
aside or a declaration made that the decision is void”.
In response to the submission that the matter should be remitted back to the
adjudicator, Applegarth J in BM Alliance was of the view at [40] that such an order
may give rise to complex issues including whether the determination is to be based
upon existing evidence and submissions or include matters which have come to light
since the making of the decision. He also commented that to remit the matter to the
adjudicator would result in further costs.
In respect to the Court’s power to remit the matter back to the adjudicator,
Applegarth J, without finally deciding the issue, said at [45]:
“I have not been persuaded that in enacting s 25 of the Act the Parliament intended to
govern the time within which an adjudication decision can be made in a case in which the
original adjudication decision is set aside months or years later by a Court. But if this was
Parliament’s intent, then the objects of the Act are best advanced by making orders of the
kind submitted by BGC.”
In granting the order that the claimant (in the adjudication application) repay that part
of the decision which was affected by jurisdictional error, Applegarth J permitted the
claimant to retain the amount which it would have been awarded if the adjudicator
had made his decision free of jurisdictional error. Such an outcome, he said
advances the policy of the Act and was a more convenient and satisfactory remedy
than declaring the decision void with or without an order for remitter “with its
associated costs and complexities”.
For the reasons expressed by Applegarth J, I am of the view that an amendment to
the Act providing the Court with an express power to remit the matter to the
adjudicator or another adjudicator is not a preferable outcome.
In my view however, if an adjudicator has committed a jurisdictional error of law in
part of an adjudication decision which does not affect the whole of the decision, the
Act should expressly provide a court with the power to be able to sever that affected
aspect of the decision with the balance to remain enforceable. The parties may have
already expended significant costs on the adjudication and court processes. If the
court is able to sever the affected part of the adjudication decision then there will be
significant cost advantages in doing so.
224
Review Adjudication
Another suggestion made to improve the operation of the BCIPA and limit the
number of applications to the Court was to provide a mechanism for the review of an
adjudication decision by another adjudicator similar to the provisions contained in
Division 2A of the Building and Construction Industry Security of Payment Act 2002
(Vic) (“the Amended Victorian Act”). The suggestion was that such a review
mechanism be introduced into the BCIPA and made mandatory before an application
could be made to the Court for injunctive or declaratory relief.
Any such pre-condition may be in breach of the principles espoused in Kirk and
therefore may be invalid. Notwithstanding that, even if the suggestion withstood
such a challenge, in my view to place another interim mechanism between the
parties and the Court is undesirable and a step too far for adjudication. Such a
mechanism would in any event not apply to the operation of the BCIPA because a
review adjudication under the Amended Victorian Act is limited to an examination of
whether a claimed amount included an “excluded amount”.237 The entitlement to
lodge an adjudication review under the Amended Victorian Act is therefore very
limited. To expand upon any such entitlement, risks a merits based review approach
of the original decision. That should be avoided in my view because it detracts from
the interim rapid nature of the Act and is not consistent with the object of the BCIPA.
It is also worth noting that during my discussions with the responsible officer in
charge of administering the Amended Victorian Act, I was advised that the review
adjudication process had only been used on one occasion since the amendments
commenced in 2006.
For these reasons, I do not support the concept of adjudication decisions being
reviewed by other, even if more senior adjudicators.
Suggested Legislative Amendments
If Government accepts the recommendation, I shall leave to Parliamentary Counsel
the task of amending the Act to expressly permit a court to sever part of an
adjudication decision which is held to be invalid.
Q13 - Recommendations
27.
There is no necessity or justification for the Government to attempt to alter the
rights of the parties to invoke the supervisory jurisdiction of the Supreme Court
over decisions made by adjudicators.
28.
The BCIPA should be amended to expressly permit the Court, where
appropriate, to sever part of an adjudication decision that is affected by
jurisdictional error, and in the process confirm that the balance of the
adjudication decision remains enforceable.
237
Section 28B(3) of the Amended Victorian Act
225
Question 14: Are there any other issues you wish to raise in
relation to the effectiveness of the BCIP Act process or the
jurisdiction of BCIP Act?
Background
Sixty-one per cent of submitters provided at least one suggestion how the
effectiveness of the BCIPA may be improved. Most submitters provided multiple
suggestions. In the relatively short time afforded to me to conduct this Review, it is
not possible or desirable that I should address each of those suggestions. I have
considered the extent of commonality between these suggestions and have also
applied my own views as to the importance or otherwise of any reforms. The
following issues represent those that I consider most pressing, or worthy of further
discussion:
Section 21(2) anomaly
As identified in response to Question 9 above, the consequences for a respondent
who does not provide a payment schedule within the mandated deadlines can be
dire. For instance, pursuant to s.18(5) of the BCIPA, if a respondent fails to provide
a payment schedule within the mandated deadlines contained in s.18(4)(b):
“The respondent becomes liable to pay the claimed amount to the claimant on the due date
for the progress payment to which the payment claim relates.”
If a respondent fails to provide a payment schedule in accordance with s.18(4)(b) of
the BCIPA, the claimant may:
(a) recover the unpaid portion of the claimed amount from the respondent as a
debt due and owing to the claimant, in any court of competent jurisdiction
pursuant to s.19(2)(a)(i) of the BCIPA; or
(b) may bring an application for adjudication under s.21 of the BCIPA.
However, unlike the route provided in s.19(2)(a)(i) of the Act, a claimant wishing to
recover the unpaid portion of the payment claim via adjudication, must first pursuant
to s.21(2) of the Act, provide the respondent with a second chance to provide a
payment schedule. Section 21(2) provides:
(2) An adjudication application to which subsection (1)(b) applies can not be made
unless(a) the claimant gives the respondent notice, within 20 business days immediately
following the due date for payment, of the claimant’s intention to apply for
adjudication of the payment claim; and
(b) the notice states that the respondent may serve a payment schedule on the
claimant within 5 business days after receiving the claimant’s notice.
226
Therefore there is an anomalous situation whereby a claimant who wishes to
proceed to recover the unpaid portion of a payment claim via adjudication must first
provide the respondent with a “second chance” to provide a payment schedule. Yet
if the claimant wishes, it may in the alternative bring an application to the court for
summary judgment under Rule 292 of the Uniform Civil Procedure Rules by way of
an originating application238, without having to provide the respondent with a second
chance to provide a payment schedule.
I accept the submissions that for a claimant to be able to proceed to make an
application for summary judgment to a court without first giving a respondent a
“second chance” to provide a payment schedule is unfair. Section 19 should be
amended to provide the requirement that a claimant wishing to proceed to make an
application pursuant to s.19(2)(a)(i) of the BCIPA, must first provide the respondent
with a “second chance” to provide a payment schedule.
Suggested Legislative Amendment
19 Consequences of not paying claimant if no payment schedule
…
(1) …
(2) The claimant(a) may(i) subject to subsection 5 recover the unpaid portion of the claimed amount
from the respondent, as a debt owing to the claimant, in any court of
competent jurisdiction;
…
(5) An application to a court to which subsection (2)(a)(i) applies can not be made
unless(a) the claimant gives the respondent notice, within 20 business days immediately
following the due date for payment, of the claimant’s intention to bring the
application; and
(b) the notice states that the respondent may serve a payment schedule on the
claimant within 5 business days after receiving the claimant’s notice.
To ensure that a claimant retains the entitlement to elect whether to proceed to
summary judgment or adjudication, even after a notice is issued under s.19(5), I
suggest that s.24(3) be also amended to read:
(3) The respondent may give the adjudication response to the adjudicator only if the
respondent has served a payment schedule on the claimant within the time specified
in section 18(4)(b), s.19(5)(b) or 21(2)(b).
238
AE Smith & Son Pty Ltd v Coastline Constructions Pty Ltd BD2504 of 2006 per McGill SC DCJ p.4.10 to 5.12
referring to Vanbeelen v Blackbird Energy Pty Ltd [2006] QDC 285 per Brabazon QC DCJ
227
Section 24(5) anomaly
Section 24(5) of the BCIPA provides:
(5) A copy of the adjudication response must be served on the claimant.
In my capacity as both an adjudicator and Counsel, I am aware of the practices of
some respondents and their representatives, whereby the respondent is dilatory in
providing a copy of the adjudication response to the claimant. This is likely because
s.24(5) of the Act does not require compliance within a specific timeframe. I am
aware of a number of complaints by claimants who allege that they had not been
provided with a copy of the adjudication response or that they were not provided with
it in a timely manner.
Currently, under s.24(4) of the BCIPA, a respondent cannot include in the
adjudication response any reasons for withholding payment unless those reasons
have already been included in the payment schedule served on the claimant. Yet
many respondents do so. Often, these submissions go to the jurisdiction of the
adjudicator to decide the matter, yet the claimant is sometimes prevented from
adequately dealing with those issues because of the respondent’s failure to provide
a copy of the adjudication response in a timely fashion.
I accept that the Act as it presently stands does not permit the claimant an
opportunity to reply to the adjudication response. However, even if the Act remains
un-amended in that regard, if the respondent raises jurisdictional issues for the first
time in the adjudication response, the claimant should at the very least have the
opportunity, to bring these issues to the attention of the adjudicator, albeit
unsolicited. The adjudicator should then in my view, call for further submissions
pursuant to s.25(4) of the Act.
Irrespective of whether Government accepts my recommendation to amend
s.24(4)239 it is important that s.24(5) be amended to require a respondent to serve the
adjudication response on the claimant as quickly as possible but no later than 2
business days after it was provided to the adjudicator. That will then enable a
claimant to be appraised of any additional issues raised by the respondent and the
claimant can act appropriately.
Suggested Legislative Amendment
That s.24(5) of the BCIPA be amended to read:
(5) A copy of the adjudication response must be served on the claimant as quickly as
possible but no later than 2 business days after it was provided to the adjudicator.
239
See p.199 above
228
Domestic Adjudication
Master Builders and the Housing Industry Association both submitted that one of the
fundamental glaring omissions of the questions posed in the Discussion Paper was
the lack of reference to the merits of introducing domestic adjudication. The concept
of domestic adjudication has been discussed since before the introduction of the
BCIPA.240 A number of other submissions were received from stakeholders
recommending adjudication for domestic building work.
One of the central arguments used by those seeking the implementation of a
domestic adjudication scheme is the fact that builders who perform construction work
in the residential sector are unable to use the Act against “resident owners” 241 whilst
their subcontractors working on the same site are permitted to use the Act against
them. For residential builders, there is a “sandwich type effect” on their cash flow.
This was one of the issues relied upon when responding to Question 1, where I
recommended that it was not appropriate to exclude one particular part of the
building and construction industry from the operation of the Act.
In December 2012, the Minister for Housing and Public Works, the Hon Tim Mander
appointed a Panel of four members to advise him on the recommendations of the
Parliamentary Inquiry into the operation and performance of the Queensland Building
Services Authority. I served on the Panel as one of the four members.
The Panel were assisted by KPMG who consulted with a broad cross-section of
stakeholders including consumers, licensees/builders, Industry Associations, the
QBSA, legal representatives and reinsurers. One of the key issues arising out of the
Parliamentary Inquiry and KPMG’s stakeholder consultations was the need for the
introduction of an early intervention, dispute resolution process with access to
independent expert advice. Support for early intervention was almost universal
across the spectrum of stakeholders interviewed.242
The Panel provided a report responding to each of the forty-one recommendations
made by the Parliamentary Inquiry. In its report, the Panel recommended that the
Queensland Government implement a 10-point action plan to reform the way in
which building services are provided and regulated in Queensland. One of those
reforms included the adoption of the “Rapid Domestic Adjudication” scheme (“RDA”).
Part of the Panel’s report to the Minister was a summary of the proposed RDA
scheme. That summary is attached and marked Annexure C.
I accept that any RDA model must provide adequate protections for consumers,
many of whom may have never built or renovated a house before. It is important
that the legislative framework of the RDA recognise the inherent power and
knowledge imbalance which will be evident in the relationship between consumer
and contractor.
240
See Scurr A.T. MBE, Inquiry into Security of Payment Within the Building and Construction Industry
(Queensland Government, September 1996), p 117
241
Defined in s.3(5) of the BCIPA
242
KPMG Stakeholder Consultation Report on the Recommendations of the Inquiry into the Operation and
Performance of the Queensland Building Services Authority, 11 April 2013, p.11
229
The RDA will require legislative safeguards to protect consumers, but equally, the
RDA should be designed such that contractors who are entitled to a progress
payment, are able to recover them in a rapid interim manner.
Given the complex nature of the proposed RDA and how it would operate within the
existing legislative schemes governing the industry, the Panel recommended that it
be referred to an implementation committee within the Department of Housing and
Public Works.
At the time of writing this report, the Government’s response to the Panel’s
recommendations have not been made public so it is not known whether the
Government intends to introduce the proposed RDA.
It should come as no surprise that I also recommend the introduction of the RDA
recommended by the Panel.
Suggested Legislative Amendments
Given the significance of the RDA, Government if it decides to implement the
scheme will need to decide whether to insert the RDA provisions into the BCIPA. My
preference is however, given the unique nature of the proposed RDA that it would be
best suited in separate legislation. This will be one of the many considerations for
the implementation committee of the Department of Housing and Public Works.
Once an appropriate model is finalised it will be a matter for Parliamentary Counsel
to draft the Bill.
Adjudicator Qualifications and Compulsory Continuing Professional Development
The Review has received a number of complaints from stakeholders about the
quality of some adjudication decisions. The following issues need to be taken into
account when considering the appropriateness of adjudication decisions:
•
•
Adjudicators are often called upon to consider complex areas of building and
contract law, yet they are not required to be legally qualified;
Presently, adjudicators accept appointment by an ANA at a time when they
have little or no knowledge of the issues in dispute. Ordinarily, adjudicators
are advised the names of the parties, the value of the claim and more often
than not, the volume of material provided. In essence, the parties are relying
very much upon the skill and discernment of the ANA in determining who is
the most appropriate available adjudicator to be appointed. In fact, it is a
condition of an ANA’s Registration that, among other things:
“In nominating an adjudicator the ANA will ensure that:
(a) the adjudicator has the appropriate experience and qualifications to determine
the adjudication application;
(b) the adjudicator has been adequately retrained in the adjudication process
relating to the Act;
230
(c) any perception of conflict of interest has been addressed prior to nomination.” 243
•
•
Adjudication decisions are made in a “pressure cooker” environment244,
having to be made as “quickly as possible”, but mostly within 10 business
days after receiving the adjudication response;245
Some adjudication applications are very complex. Whilst not the norm, it is
not unusual in more complex matters, for parties to provide archive boxes of
submissions and evidence to the adjudicator. During an individual interview
with one adjudicator, I was informed about an adjudication application where
the payment claim was seeking the sum of $90M. It was prepared over 150
lever arch binders and the adjudication response contained 90 lever arch files.
Notwithstanding these constraints, adjudicators are willing participants in the
adjudication process and by all accounts are well remunerated for their efforts.
Whilst acknowledging that some complaints of adjudicator’s decisions may be well
founded, the problem to the extent that it is one, must be considered in the context
that only .5% of adjudication decisions to 31 August 2012 have been successfully
reviewed in the Courts.246
To be eligible to become an adjudicator in Queensland, the registrar must be
satisfied that the applicant is a “suitable person to be registered as an adjudicator”.247
When considering whether a person is suitable, the registrar must have regard to
s.60 of the BCIPA which provides:
60 Suitability of person to be registered
(1)A person is not a suitable person to be registered as an adjudicator unless the person
holds—
(a) an adjudication qualification; or
(b) another qualification that the registrar considers to be equivalent to an adjudication
qualification.
(2)In deciding whether an applicant is a suitable person to be registered, the registrar
may have regard to the following matters—
(a) whether the person has a conviction for a relevant offence, other than a spent
conviction;
(b) whether the person—
(i) held a registration under this division, or a licence or registration under a
corresponding law, that was suspended or cancelled; or
(ii) has been refused registration under this division or a licence or registration
under a corresponding law;
(c) the experience and qualifications of the person;
(d) the matters stated in the application for registration under section 57;
(e) anything else relevant to the person’s ability to carry out the person’s functions as
an adjudicator.
Section 57 of the BCIPA provides:
243
See Section 2(l) and Schedule 4 of the Conditions of Registration of an Authorised Nominating Authority http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/ANAConditionsofRegistration.pdf
244
Shell Refining (Australia) Pty Ltd v AJ Mayr Engineering Pty Ltd [2006] NSWSC 94 at [27]
245
See s.25(3) of the BCIPA
246
For further discussion on the number of adjudication decisions overturned see p.222 above
247
Section 59 of the BCIPA
231
57 What the application must state
The application must state the following—
(a) the name and address of the applicant;
(b) an address in Queensland for service of documents;
(c) the experience and qualifications of the applicant, relevant to deciding adjudication
applications;
(d) other details, required in the approved form for the application, to enable the registrar
to decide whether the applicant is a suitable person to be registered as an
adjudicator.
Section 111 of the BCIPA enables the Governor in Council to make regulations
under the Act. Section 111(2) provides:
(2) A regulation may—
(a) provide for fees; and
(b) for an adjudication qualification, prescribe the following—
(i) the name of the qualification;
(ii) the bodies that may issue the qualification;
(iii) the name of the adjudication competency to be
achieved to gain the
qualification;
(iv) the elements that must be successfully completed to achieve the
competency.
The term “adjudication qualification” is defined in Schedule 2 of the Act to mean:
a certificate issued by a body prescribed under a regulation to an individual stating that the
individual has achieved an adjudication competency standard prescribed under a regulation.
Schedule 1 Part 1 of the Building and Construction Industry Payments Regulations
2004 (“the Qld Regulations”) identifies each body that may issue a certificate in
adjudication. Each body therein listed is a currently registered ANA.
Schedule 1 Part 2 of the Qld Regulations sets out the elements that must be
successfully completed to obtain an adjudication qualification. The elements are
relatively unremarkable. However, there appears to be no regulation regarding the
duration of the course or the detail that the course must provide to persons wishing
to obtain an adjudication qualification.
On this issue the registrar provided me with a training manual for those seeking to
obtain an adjudication qualification which had been prepared by a prospective ANA
seeking registration in Queensland. I have perused the 156 page “Adjudication
Training Course Papers” and must say that I was impressed as to its content and
detail. It addressed all of the requirements contained in Schedule 1 Part 2 of the
Queensland Regulations.
232
Each ANA entitled to issue an adjudication qualification must provide similar
documentation to demonstrate their compliance with the Regulations and to comply
with the ANA’s conditions of registration.248
As a comparison, I have looked at s.6 of the Building and Construction Industry
Security of Payment Regulations 2011 (SA) (“the SA Regulations”) which sets out
the following minimum requirements for the eligibility to become an adjudicator in
that State:
6—Eligibility criteria for adjudicators
Pursuant to section 18(1)(b) of the Act, a natural person is eligible to be an adjudicator in
relation to a construction contract if—
(a) the person has successfully completed a formal course of training of at least 2 days
duration in adjudication of payment disputes in the building and construction industry
that required the person to pass a written examination; and
(b) the person—
(i) holds a degree, diploma or other qualification in—
(A) architecture; or
(B) building surveying; or
(C) building; or
(D) construction; or
(E) law; or
(F) project management; or
(G) quantity surveying,
from a university; or
(ii) is, or is eligible to be, a member (other than a student member) of any 1 or more
of the following professional bodies:
(A) The Royal Australian Institute of Architects;
(B) Engineers Australia;
(C) Australian Institute of Building Surveyors;
(D) The Institute of Arbitrators and Mediators Australia;
(E) The Australian Institute of Building;
(F) Australian Institute of Project Management; or
(iii) holds registration as a building work supervisor under the Building Work
Contractors Act 1995 that authorises the person to supervise construction work
of a kind carried out, or to be carried out, under the construction contract.
Neither the BCIPA nor the Qld Regulations require an adjudicator to hold a tertiary
qualification. However, the Application form to become a registered adjudicator in
Queensland requires, apart from the usual “suitability” requirements249 an applicant
to demonstrate that they have suitable qualifications and experience to satisfy
s.60(2)(c) of the BCIPA. As I have indicated several times throughout this Report, I
do not think it is appropriate to shut the gate on persons who may otherwise make
very good adjudicators because they do not have a formal qualification from a
tertiary institution. Whilst it is unlikely that a non-tertiary educated adjudicator may
be called upon to decide a multi-million dollar adjudication application, I consider it is
very important for the integrity of the Act and for the betterment of the industry to
permit the registration of trade based adjudicators for example.
248
Condition of Registration 2(l) and Schedule 4:
http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/ANAConditionsofRegistration.pdf
249
As to bankruptcy, the entering into a deed of agreement under Part IX of the Bankruptcy Act 1966 etc.
233
It must be remembered that over the past two years, between 75% and 78% of
adjudication applications involve payment claims of less than $66,000250. Often, a
law degree or a degree in architecture or quantity surveying for example is not
required. What is required is an independent person who having obtained their
adjudication qualification, drawing upon their own industry experience has the
requisite skills to be able to decide the value of a payment claim. As I have also
said on a number of occasions, the appointment of the appropriate adjudicator is a
matter of acknowledging that there are “different horses for different courses”.
Graph J depicts the qualifications of adjudicators currently registered in Queensland.
Graph J:
Source: Building and Construction Industry Payments Agency, April 2013
Graph J demonstrates that whilst neither the BCIPA nor the Qld Regulations require
an adjudicator to have formal tertiary qualifications as per the SA Regulations, the
number of registered adjudicators in Queensland who would not also satisfy the SA
Regulations are likely to be very few. Given the qualifications of the registered
adjudicators in Queensland and my expressed view that it is appropriate that parties
be able to draw upon the expertise of adjudicators across a broad spectrum of
disciplines, I am not satisfied that the lack of any requirement in the BCIPA for an
adjudicator to hold a formal tertiary qualification is a contributing factor to the
relatively small number of adjudication decisions being declared void.
Graph J also demonstrates in my view, that registered adjudicators in Queensland
have the appropriate foundations to be well qualified to undertake their statutory
task.
The Collins Inquiry recommended the following reforms for the training of
adjudicators:251
250
251
Tables 2 and 1 of BCIP Agency Annual Reports 2010/2011 & 2011/2012 respectively
Recommendation 40, page 370
234
1. In the light of the additional functions which have been recommended to be carried
out by adjudicators under the provisions of SOPA, there should be instituted a more
intensive and detailed training course to be successfully completed before any
person can qualify to act as an adjudicator and exercise functions under SOPA.
2. Adjudicators’ training and refresher courses should be devised and conducted by an
independent neutral and competent body qualified to do so, such as the Institute of
Arbitrators and Mediators Australia. Payment for such courses shall be made by the
applicants and the Institute of Arbitrators and Mediators Australia shall be entitled to
levy reasonable charges for the development and conduct of such courses.
3. Such courses of instruction and training should be open only to those who have had
substantial relevant experience in the building and construction industry and shall
consist at least of the following modules:
(i) Analysis of the Building and Construction Industry Security of Payment Act 1999
(NSW);
(ii) Overview of the law of contract;
(iii) Analysis of building contracts;
(iv) Analysis of costs and claims in the building and construction industry;
(v) Detailed analysis of building construction claims and contractor entitlements; and
(vi) An overview of the law of building and construction.
I respectfully adopt many of those recommendations of Collins QC in so far as they
would relate to the BCIPA and suggest that the subjects of study be added to those
elements listed in Schedule 1, Part 2 of the Qld Regulations, to the extent that those
elements may be relevant after the consideration of the amendments recommended
by this Review.
However, I also wish to add one very important element that is neither addressed in
the current Regulations, nor those recommended by Collins QC and that is the
subject of the study of “[Judicial] Ethics”. The decision of an adjudicator, whilst
interim can and often does have profound affects on the parties involved. I consider
that the parties, industry and the public at large have an entitlement to expect that
not only will the appointed adjudicator have the requisite skills, knowledge and
experience to properly deal with the issues at hand, but that they will exhibit and act
with the utmost integrity, independence, diligence, equality and impartiality not
dissimilar to those expected of a tribunal member or a judge.252
These comments should not be misinterpreted. I am of the view that the
overwhelming majority of adjudicators are hard-working diligent experts in their
chosen fields. Notwithstanding that, it is important that all “Active Adjudicators”253
are alive to the various ethical issues which can sometimes arise as a “decision
maker” working in what is a relatively small industry.
The jurisprudence involving the various “security of payment” legislative regimes
around the country is developing at a rapid rate.
252
Canadian Judicial Council, Commentaries on Judicial Conduct, Ottawa Ontario, 1991; Canadian Judicial
Council, Ethical Principles for Judges, Ottawa Ontario, 1998; both cited in the Administrative Review Council A
Guide to Standards of Conduct for Tribunal Members, Rev Aug 2009, p.67
253
For a discussion of the meaning of “Active Adjudicator”, see p.165 above
235
It is therefore imperative that “Active Adjudicators” keep current with these
developments.
I consider that it is important for the integrity of the BCIPA that “Active Adjudicators”
be required as a condition of their registration to undertake compulsory continuing
professional development. I propose that the registrar develop appropriate rules
(“CPD Rules”) based on the Bar Association of Queensland Continuing Professional
Development Rules.254 It is proposed that to remain on the register of “Active
Adjudicators”, adjudicators must obtain 10 CPD points in a given 12-month period.
I recommend that CPD points may be obtained by various means including:






The attendance of a relevant educational seminar recognised by the registrar
(one CPD point per hour of attendance – mandatory minimum of five hours
per 12-month period);
The delivery of a relevant educational or instructional paper or teaching at an
educational seminar recognised by the registrar (three CPD points per hour of
delivery);
The preparation and publication of an educational or instructional paper
recognised by the registrar (three CPD points per published paper);
The subscription to a related legal annotated service of the law relating to the
BCIPA recognised by the registrar (maximum of five CPD points per twelve
month period);
Mentoring a pupil adjudicator (maximum of three CPD points per twelve
month period);
Any other means approved by the registrar.
Adjudicator “Discipline”
In various written submissions to the Review, it was suggested that adjudicators lack
accountability for the adjudication decisions they make. That is incorrect.
Section 77(1) of the BCIPA entitles the registrar to suspend or cancel the registration
of an ANA or an adjudicator. It provides:
(1) Each of the following is a ground for suspending or cancelling a registration—
(a) the registrant is not, or is no longer, a suitable person to hold the registration;
(b) the registrant has contravened a condition of the registration;
(c) the registration was issued because of a materially false or misleading
representation or declaration.
The registrar has not suspended or cancelled the registration of an ANA or an
adjudicator since the commencement of the BCIPA in October 2004, although a
number of adjudicators have been counseled and required to undertake a period of
mentoring with an experienced adjudicator.255
254
255
http://www.qldbar.asn.au/index.php?Itemid=47&id=100&option=com_content&task=blogcategory
As advised by the BCIP Agency
236
General Condition 2(l) requires ANA’s to comply with Schedule 4 of the ANA
Conditions of Registration with respect to the selection training and monitoring of
adjudicators. Schedule 4(1)(c) requires an ANA to:
“Immediately report to the Adjudication Registrar any instance of non-compliance and
unsatisfactory adjudicator performance. In such instances the ANA is not to refer any
adjudication applications to the adjudicator until such time as the ANA has provided
appropriate up-skilling to the adjudicator, so as to ensure that the issues of concern do not
arise again”
The terms “non-compliance” and “unsatisfactory performance” are ambiguous and
very subjective. In my view they should be clarified if the role of ANA’s are retained
in their current form. However, the point is relatively clear, if an ANA is dissatisfied
with the performance of the adjudicator, it is not permitted to appoint the adjudicator
until such time as the ANA is satisfied that the problem(s) does not arise again. This
condition places the onus of ensuring the proper performance of the adjudicator at
the hands of the ANA, not the registrar, although the registrar does of course
maintain his power to suspend or cancel the adjudicator’s registration under s.77(1)
of the BCIPA.
The South Australian Government requires ANA’s in that State to in effect “counsel”
the adjudicators on its panel who have had an adjudication decision overturned. In
the ANA Code of Conduct published by the South Australian Government 256, it states
inter alia:
“An ANA must not nominate an adjudicator that has been found, by a court in Australia, to
have made technical errors in performing adjudications unless the ANA is satisfied that the
cause of the error has been resolved.
The making of unbiased decisions is of utmost importance and so an ANA must not, without
the written approval of the Minister for Business Services and Consumers, appoint a person
as an adjudicator if that person has been found to have acted not in good faith, twice or
more, by a Court in Australia within the last 5 years in relation to adjudication duties.”
“Technical errors”
The first of the conditions listed above is self-explanatory and reasonable although
the term “technical errors” is somewhat ambiguous. Provided the adjudicator has
demonstrated to the ANA that the adjudicator understands how he or she “got it
wrong”, one would think that in most cases an ANA would re-appoint the adjudicator.
If the adjudicator continues to make the same errors, one would expect that an ANA
might require the adjudicator to undertake further education or mentoring for
example. If problems persist, one would think that an ANA would eventually remove
the adjudicator from its panel. If nothing else, eventually such conduct must start to
reflect poorly upon the ANA as well as the adjudicator. I am aware that a number of
adjudicators have been removed from various ANA panels for these reasons.
256
http://www.cbs.sa.gov.au/securityofpayment/pdf/ANACodeofConduct.pdf
237
As I see it, this first condition, is not about “punishing” adjudicators, but ensuring that
in the event that they have a decision impugned by a Court, that the adjudicator is
able to demonstrate that they are aware of why the decision was disturbed. In this
respect it is probably not appropriate that the first of these conditions should be
considered as “discipline” at all, but I readily acknowledge that is my description not
that of the South Australian Government.
The decisions of adjudicators must of course be seen in the context of the “pressure
cooker” environment in which adjudicators are required to work. It must also be
acknowledged that as the jurisprudence of the “security of payment” law develops,
what was good law yesterday may not be tomorrow. Adjudicators will make
mistakes, just as judges make mistakes. Taken in context however, the number of
adjudication decisions that have been declared void in Queensland is very low. 257
Absence of good faith
As to the second condition imposed by the South Australian Government, there has
been considerable judicial debate as to the circumstances when an adjudicator is
found to have not acted in good faith. In Holmwood Holdings Pty Ltd v Halkat
Electrical Contractors Pty Ltd258 Brereton J found (adopting a broad approach) that:
“[G]ood faith as a condition of validity of the exercise of an adjudicator’s power to make a
determination requires more than mere honesty. It requires faithfulness to the obligation. It
requires a conscientious effort to perform the obligation. And it does not admit of
capriciousness.”
However, on appeal, Brereton J’s approach was not followed, with Giles JA
favouring a more narrow approach.259
In Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd 260 Peter
Lyons J preferred a broader approach to determining a lack of good faith accepting
that:
(a) Recklessness in the exercise of the power may not be sufficient to establish
bad faith, unless it amounts to actual wrongful intent. It is doubtful that
capriciousness alone will demonstrate bad faith, unless whim or fancy has
consciously been preferred to considered judgment;
(b) While actual bias may be a manifestation of bad faith, that will not be the case
where actual bias occurs subconsciously, presumably because bad faith
requires a conscious intent to do something which is wrong;
(c) An allegation of bad faith is a serious matter, involving personal fault on the
part of the decision maker;
257
See the discussion above at p.222
(2005) 22 BCL 285
259
Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32
260
[2009] QSC 165
258
238
(d) A decision by an advocate to make an allegation of bad faith gives rise to a
question of professional ethics: like an allegation of fraud, an allegation of bad
faith should not be made unless there are proper grounds for doing so;
(e) It is a large step to jump from a decision involving errors of fact and law, to a
finding that the decision maker acted in bad faith;
(f) Not surprisingly, bad faith in this sense is very rarely established;261
(g) What was required of the adjudicator was a genuine attempt to exercise his
power in accordance with the BCIPA and in considering the contract, a
genuine attempt to understand and apply it.
On appeal, Holmes JA gave the leading judgment in Queensland Bulk Water Supply
Authority t/a Seqwater v McDonald Keen Group P/L (in liq)262. Although Peter Lyons
J at first instance found that on either interpretation, the adjudication decision was
not void on the ground that the adjudicator had not acted in good faith,263 Holmes JA
said at [50] - [51]:
“[50] The difference between the two tests would only be relevant for present purposes if
one took the view that the arbitrator (sic) had, without any deliberate, wilful or conscious
intent, constructed a contract so different from the one which he was required to consider as
to fall short of a genuine attempt at his task. If, instead, one concluded, as QBWSA posited,
that the adjudicator had approached the adjudication intent on determining the claim by
ensuring that MKG was fairly recompensed, rather than by reference to MKG’s entitlements
under the contract, one would inevitably conclude that there was personal fault on his part,
and, at best, a conscious preference of “whim or fancy ... to considered judgment”.
[51] I incline to the view that the absence of good faith may not be the exact converse of
bad faith, and I agree with the learned primary judge that the content of what is required may
vary according to context. But I am not entirely convinced of the significance his Honour
attributed to the context here, and, more particularly, to the interim character of the
arbitrator’s decision. In that context, of the Payments Act which is designed to provide an
expeditious mechanism for payment, and which allows of further proceedings, unaffected by
the arbitrator’s decision, to determine the parties’ contractual rights, I think there is a good
deal to be said for a narrow approach to questions of good faith. However, as will emerge
from what follows, I agree with the learned primary judge that on either test, QBWSA has not
demonstrated a want of good faith on the adjudicator’s part.” [Emphasis added]
It is a serious matter if an adjudicator is found not to have acted in good faith and
one that is not taken lightly by the Courts, nor of course should it be posited by
Counsel unless there are “proper grounds for doing so”.264 I am only aware of one
decision where an Australian Court has determined that an adjudicator failed to
exercise his or her statutory powers in good faith but then the comment was obiter.265
261
Ibid at [65] – [68]
[2010] QCA 7 with whom Fraser JA and Fryberg J agreed. However, Fryberg J expressed no view on
whether the narrow or wide approach should be adopted when considering questions of good faith under the
BCIPA
263
Ibid at [32]
264
Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd & Anor [2009] QSC 165 per Peter
Lyons J at [67] citing Minister for Immigration and Multicultural and Indigenous Affairs v SBAN [2002] FCAFC 431
at [9]; NAKF v Minister for Immigration and Multicultural and Indigenous Affairs (2003) ALR 412 at [19]
265
Laing O’Rourke Australia Construction v H & M Engineering & Construction [2010] NSWSC 818 at [114] per
McDougall J
262
239
In my view, the “disciplinary” measures available under the SA ANA Code of
Conduct have some merit. I consider that it is important to ensure when an
adjudicator does have a decision declared void, that he or she is able to demonstrate
to the registrar that they have an understanding of the errors made. This shift in
accountability from the ANA to the registrar, should in my view occur irrespective of
Government’s acceptance of Recommendations 17 and 18, although if these
recommendations are not accepted Recommendation 38 will need to be amended to
involve subsequent appointments by an ANA.
In the more serious cases where any Court in Australia makes a finding that the
adjudicator, acting in their capacity as an adjudicator, has not acted in good faith, I
see no reason why the adjudicator should not be called upon to show cause why
their registration should not be suspended or cancelled.
Where any Court in Australia makes a finding that the adjudicator, acting in their
capacity as an adjudicator, has not acted in good faith on a subsequent occasion in
a five year period, I see no reason why the adjudicator should not be called upon to
show cause why their registration should not be cancelled.
Return of Adjudicator’s Fees
Similarly, it has also been argued in written submissions to the Review that in the
event that an adjudicator’s decision is impugned, an adjudicator should be required
to return the fees charged to decide the adjudication application. On the face of it,
there is an obvious attraction to the submission. In most cases, a claimant of an
adjudication decision which is overturned will be left in a worse position than they
were before they made the application. They will not have been paid by the
respondent, or if they have, they will be required to repay the adjudicated amount.
They will have to meet the costs of their legal representatives (if any) for the
adjudication, the cost of the adjudication fees and most likely the respondent’s legal
costs of the Court proceedings. Adjudicators should be acutely aware of the
consequences to the parties of a poorly drafted and reasoned adjudication decision.
The question arose recently in the UK when an adjudicator appointed under the
Housing Grants, Construction and Regeneration Act 1996 (“the UK Act”) was
ordered on appeal to repay his fees when he made an unenforceable decision
because it was found that the adjudicator breached the rules of natural justice.266
However, the Court of Appeal’s decision in PC Harrington appears to be based on
the adjudicator’s total failure of consideration under his contract with the parties.
That does not apply under the BCIPA because an adjudicator is not appointed by the
parties under contract, but by an ANA pursuant to the BCIPA. An adjudicator’s
appointment is a statutory appointment made pursuant to s.23 of the BCIPA by an
entity clothed with the power to appoint registered adjudicators.
266
[2012] EWCA Civ 1371
240
There are sound and established public policy reasons why an adjudicator should
not be required to refund their fees in the event that his or her decision is overturned,
provided that they have not been guilty of fraud or found to have acted not in good
faith. In Najjar v Haines267 Kirby P held at 233-235:
“... I have (with the other members of the Court) concluded that the common law immunity
from an order for costs of a proceeding which miscarries, enjoyed by judicial officers,
extends to a referee appointed by the Court under the Supreme Court Rules, Pt 72. I do so
for the following reasons:
1. The judicial immunity is not accorded to judicial officers because of their status, education
or titles. It is accorded because it is essential to the performance of their actual functions as
judicial officers. Those functions require independence and removal from the risk that a
disaffected party (of whom there is usually at least one) will challenge a determination and
seek to make the person determining the dispute liable for damages and costs. If the
determiner stood at risk of such liability, he or she would be under an intolerable pressure to
consider personal consequences of any determination instead of the merits only of the
matter in contest.” [Emphasis added]
The same policy reasons noted by Kirby P in Najjar in my view apply to adjudicators
although I readily accept that an adjudicator is not a judge.
A number of submitters who correctly predicted the submissions to be made,
referred me to the Scottish decision of Prentice Island Limited v Castle Contracting
Limited268 where the Sheriff Principal, Dunlop QC, refused an appeal where the
Sheriff had previously refused to order the return of an adjudicator’s fees in
circumstances where the adjudicator’s decision was declared void. At [16]-[17], his
Lordship found that a distinction could be drawn between the process upon which
the adjudicator is engaged and the product of that process. He said:
“As the learned sheriff points out, it would be intolerable if he [the adjudicator] should be
deprived of his fees because his decision in this regard turns out on examination by the
courts to be mistaken. I would be slow to accept that that is the consequence of such an
erroneous decision unless no other view of the Scheme was possible.”
…
That decision may ultimately be found to be a nullity, but so long as the adjudicator has in
good faith remained in post in my view paragraph 25 gives him a right to be remunerated for
his work in that capacity.”
Paragraph 25(1) of “the Scheme” provided:
"The adjudicator shall be entitled to the payment of such reasonable amount as he may
determine by way of fees and expenses incurred by him and the parties shall be jointly and
severally liable to pay that amount to the adjudicator."
It is an important consideration to the question that an adjudicator does not set the
timeframes under which the parties and he or she operate under the BCIPA. Just as
the parties are required to work within extremely compressed timeframes, an
adjudicator must do likewise.
267
268
(1991) 25 NSWLR 224
[2003] ScotSC 61
241
Even if Government accepts this Review’s recommendations in relation to extending
various timeframes, the parties and the adjudicator are still working in a “pressure
cooker” environment.
It would seem then somewhat unfair if the Legislature which dictates the terms in
which the adjudicator must work, would not protect his or her fees in the event that
the decision is overturned in circumstances where it is readily accepted that many
adjudication decisions will be made incorrectly. 269
In addition, if adjudicator’s fees were not protected, as a matter of practical reality, it
is likely that some if not many adjudicators would re-think their positions about their
willingness to be appointed in that role. This could lead to a lack of adjudicators who
are willing to be appointed, particularly in complex matters where it is more likely that
a decision will be challenged and where often extensive labour has been provided by
the adjudicator to arrive at his or her decision. If that were to occur, the object of the
Act would be frustrated.
The BCIPA expressly protects adjudicators and ANAs from liability for their
respective actions or omissions, provided they are done in good faith. 270
I am unaware of any reported decision in Australia which has ordered the return of
an adjudicator’s fees in the event that the decision was overturned though the
theoretical prospect was raised in Rail Corporation of NSW v Nebax Constructions
Pty Ltd.271
In the premises, provided that an adjudicator has acted in good faith in arriving at his
or her decision, I am of the view that as a matter of public policy an adjudicator’s
fees should be protected.
Adjudicator Immunity
One ANA in its written submissions suggested that s.107 of the BCIPA be amended
to extend to adjudicators and ANA’s the same immunity as s.237 of the Queensland
Civil and Administrative Tribunal Act 2003 (“QCAT Act”) provides to members,
adjudicators and mediators of the Tribunal. That is in the performance of their
respective functions Tribunal members, adjudicators, assessors and mediators have
the same protection and immunity as a Supreme Court judge has in the performance
of a judge’s functions.
The importance of the principle of judicial immunity was discussed in Yeldham v
Rajski:272
“It is a hallmark of our legal system, inherited from England, that at least judges of superior
courts, in the performance of judicial functions, are immune from suit in respect of them.
269
Brodyn Pty Ltd v Davenport [2003] NSWSC 1019 per Einstein J at [14]
See s.107 of the BCIPA
271
[2012] NSWSC 6 at [12] per McDougall J
272
(1989) 18 NSWLR 48 at 52 per Kirby P
270
242
Such immunity is grounded in high public policy, designed to ensure that, in the performance
of their judicial functions, such judges may act fearlessly and without the harassing concern
that they will be made personally liable for the performance of their functions before another
judge at the suit of a person disgruntled by the decision.”
In Yeldham Hope AJA, with whom Priestley JA agreed said at 69:
“The basis of the immunity of judges from civil proceedings in respect of their judicial acts,
which has been part of the law for centuries, is based on high policy which has been put in a
number of ways but in essence is that the immunity is essential to the independence of
judges. It is a policy designed to protect the citizen and not merely to give protection to
judges. … In the course of the exercise of their functions, judges often, for example, have to
decide whether a person is telling the truth or lying and to say so in their judgments. If the
law were that any disgruntled litigant could charge a judge with contempt for being wrong
and mala fide in his conclusion, or in arriving at the conclusion without any or any sufficient
evidentiary basis, the independence required of judges would be greatly eroded. I can see
no basis for distinguishing this situation from the undoubted position in respect of civil
proceedings and in my opinion the same position does apply, and acts or statements by
judges in the course of exercising their judicial functions do not fall within the law of
contempt.” [Emphasis added]
Section 107 of the BCIPA provides:
107 Protection from liability for adjudicators and authorised nominating authorities
(1)An adjudicator is not personally liable for anything done or omitted to be done in
good faith—
(a) in performing the adjudicator’s functions under this Act; or
(b) in the reasonable belief that the thing was done or omitted to be done in the
performance of the adjudicator’s functions under this Act.
(2)No action lies against an authorised nominating authority or any other person for
anything done or omitted to be done by the authorised nominating authority in good
faith—
(a) in performing the nominating authority’s functions under this Act; or
(b) in the reasonable belief that the thing was done or omitted to be done in the
performance of the nominating authority’s functions under this Act.
[Emphasis added]
Section 30 of the NSW Act is in almost identical terms, as is s. 31 of the SA Act.
Section 46 of the Amended Victorian Act although drafted differently, requires an
adjudicator to have acted in good faith to attract the statutory protection.
Section 37(1) and (2) of the Building and Construction Industry (Security of Payment)
Act 2009 (ACT) (“the ACT Act”) states that the adjudicator and the ANA,
respectively, are:
“not personally liable for anything done or omitted to be done honestly and without
recklessness(a)in exercising a function under the Act; or
(b)in the reasonable belief that the act or omission was in the exercise of a function
under the Act.” [Emphasis added]
243
Section 54 of the WA Act, s.56 of the NT Act and s.39 of the Building and
Construction Industry Security of Payment Act 2009 (Tas) (“the Tas Act”) also
require the adjudicator and “prescribed appointer” to have acted in good faith.
So that there is no confusion, an adjudicator appointed under the QCAT Act is not
the same as an adjudicator appointed under the BCIPA. Although the common
name is regrettable, an adjudicator’s functions under the QCAT Act are set out in
s.195. Put simply, an adjudicator under the QCAT Act may among other things hear
and decide minor civil disputes and act as otherwise directed by the President.
Adjudicators under the QCAT Act are appointed by the Governor in Council 273 for a
period of not less than three years, but not more than five.274 To be eligible for
appointment, a person must be an Australian lawyer of at least 5 years standing. 275
An adjudicator may be appointed on a full-time or part-time basis.276
I accept that it seems somewhat strange that the appointment process of
adjudicators under the QCAT has a significantly greater quality of formality and
security than when an adjudicator is registered under the BCIPA, despite the fact
that the latter may be deciding the merits of a $90M payment claim. The former is
appointed for a term by the Governor in Council on a full-time or part-time basis and
must be legally qualified. Adjudicators under the BCIPA enjoy no such “security”.
BCIPA adjudicators are appointed by ANA’s on a piecemeal “as needed basis” and
are remunerated by the parties, not the State.
I am of the view that the major distinction between the two forms of adjudicators is
that those that are appointed under the QCAT Act, make final decisions, subject to
any right of appeal277 whilst the decision of a BCIPA adjudicator is interim.278
Whilst I hold firm to my earlier expressed views that adjudicators must act with the
utmost integrity, independence, diligence, equality and impartiality not dissimilar to
those expected of a tribunal member or a judge, an adjudicator is not a tribunal
member nor a judge.
In my view, it is all the more important because adjudicators are appointed on a
piecemeal basis rather than them enjoying at least some form of tenure, that the
obligation for them to make their decisions in good faith remain.
I do not recommend that any amendments be made to s.107 of the BCIPA.
Adjudicator’s Jurisdiction
There is considerable debate as to whether the Act permits an adjudicator to charge
for his or her time if they reach the conclusion that they do not have jurisdiction to
decide the application.
273
s.198(2) QCAT Act
s.198(7) QCAT Act
275
s.198(6) QCAT Act
276
s.198(9) QCAT Act
277
s.142 QCAT Act
278
s.100 BCIPA
274
244
It is believed that the uncertainty stems from s.35(4) of the Act which provides:
(3) An adjudicator is not entitled to be paid any fees or expenses for the adjudication of
an adjudication application if the adjudicator fails to make a decision on the
application (other than because the application is withdrawn or the dispute between
the claimant and respondent is resolved) within the time allowed by section 25(3).
In some cases, particularly in complex matters, jurisdictional issues may be hotly
contested. There may be entire folders devoted to jurisdictional issues and the citing
of many often-conflicting superior court authorities. The decision as to whether an
adjudicator has jurisdiction to decide the adjudication application may sometimes
take a number of days. On the other hand, it may take less than an hour.
An adjudicator who wrongly decides that he or she is seized of jurisdiction to decide
the matter, makes a jurisdictional error of law enabling the Court to declare the
decision void. In Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd 279
Chesterman JA said at [37]:
“The situation appears thus to be that an adjudication decision may be impugned on the
basis described in Brodyn, that essential statutory pre-conditions have not been complied
with, and by application for a prerogative writ on the grounds of error of law on the face of
the record or jurisdictional error or, presumably, any other ground recognised by pre JR Act
jurisprudence.”
Two main concerns have been raised before the Review in relation to an
adjudicator‘s decision whether they have jurisdiction.
Firstly, in circumstances where an adjudicator has expended a significant period of
time to reach the conclusion that there is no jurisdiction to decide the matter, he or
she may (improperly) consider themselves economically personally bound to “find a
way of ensuring they have jurisdiction”.
In my view, an adjudicator must make his or her decision on the merits of the case,
independent of their own financial interests. If the provisions of the Act are unclear
about the adjudicator’s entitlement to his or her fees, then that must be clarified not
so much for the benefit of the adjudicator but for the integrity of the adjudication
process.
Secondly I am concerned that there appears to be a school of thought amongst
some in the “adjudication community” that adjudicators ought not reach a conclusion
that he or she does not have jurisdiction because to do so, would be to effectively
prevent a claimant from pursuing its claim before another adjudicator. 280
279
[2011] QCA 22
Based on the principles of issue estoppel – Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69
per Macfarlan JA at [68]-[72], with whom Handley AJA agreed
280
245
I empathically reject such a view. An adjudicator is appointed to determine a
payment dispute. Part of his or her role must be to consider whether the claimant is
entitled to bring the payment claim and the adjudication application and whether they
themselves have been properly appointed under the BCIPA. These are jurisdictional
issues which go to the very core of whether the adjudicator is seized of power to
decide the matter. For instance if it is brought to the attention of the adjudicator that
the claimant does not hold the requisite licence to perform the work the subject of the
claim, then the claimant is not permitted to utilise the Act. This has been well settled
by the Court of Appeal281. It is incumbent upon an adjudicator in such circumstances
to decide that there is no jurisdiction to decide the matter.
In my view an adjudicator must not abdicate their responsibilities to make a decision
under the Act to allow another adjudicator to possibly reach a contrary view. If the
adjudicator after carefully considering the parties’ submissions and the law, reaches
a conclusion that they have no jurisdiction, then that should be considered as much
a decision made under the BCIPA as one that decides an adjudicated amount, the
date it was due to be paid and the interest payable. 282 Such was the view of the
Court in John Holland Pty Ltd v Schneider Electric Buildings Australia Pty Ltd 283. In
such circumstances, an adjudicator would be entitled to his or her usual reasonable
fees.
Calculation of Interest Rates
The Queensland Law Society made an informal submission to the Review regarding
the calculation of interest rates on 2 May 2013. In short, the submission requested
that consideration be given to calculating the penalty rate of interest under s.67P(3)
in accordance with the recent Supreme Court Practice Direction Number 7 of 2013.
Although this submission was made out of time, I am prepared to consider it as the
calculation of s.67P interest rates has been an issue of some consternation since the
commencement of the Act.
Section 26(1)(c) of the BCIPA provides that an adjudicator must decide the rate of
interest payable on any amount.
When determining the rate of interest payable on the unpaid amount of a progress
payment that has become payable, reference must be had to s.15(2) and where
applicable s.15(3) of the Act.
Those provisions provide:
(2) Subject to subsection (3), interest for a construction contract is payable on the
unpaid amount of a progress payment that has become payable at the greater of the
following rates—
(a) the rate prescribed under the Civil Proceedings Act 2011, section 59(3) for a
money order debt;
281
Cant Contracting Pty Ltd v Casella [2007] 2 Qd R 13; [2006] QCA 538
See s.26(1) of the BCIPA
283
[2010] QSC 159 per Applegarth J at [12]-[19]
282
246
(b) the rate specified under the contract.
(3) For a construction contract to which Queensland Building Services Authority Act
1991, section 67P applies because it is a building contract, interest is payable at the
penalty rate under that section.
Section 59(3) of the Civil Proceedings Act 2011 calculates the interest rate by
reference to a practice direction of the Supreme Court. Until recently, the rate was
set at 10% per annum.284
On 19 April 2013, the Chief Justice released Supreme Court Practice Direction No 7
of 2013 (“SCPD#7”). SCPD#7 stipulated that for the purposes of calculating interest
under s.59(3) of the Civil Proceedings Act 2011 (the rate applicable to a money order
debt – i.e. an adjudicated amount), in respect of the period from 1 January to 30
June in any year the rate is to be calculated at 6% above the cash rate last published
by the Reserve Bank of Australia before that period commenced. In respect of the
period from 1 July to 31 December in any year, the rate is to be calculated at 6%
above the cash rate last published by the Reserve Bank of Australia before that
period commenced.
The purpose of SCPD#7 was to “implement… an agreement reached, by
representatives of all Australian jurisdictions, to establish nationally uniform rates”.
Section 67P(3) of the QBSA Act provides:
(3) In this sectionpenalty rate means(a) the rate made up of the sum of the following(i) 10% a year;
(ii) the rate comprising the annual rate, as published from time to time by the
Reserve Bank of Australia, for 90 day bills; or
(b) if the building contract provides for a higher rate of interest than the rate worked
out under paragraph (a) – the higher rate.
The difficulty with s 67P(3)(a)(ii) of the QBSA is that the annual rate for 90 day bills is
calculated daily285 and to calculate the applicable interest correctly one must
undertake a somewhat laborious mathematical calculation incorporating daily
changes of interest rates over what can be an extended period of time.
Example 1:
As at 1 April 2013 the rates in relation to ss.15(2)(a) and 15(3) of the BCIPA were:
 s.15(2)(a)– 10%286
 Penalty rate under s.15(3)– 10% + 3.09%287 = 13.09%
Example 2:
As at 1 May 2013 the rates in relation to ss.15(2)(a) and 15(3) of the BCIPA were:
 s.15(2)(a)– 6% + 3%288 = 9%
284
See Supreme Court Practice Direction No 21 of 2012
See: http://www.rba.gov.au/statistics/tables/index.html#interest_rates (Go to: “Interest Rates and Yields –
Money Market – Daily – F1(XLS]”)
286
See Supreme Court Practice Direction No 21 of 2012
287
3.09% being the Reserve Bank 90 day bill rate at 1 April 2013
288
3% being the Reserve Bank cash rate as at 31 Dec 13
285
247

s.15(3)– 10% + 2.91%289 = 12.91%
It can be seen that the interest rate under s.59(3) of the Civil Proceedings Act 2011
both before and after the commencement of SCPD#7 provides a regime which is
relatively simple to calculate. However the rate calculated under s.67(P)(3) of the
QBSA Act remains difficult in its application and understanding.
The obvious attraction to s.67P(3) of the QBSA Act adopting a calculation of interest
similar to that set out in SCPD#7 is that the interest rate is set twice per year, rather
than daily resulting in a significantly easier administrative task.
It is also apparent that the interest rate calculated under s.67P(3) of the QBSA Act
(commonly called the penalty rate) has been appropriately set at a level higher than
the rate prescribed under s.59(3) of the Civil Proceedings Act 2011 (Qld) and this
should remain so. It is noted that before SCPD#7 commenced that level was in the
order of 3%.
Suggested Legislative Amendment
That s.67P(3) of the QBSA Act be amended to read:
In this sectionpenalty rate means(a) the rate made up of the sum of the following(i) 10% 3% a year;
(ii) the rate comprising the annual rate, as published from time to time by the
Reserve Bank of Australia, for 90 day bills the rate prescribed under the Civil
Proceedings Act 2011, section 59(3) for a money order debt; or
(b) if the building contract provides for a higher rate of interest than the rate worked out
under paragraph (a) – the higher rate.
Entitlement to withdraw an Application
There is some debate amongst stakeholders whether the BCIPA expressly permits
an adjudication application to be withdrawn, although I understand that the practice
of doing so, appears to be not infrequent.
Section 35(4) of the BCIPA implies that an application may be withdrawn or settled
and if so the adjudicator is still entitled to be paid his or her fees and expenses.
Section 35(4) of the Act provides:
(4) An adjudicator is not entitled to be paid any fees or expenses for the adjudication of
an adjudication application if the adjudicator fails to make a decision on the
application (other than because the application is withdrawn or the dispute between
the claimant and respondent is resolved) within the time allowed by section 25(3).
289
2.91% being the Reserve Bank 90 day bill rate at 1 May 2013
248
The BCIPA in my view should always seek to promote an early resolution of the
payment dispute. To that end the Act should enable a claimant to withdraw the
Application.
Suggested Legislative Amendments
To put the matter beyond doubt, I recommend that the BCIPA adopt s.67 of the SA
Act (with appropriate amendments) to read:
A claimant may withdraw an adjudication application at any time before the application is
determined by notice in writing served on the respondent, the adjudicator and the registry.
Entitlement for the adjudicator to withdraw
The Review has received a number of submissions suggesting that an adjudicator
be given the express entitlement to withdraw from deciding an adjudication
application.
I accept that in some cases, an adjudicator may simply be unable to complete his or
her statutory role as a result of significant ill-health or perhaps the death of a close
family member. Presently, an adjudicator would assumedly seek an extension of
time from the parties under s.25(3)(b) of the BCIPA and if that was not forthcoming,
then he or she would have no choice but to let the matter “time-out”.
This would afford the claimant an opportunity to make a fresh adjudication
application under s.32(1)(b) of the BCIPA.
A suggestion has been made that an adjudicator ought to be able to assign his or
her nomination to another adjudicator. I do not accept that submission. I remain
firmly of the view that an adjudicator’s role once accepting the nomination is nondelegable. There is a general principle that a judicial or quasi-judicial function
conferred by statute cannot be delegated.290 Only a natural person may be
registered as an adjudicator.291 This is in contrast to companies being able to be
registered as ANA’s.292 In my view, this distinction identifies that the Legislature
intended that the role of an adjudicator would be performed personally, rather than
something which was able to be assigned or tasked to another person as would be
done if a company was able to be registered as an adjudicator. In saying that, I do
not suggest that some administrative matters cannot be fulfilled by a staff member
working for an adjudicator, such as the typing of a decision or the preparation of
spreadsheets or if need be, communicating with the parties. However, ultimately the
valuing of the progress claim293 and the reasoning behind that decision must be that
of the adjudicator and the adjudicator’s alone.
290
Vine v National Dock Labour Board [1957] AC 488
Section 56(1) of the BCIPA. “Individual” is defined in s.36 of the Acts Interpretation Act 1954 as a “natural
person”
292
Section 42(1) of the BCIPA. “Person” is defined in s.36 of the Acts Interpretation Act 1954 as “includes an
individual and a corporation”
293
And other requirements set out in s.26(1) of the BCIPA
291
249
I am of course sympathetic to an adjudicator who may fall gravely ill or suffer
bereavement during an adjudication decision, such that they are unable to complete
the decision in the time permitted. However, given my stance in relation to the nondelegable function of an adjudicator, I am of the view that the adjudicator’s only path
in such circumstances is to let the matter time out, failing an agreement to give the
adjudicator an extension of time.
I do not consider that the parties ought to bear the costs of a partly completed
adjudication decision which is of course worthless. Whilst the adjudicator may have
expended considerable time and effort on the incomplete decision, s.35(4) expressly
excludes an adjudicator from recovering his or her fees if the decision is not made
within the time allowed by s.25(3) of the Act. Such are the challenges and risks that
adjudicators accept when they accept a nomination.
I am not convinced that any amendment is necessary or desirable.
Education of Industry and Consumers
A number of submitters raised the issue of the lack of awareness of the BCIPA in the
industry. I note that the QBSA and BCIP Agency provides educational awareness of
the BCIPA via statewide roadshows, the publication of all adjudication decisions and
on-line articles.294
If the recommendations of this Review are accepted in part or in whole, significant
educational programs may be required for both industry and particularly consumers.
The lack of understanding of the building process by consumers was a key issue
considered by the Panel advising the Minister into the Recommendations of the
Parliamentary Inquiry into the Operation and Performance of the Queensland
Building Services Authority. The Panel recommended among other things:
•
•
•
•
294
The development of an electronic consumer awareness course for
homeowners intending to enter into a domestic building contract. This course
will be available on line and delivered free of charge. Consumers completing
the consumer awareness course will be eligible for a discount on their Home
Warranty premium;
The development of a user-friendly website and incorporate on line delivery of
resources to both consumers and industry;
The introduction of a suite of uniform mandatory domestic building contracts
which must provide a warning statement to recommend that homeowners
obtain independent legal advice to ensure they understand the contract and
its inclusions and exclusions before entering into the contract; and
The introduction of a continuous professional development program for
contractors.
Via the QBSA’s on-line publication Building Links
250
It is accepted that industry and consumers will require significant educative programs
to be kept abreast of the proposed legislative amendments both to the QBSA and
the BCIPA. It is my view, should Government accept these recommendations and
those of the Panel, that the QBSA whatever iteration it may assume, is well placed to
fulfill those needs.
Harmonisation of the “Security of Payment” Acts
The harmonisation of the various legislative “security of payment” models is a noble
and worthwhile long-term pursuit and is a quest that should be pursued by the
Council of Australian Governments. Uniformity would bring many benefits to
industry, particularly those that trade in multiple jurisdictions.
However, in my view the various forms of the BCIPA are still in their relative infancy.
Although the BCIPA commenced eight and a half years ago, this Review
demonstrates that there are a number of important areas of reform. It will be
significantly easier to reform the BCIPA as and when required if the Act is not
constrained by external influences and pressures of other jurisdictions.
It is important to note, as demonstrated by my recommendations and reasons that
there are a number of worthwhile amendments which emanate from various
jurisdictions. No one jurisdiction has a licence on the perfect “security of payment”
legislation.
In the course of this Review, I have attempted to critically analyse “the good, the bad
and the ugly” of all of the regimes in Australia. That will no doubt be an on-going
process for some time to come.
Whilst uniformity is a worthwhile objective, I remain of the view that at this point in
time, the States and Territories stand more to gain from learning from our collective
experiences, than trying to expedite the introduction of a single model.
Expert Reports
The Review received a submission regarding the admissibility of expert reports and
how the BCIPA does not establish any rules under which that expert evidence
should be received. It was suggested that “Court expert rules” should be adopted to
enable an adjudicator to give weight to the report.
I accept that the Act does not provide any guidance to an adjudicator or a person
asked to provide an expert report as to what should be contained in that report.
There is no requirement of a declaration by the expert that they understand their duty
is to assist the adjudicator, rather than the person that engaged them.
The use of expert evidence in adjudication is becoming more popular. Adjudicators
should be able to rely upon expert evidence as being impartial.
251
The days of experts being “hired guns” in the Court system is generally accepted as
a thing of the past, yet in adjudication, I fear it is commonplace.
Rules 426 and 428 of the Uniform Civil Procedure Rules provide:
426 Duty of expert
(1) A witness giving evidence in a proceeding as an expert has a duty to assist the court.
(2) The duty overrides any obligation the witness may have to any party to the
proceeding or to any person who is liable for the expert’s fee or expenses.
428 Requirements for report
(1) An expert’s report must be addressed to the court and signed by the expert.
(2) The report must include the following information—
(a) the expert’s qualifications;
(b) all material facts, whether written or oral, on which the report is based;
(c) references to any literature or other material relied on by the expert to prepare
the report;
(d) for any inspection, examination or experiment conducted, initiated, or relied on by
the expert to prepare the report—
(i) a description of what was done; and
(ii) whether the inspection, examination or experiment was done by the expert or
under the expert’s supervision; and
(iii) the name and qualifications of any other person involved; and
(iv) the result;
(e) if there is a range of opinion on matters dealt with in the report, a summary of the
range of opinion, and the reasons why the expert adopted a particular opinion;
(f)a summary of the conclusions reached by the expert;
(g) a statement about whether access to any readily ascertainable additional facts
would assist the expert in reaching a more reliable conclusion.
(3) The expert must confirm, at the end of the report—
(a) the factual matters stated in the report are, as far as the expert knows, true; and
(b) the expert has made all enquiries considered appropriate; and
(c) the opinions stated in the report are genuinely held by the expert; and
(d) the report contains reference to all matters the expert considers significant; and
(e) the expert understands the expert’s duty to the court and has complied with the
duty.
I concede that there is a considerable attraction to introducing similar rules into the
adjudication process. However I am reluctant to recommend such. Presently, there
are no “Rules of Adjudication” other than the provisions that are set out in the
BCIPA. I am reluctant to recommend the introduction of a new set of rules in
addition to those contained within the Act (with the proposed amendments). The Act
has enjoyed a degree of success because of its informality and speed in which it is
able to deal with payment disputes. Whilst I consider there is a need for ensuring
that expert evidence is properly prepared and considered, I am not willing to sacrifice
form over function.
That is not to say that experts themselves cannot prepare their own reports as
though they were to comply with UCPR 426 and 428, indeed I would encourage
them to do so.
252
Adjudication fees
Disclosure
One building contractor suggested in his written submissions that there was a need
for greater financial disclosure of payments made to adjudicators and ANAs. 295 He
suggested that often, the parties had no knowledge of the rates that would be
charged by an adjudicator at the time of serving the application.
I have conducted my own searches of the various ANA websites looking for
disclosures in respect to the costs of adjudication. Generally speaking there was at
least some degree of disclosure regarding costs by some ANAs in so far as the
hourly rate charged by the adjudicator is concerned. I was however, unable to find
any disclosure by any ANA of the fees they charged adjudicators for the appointment
process. One submitter referred to this as the “ANAs commission”.
I am of the view that the current state of disclosure by ANAs is inadequate. If ANAs
continue in their role to appoint adjudicators, I consider it appropriate that they be
required to publish all fees and charges on any website that they use, together with
any fee that the ANA may take out of the adjudicator’s fees. Similarly, if the ANA
nomination role is assumed by the adjudication registry any fees or charges of both
the registry and the adjudicator should be expressly stated on its website.
Regulation of fees
Should Government accept my recommendation to permit the nomination process to
only be performed by the Adjudication Registry296 then I am of the view that
Government should regulate adjudication fees according to the grade of the
adjudicator appointed to decide the adjudication application. If there is only one
appointer, i.e. the Adjudication Registry, then it is appropriate that adjudication fees
be regulated because there will be no competition in the market place.
Should Government not accept Recommendations 17 and 18, then it is appropriate
at this point in time, that market forces be able to dictate adjudicators’ reasonable
fees.
Grading of Adjudicators
Should Government accept Recommendations 17 and 18, I recommend that the
Adjudication Registry grade adjudicators according to their skills, experience and
qualifications. Government may consider approving the following grading structure of
adjudicators:
295
296
As did the Housing Industry Association
Recommendations 17 and 18
253
Grade 1 Adjudicator (Pupil Adjudicator): An adjudicator who has within the past 12
months satisfied the requirements to become a registered adjudicator.
Grade 2 Adjudicator: An adjudicator who has decided at least 20 adjudications and
has at least 2 years experience performing adjudication decisions.
Grade 3 Adjudicator: An adjudicator who has decided at least 50 adjudications and
has at least 4 years experience performing adjudication decisions.
Grade 4 Adjudicator: An adjudicator who has decided at least 100 adjudications and
has at least 6 years experience performing adjudication decisions.
Grade 5 Adjudicator: (Senior Adjudicator): An adjudicator who has decided at least
150 adjudications and has at least 8 years experience performing adjudication
decisions or can satisfy the registrar that the applicant has demonstrated at least 10
years experience as a judge, magistrate, Senior Counsel or Queen’s Counsel, a
senior solicitor or having another relevant professional qualification of at least 15
years standing that the registrar deems fit.
Q14 - Recommendations
29.
Section 19 of the BCIPA should be amended to provide the requirement that a
claimant wishing to proceed to make an application to a court pursuant to
s.19(2)(a)(i), must first provide the respondent with a “second chance” to
provide a payment schedule.
30.
Section 24(5) of the BCIPA should be amended to require a respondent to
serve the adjudication response on the claimant as quickly as possible, but no
later than 2 business days after it was provided to the adjudicator.
31.
Section 26 of the BCIPA should be amended to provide that an adjudicator
must make a decision as to whether he or she has jurisdiction.
32.
Section 35 of the BCIPA should be amended to clarify that an adjudicator
acting in good faith is entitled to his or her fees, even if the adjudicator’s
decision is found to be void or otherwise not effective at law.
33.
Section 35 of the BCIPA should be amended to provide that an adjudicator is
entitled to charge a reasonable fee in the event that he or she concludes that
there is no jurisdiction to decide the matter.
34.
The BCIPA should be amended to expressly permit a claimant to withdraw an
adjudication application.
35.
Adjudicators should be required, as an entitlement to maintain registration as
an ‘Active Adjudicator’, to satisfy mandatory continuing professional
development (CPD) rules, where as a minimum 10 points per 12 month period
are obtained. Such CPD rules should be developed in consultation with
254
relevant industry stakeholders.
36.
Adjudicators should be registered and appropriately graded according to their
skills, experience and qualifications.
37.
The development and implementation of a “Rapid Domestic Adjudication”
(“RDA”) model to fast track domestic building disputes with mandated
response timelines. See Annexure C for details.
38.
In consultation with industry stakeholders, the elements necessary to obtain
an adjudication qualification as contained within Schedule 1, Part 2 of the
Building and Construction Industry Payments Regulation 2004 should be
amended with at least the following additional elements:
 Overview of the law of contract;
 Analysis of common standard form building contracts;
 Analysis of costs and claims in the building and construction industry;
 Detailed analysis of building construction claims and contractor
entitlements;
 An overview of the law of building and construction; and
 A detailed analysis of the ethical obligations of an adjudicator.
39.
Assuming Government accepts Recommendations 17 and 18, I recommend
that it be a condition of an adjudicator’s registration that:
(d) In the event that an adjudicator, acting in that capacity, has been found
by a Court in Australia to have made a jurisdictional error or denied the
parties procedural fairness, the adjudicator must advise the registrar in
writing within 7 days of receipt of the Court decision and the registrar
will not further appoint the adjudicator unless satisfied that the cause of
the error has been resolved;
(e) Any adjudicator found by a Court in Australia to have acted not in good
faith in performing the role of an adjudicator, must advise the registrar
in writing within 7 days of receipt of the Court decision and shall be
called upon by the registrar to show cause under s.78 of the BCIPA
why their registration should not be suspended or cancelled; and
(f) Any adjudicator found by a Court in Australia to have acted not in good
faith in performing the role of an adjudicator twice in a 5 year period,
must advise the registrar in writing within 7 days of receipt of the Court
decision and shall be called upon by the registrar to show cause under
s.78 of the BCIPA why their registration should not be cancelled.
40.
That the penalty rate of interest calculated under s.67P(3)(a) of the
Queensland Building Services Authority Act 1991 (Qld) should be amended to
the rate made up of the sum of the following(iii) 3% a year;
(iv) the rate prescribed under the Civil Proceedings Act 2011, section 59(3)
for a money order debt.
255
41.
In the event the Government elects NOT to accept Recommendations 17 and
18, it should be a requirement of an ANA’s registration that it fully discloses to
prospective parties all likely fees and costs, including any service fees or
similar obtained from the adjudicator.
42.
In the event the Government elects to accept Recommendations 17 and 18, all
adjudication fees and costs should be regulated and published.
256
Question 15: Would you support the making void of any
unreasonable timeframes for notification of extension of time
requests within contracts?
If a minimum timeframe was set by legislation how many business
days do you believe are reasonable for an extension of time
request?
Question 16: Would you support the making void of any
unreasonable timeframes for notification of variations within
contracts?
If a minimum timeframe was set by legislation how many business
days do you believe are reasonable for a variation to be lodged?
Background
It is broadly acknowledged that the payment mechanism under a construction
contract and the payment mechanism under the BCIPA operate as a dual payment
system, enabling a claimant to utilise one or both schemes.297
However, the BCIPA in a number of provisions alters the parties’ contractual
entitlements. For example:
•
•
•
Section 15 gives effect to the maximum payment terms set out in s.67U of the
QBSA Act for construction trade management contracts and subcontracts 298
and s.67W of the QBSA Act for commercial building contracts.299 If a payment
term exceeds either of these relevant timeframes, then s.15(1)(b) sets a
default period of 10 business days after a payment claim is served;
Section 16 voids a “pay when paid”; clause and
Section 99 prohibits contracting out of the BCIPA.
The BCIPA itself creates a statutory entitlement to payment at prescribed times,
even if the contract does not.300
297
John Holland Pty Ltd v Roads & Traffic Authority of New South Wales (2007)23 BCL 205: [2007] NSWCA 19
at [77] per Basten JA applied in Hervey Bay (JV) Pty Ltd v Civil Mining & Construction Pty Ltd [2008] QSC 58 at
[24] per McMurdo J
298
Which are restricted to a maximum of 25 business days
299
Which are restricted to a maximum of 15 business days
300
See Schedule 2, definition of “reference date”, paragraph (b)
257
Given the similarity in the two questions posed above and the common responses
provided by stakeholders, it is appropriate that both questions can be considered
together.
Feedback outcomes
The responses to these two questions were evenly divided with approximately 30%
in favour of legislative amendments to declare void any contractual term which set
unreasonable timeframes for the notification of extensions of time (“EoT”) requests
and for the notification of variations. Approximately 31% percent of submitters were
opposed to such legislative intervention, whilst 39% of submitters did not respond
directly to the questions at all.
Support for change
Submissions provided in support of legislative intervention included:
Time bars may be unenforceable as a result of Andrews v ANZ
Several written submissions were received by the Review that time-bar clauses as a
result of the recent High Court decision in Andrews v Australia and New Zealand
Banking Group Ltd301 may be unenforceable if the penalty meted out to the
contracted party exceeds reasonable compensation to the contracting party.
Time bars too restrictive
Other written submissions were received from a number of stakeholders arguing that
contractual time bars were too restrictive, disentitling contracted parties from making
a claim for EoT and variations after the contract deadline. These submitters argued
that unreasonable timeframes should be void. Commonly, it was suggested that
minimum timeframes should be established in legislation in the order of between 10
and 20 business days.
Mandating of timeframes should be in Part 4A of the QBSA cf. BCIPA
A quantity surveyor in his written submissions argued as did a number of other
submitters, that the mandating of notification periods for extensions of time and
claims for variations should not be incorporated into the BCIPA, but rather into Part
4A of the QBSA Act, similar to the provisions contained in ss.67U and 67W
regarding maximum payment terms.
301
(2012) 290 ALR 595; [2012] HCA 30
258
Support for status quo
Submissions opposed to legislative intervention argued that:
Unnecessary and unwelcome intrusion
The overwhelming reason given by those opposed to the setting of a statutory
minimum timeframe to notify a contracting party of an EoT request or variation was
that such legislative intervention was an unnecessary and unwelcome intrusion into
the freedom of parties to agree upon commercial terms.
Different timeframes for different contracting parties
Several submitters argued that if there were to be any legislative intervention, it
would have to allow for different timeframes between subcontractor and contractor
on the one hand, and contractor and principal on the other.
These submitters argued, rightly in my view, that the minimum timeframes would
need to be shorter in the subcontract to allow the formulation of a claim under the
head contract.
Timeframes overcome information asymmetry
A submitter described the purpose of the timeframe provisions was to:
“… overcome the information asymmetry between the contractor claimant and the principal
or head contractor respondent. Properly, claimants should be required to put forward such
claims in a timely manner during the term of the contract while the information and the
people are available on the project to determine it.”302
Statutory timeframes – inflexible
In another written submission it was argued that:
“Any prescribed statutory time frames for notifications would not be flexible enough to cater
to the unique commercial realties and time pressures of individual contracts. It would be
unreasonable to impose a statutory minimum time frame for notification which applies
equally to small simple projects and large complex projects.
302
Written submission to the Review
259
Time frames for notifications are a matter for commercial negotiation between parties on a
contract by contract basis. There are important reasons why time frames are imposed on
contractors. Prompt notification helps to minimise consequential delays along hierarchies of
construction contracts, which in turn, helps to deliver projects on time and within budget.
Regular notification also encourages communication and healthy commercial and working
relationships.”
Similar views were expressed by a number of submitters which challenged the
efficacy of adopting a “one size fits all” approach to mandatory minimum notification
periods. It was submitted that by mandating a minimum notification period, the Act
would simply be creating a default period because the drafters of contracts would
adopt that minimum period regardless of whether it was appropriate for the subject
work.
The Review was asked to exercise caution by a number of submitters keen to
ensure that the Act was not unnecessarily complicated.303
Timeframes consistent with the object of the Act
It was also suggested that contractual time bars are consistent with the object of the
Act because they facilitate and promote speedy and effective resolution of
construction payments. Additionally, it was argued that they generate “certainty of
outcome” for the principal, contractor and financiers. 304
Consideration
Are time-bars unenforceable if the penalty exceeds reasonable compensation?
Some construction contracts are drafted in such a way that they do provide short
timeframes where a contracted party must notify its superior contractor of the coming
into existence of certain facts that may require an extension of time, or when the
contracted party must notify of its intention to claim a variation. However, as has
been submitted, these notification clauses serve valuable purposes. They enable a
contracted party to investigate the claim in a timely manner, before a problem may
be built over and hidden from view for instance. They enable a contracting party to
be able to raise the matter with its principal who can then make a timely and
informed decision as to whether to proceed with the variation. 305
These issues were discussed in John Goss Projects Pty Ltd v Leighton Contractors
Pty Ltd306, where McDougall J held that a time bar doesn’t constitute an attempt to
contract out of the Act. His Honour said:
303
Written submissions to the Review
Written submissions to the Review
305
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] EWHC 447, at [103] per Jackson J
306
(2006) 66 NSWLR 707
304
260
[80] Where John Goss wishes to claim an amount over and above the Contract Amount (for
example, for a variation, or for delay or disruption costs), it is required, as a precondition of
such a claim, to give notice under, and complying with the terms of, cl 45. It is obvious why a
head contractor in Leighton's position might stipulate for such notice. Firstly, it will enable the
claim to be investigated promptly (and, perhaps, before any work comprised in it is rebuilt, or
built over). Secondly, it will enable Leighton to monitor its overall exposure to the
subcontractor. Thirdly, it will enable Leighton to assess its own position vis-à-vis its principal.
No doubt, there are other good reasons for stipulations of the kind found in cl 45.
[81] It is correct to say that cl 45 operates to bar claims if the notice provisions in it are not
followed. But it does not follow that cl 45 is thereby inconsistent with the rights given under
the Act, so as to attract the operation of one or other of the alternatives set out in s 34(2).
[82] As I have said, the ground of invalidity alleged by John Goss was that the requirement
to notify a claim within 10 business days of the occurrence of the events giving rise to it was
inconsistent with the right given by s 13(4) to bring a payment claim within 12 months after
cessation of work under the contract. I do not accept that submission. Clause 45 says
nothing about the time when a payment claim may be made. Its concern is to limit
entitlement to work that might be comprised in a payment claim, whenever the payment
claim is made.
[83] Provided notice is given in accordance with cl 45, the work that is the subject of the
notice may be included in a payment claim made at any time, subject of course to the
general provisions of the Act relating to progress claims and their contents. (Emphasis added)
Davenport in his paper A possible end to time-bar clauses307 argues that John Goss
is now bad law, because of the decision in Andrews v Australia and New Zealand
Banking Group Ltd308 which held that Interstar Wholesale Finance Pty Ltd v Integral
Home Loans Pty Ltd (2008) 257 ALR 292 was wrongly decided.
With respect, I have reached a different conclusion to Davenport.
Two preliminary points should be made: first, John Goss does not depend on the
correctness of Interstar; indeed, the argument that the time bar was a penalty was
not even raised in John Goss. Second, Andrews merely overturned the ruling in
Interstar that only stipulations in relation to breaches of contract could be penalties; it
did not hold that the exception fees the subject of the claim at first instance were
actually penalties. The matter has been remitted to the trial judge, who at the time of
writing this report, is yet to hear further argument.
Subject to the above point, Andrews confirmed the common law of penalties.
The High Court in Ringrow Pty Ltd v BP Australia Pty Ltd309 rejected the argument
that a clause is penal because of a disproportion between the legitimate interest
protected and the mechanism protecting it (cf. the jurisprudence regarding clauses in
restraint of trade). Rather, the ostensible penalty must be “extravagant and
307
(2013) 51(2) Law Society Journal (NSW)
(2012) 290 ALR 595;[2012] HCA 30
309
(2005) 224 CLR 656 at 667-9
308
261
unconscionable in amount” and “out of all proportion” with the loss flowing from the
action of the party to be penalised (citing AMEV-UDC Finance Ltd v Austin310).
As such, the correct approach is not, as Davenport seems to suggest, comparing the
measure of loss to the proprietor that would be suffered if the contractor did not give
notice of the EoT claim in a timely manner, as against the value of that EoT claim
that would be forfeited due to the operation of the time bar. This falls into the
‘proportionality’ trap which the High Court rejected in Ringrow.
Further, in the circumstances of Ringrow (BP’s option to repurchase a petrol station,
exercisable on the station operator’s breach of a branding agreement), the Court
noted at [22] that “in assessing extravagance and oppressiveness, it is necessary to
be able to compare the price to be paid and the value of what is to be transferred as
a result of the option’s having been exercised.”
In Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd311, the Full
Court treated a timely notice as a ‘condition precedent’ to a delay claim. The
recognition of such conditions precedent appears uncontroversial in Queensland
law: see Cook's Constructions Pty Ltd v Stork Food Systems Aust Pty Ltd 312.
The analysis of whether liquidated damages clauses are themselves penalty clauses
generally centres around whether they are a genuine pre-estimate of the proprietor’s
loss, or whether they are a collateral obligation to coerce (in terrorem) the contractor
into complying with the obligation to complete the works by the due date for practical
completion under the contract.
Although the assessment of whether a clause is a penalty or not must be made
relative to the time that a contract was entered into, the consequence of a clause
being a penalty is not to make it void absolutely, but only to avoid compliance to the
extent that it operates as a penalty.
Statutory minimum timeframes
I am not convinced that it is necessary or desirable to amend the BCIPA to legislate
for a minimum timeframe for the notification of extensions of time. I am of the same
view in respect to variations. As demonstrated throughout this Review, the “one size
fits all” approach does not cater for the gulf of different size and complexity of claims
that are currently utlising the BCIPA. It seems to me that the proposed amendments
would simply perpetuate those difficulties.
As was pointed out to me by subcontractors and contractors alike, no two contracts
are the same.313 Legislating a minimum timeframe will result in it being adopted as a
default mechanism by the drafters of construction contracts.
310
(1986) 162 CLR 170 at 190
(1994) 11 BCL 360
312
[2008] QSC 179
313
During individual interviews
311
262
This could very well result in unintended consequences for the contracted party who
may often because of the extent or nature of a proposed variation, be unable to
comply with a mandated notification period.
In my view, many of the problems that arise in this area for contracted parties, do so
as a result of their poor contract administration. Government should not be expected
to “chase its tail” by continually legislating to protect subcontractors who do not
effectively administer their contracts appropriately. The BCIPA has in many ways
already significantly altered the parties contractual rights and for the most part with
good reason. However, in my view, the suggested legislative amendments go too
far in intruding into the parties’ entitlements to enter into a contract on agreeable
commercial terms.
Suggested Legislative Amendments
Nil
Q15 - Recommendation
43.
There is no necessity or justification for the Government to attempt to alter the
rights of the parties by introducing amendments to the BCIPA which would set
mandatory minimum timeframes for the notification of extension of time claims.
Q16 - Recommendation
44.
There is no necessity or justification for the Government to attempt to alter the
rights of the parties by introducing amendments to the BCIPA which would set
mandatory minimum timeframes for the notification of variation claims.
263
Question 17: Would you support making void a construction
contract which entitles a purchaser to terminate a contract for
convenience?
Alternatively, do you believe that all construction contracts should
provide for a party to be able to claim for loss of profit when a
contract is terminated for convenience by the other party?
Background
The likely motivation behind raising this topic in the Discussion Paper was the
Supreme Court decision in Walton Construction (Qld) Pty Ltd v Corrosion Control
Technology Pty Ltd314 (“Walton”).
In Walton the Builder successfully argued, among other things that on the proper
construction of the contract, no reference date arose after the contract was
terminated.
There have been concerns within the industry that some contractors would invoke a
termination for convenience clause relying on Walton to defeat a payment claim
made under the BCIPA.
Feedback outcomes
The proposition suggested in Question 17 received little support. Of those
responding in written submissions, only 13% supported a legislative amendment
which would make void a termination for convenience clause, while 45% were
opposed and 41% did not specifically address the question. Similarly, although not
to the same extent, there was little support for the Act to be amended to provide an
entitlement to claim a loss of profit in the event that such a clause was invoked.
Support for change
Those supporting the legislative reform suggested:
Loss of profits - a matter for commercial negotiation
Whilst termination for convenience clauses “have a place… the claimant should be
entitled to claim its loss of profit.”
314
[2012] 2 Qd R 90 per Peter Lyons J
264
Although the building contractor conceded “one would think that would be a matter
for commercial negotiation …”315
Loss of profits – no place in a payment claim
A construction lawyer advised the Review that he would support such legislative
intervention, particularly as a result of the decision in Walton Construction (Qld) Pty
Ltd v Corrosion Control Technology Pty Ltd.316 He said:
“A termination for convenience clause can be used to defeat the use of the Act by
eliminating further reference dates. Most termination for convenience clauses are inserted
for the superior contractor’s benefit and provide a process for establishing the amount to be
paid to the subservient contractor in the event of such termination. I do not disagree with
termination for convenience clauses provided they do incorporate a mechanism for the
calculation of the amount to be paid to the subservient contractor. That way it is transparent
that the subservient contractor was aware of the provision and agreed to the rate to be paid
in the event of termination for convenience.
I do not believe claims for loss of profit should be able to be included in a payment claim.
Assessment of liability for damages and the quantum of damages complicates the process
and extending (sic) beyond the objectives of the Act. As already discussed previously,
adjudicators would require more extensive knowledge and skills if the adjudication process
is to include claims for damages. In my view, that would complicates the system under the
Act such that the current efficiencies will become lost…”
Termination for convenience clauses being used to avoid payment obligations
A number of subcontractor groups submitted that there was “considerable anecdotal
evidence” that builders were using termination for convenience clauses with the
intention of avoiding their payment obligations under the BCIPA. 317 I note however
that none of the submitters provided any evidence to support the submission.
Support for status quo
Those opposed to the legislative reform argued:
Unnecessary and unwelcome intrusion into the contract
Similar to the responses provided in relation to questions 15 and 16 of the
Discussion Paper, those opposed to the legislative reform argued that it was an
unnecessary and unwelcome intrusion into the freedom of parties to agree upon their
own commercial terms.
315
Written submissions to the Review
[2011] QSC 67
317
Written submissions to the Review
316
265
Many submitters also considered that the legislative amendments were not relevant
to the operations of the BCIPA.
Profit appropriate for work performed
An adjudicator submitted that the contractual entitlement to terminate for
convenience should be included in all construction contracts but commented that
appropriate profit should be recoverable on the work performed, but not the work
which had not.318
Termination for convenience clause: An essential part of any major project
One construction lawyer commented:
“Any construction project is an endeavour subject to risk and the purpose of such clauses is
enable (sic) the principal to terminate a project quickly and with some cost certainty if during
its construction the project becomes uneconomic to complete. In my experience, termination
for convenience clauses are an essential part of any major project and often required by
financiers as pre-condition (sic) to finance. …”
In response to the contracted party’s entitlement to profit, the construction lawyer
stated:
“No. A lost profit claim is a claim for profit on work that the contractor did not have to perform
and did not have to bear the risk of performing. Contractors are also able to mitigate by
replacing lost work. Also, termination for convenience clauses and loss of profit exclusions
on termination for convenience are often a commercial trade off in favour of the principal or
head contractor in exchange for the contractor itself being excluded from liability for the
principal’s loss of profit as part of any indirect or consequential loss exclusion. Such
concepts should be left to the parties to a contract to decide and should not be interfered
with.”
Major projects rely upon the ability to terminate for convenience
Another construction law firm in its written submissions to the Review warned that to
exclude a party’s entitlement to rely upon a termination for convenience clause
would have significant detrimental impacts upon the industry as a whole because in
major infrastructure projects, principals especially Government may not be prepared
to undertake such works without having the ability to terminate for its own
convenience.
One national building contractor that performs significant construction work in the
resources sector said to prohibit the use of termination for convenience clauses:
318
Written submissions to the Review
266
“…would create additional pressures and barriers on investment for Queensland based
projects.”
In response to the question of whether the legislation should be amended to allow for
loss of profits, the building contractor also said:
“No. Our view is that there should not be any statutory entitlement to a claim for loss of profit
where a contract is terminated for convenience. Termination for convenience is a risk that a
contractor or subcontractor agrees to and is built into the contract pricing. It is not our
experience that head contractors can claim for loss of profits, and accordingly we do not
agree to such provisions with our subcontractors.
It may also act as a disincentive for a subcontractor/contractor to seek out alternative work
as vigorously as it otherwise would have if it has successfully claimed loss of profit under a
long term contract. The questions posed in this section of the Consultation Paper further
raises our concerns about the increased level of regulation of contracts in Queensland, and
the decrease in enforceability of commercially negotiated terms.” .319[Emphasis added]
Volatility of international markets
A mining company argued that major resource infrastructure contracts must be
capable of termination for convenience given the volatility of international markets
and consumer demand. It also argued that there is no generic formula for
determining the profit that a contractor may have made on a project and in any
event, legislating for such an outcome could see contractors be provided with an
economic windfall.320
Consideration
Walton considered the issue of whether a claimant is entitled to a progress claim
made post termination. Peter Lyons J at [39] referred to the decision of the New
South Wales Court of Appeal in Brodyn Pty Ltd v Davenport321 wherein Hodgson JA,
with whom the other members of the Court agreed, said at [62]-[63]:
“However, s.8(2) the Act does not provide that reference dates cease on termination of a
contract or cessation of work. This may be the case under s.8(2)(a) if the contract so
provides but not otherwise; while s.8(2)(b) provides a starting reference date but not a
concluding one. In my opinion, the only non-contractual limit to the occurrence of reference
dates is that which in effect flows from the limits of s.13(4): reference dates cannot support
the serving of any payment claim outside these limits.”
319
Written submission to the Review
Written submission to the Review
321
(2004) 61 NSWLR 421 at 443
320
267
However Peter Lyons J distinguished Brodyn on the basis that the definition of the
term “reference date” in s.8(2) of the NSW cognate legislation appeared to be more
expansive than that provided under the BCIPA. He said at [40]-[56]:
“[40] This passage would appear to support the view that monthly reference dates continue
to accrue, at least under the New South Wales Act, for 12 months after the cessation of
work notwithstanding termination of the contract. However there are differences, which
seem to me to be not without importance, between the statutory provisions which
identify reference dates, in the legislation in the two States.
[41] Thus, s.8(2) of the New South Wales Act commences, “reference date, in relation to a
construction contract …”. The definition in the BCIP Act commences, “reference date,
under a construction contract …”. Further, paragraph (b) of s.8(2) of the New South
Wales Act commences with the words ‘if the contract makes no express provision with
respect to the matter’; whereas paragraph (b) of the definition in the BCIP Act uses a
different expression, as noted, relating to whether the contract ‘provide(s) for the
matter”.
[42] The use of the expression ‘under a construction contract’ found in the Queensland
definition makes it somewhat more difficult to conclude that a reference date occurs
after termination. There is then no longer a contract ‘under’ which there might be a
reference date.322 The conclusion that a reference date does not occur after termination
of a contract is, in my view, also consistent with the general nature of the payments for
which provision is made by the BCIP Act, that is to say, payments which are of a
provisional nature, made over the life of the contract.323
[43] The second difference which I have noted between the two definitions is also of
significance. The language used in the BCIP Act gives greater primacy to the
provisions of the contract dealing with the making of a claim for a progress payment
than does the language of the New South Wales Act.
[44] For these reasons, I am not prepared to adopt the statement from the judgment of
Hodgson JA in Brodyn as reflecting the effect of the definition of the expression
“reference date” in the BCIPA Act.
[45] In my view, the contract provides for reference dates, by both enabling their
identification, and by providing in effect that there is no right to make a progress claim
after the contract is terminated under clause 44.10, with the consequence that no further
reference date of this kind would then accrue.
…
[56] I have previously mentioned the definition of ‘reference date’, and the role accorded to
contractual provisions in it. It seems to me to be inconsistent with the statutory
language to conclude that a statutory right to a final payment accrues independently of a
reference date; or that a reference date occurs after termination, at least where that
would be contrary to the effect of the contract. Accordingly, in my view, no reference
date occurred in respect of the contract between the parties, after its termination.”
322
In Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106, Vickery J appears to have adopted
similar reasoning in relation to the operation of the relevant Victorian statutory provisions: see [171], [175]
323
Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 at [17]; cited in Gantley at [172]
268
The decision in Walton was delivered on 3 June 2011. Since that time, according to
my research, it has only been considered on three occasions. Firstly in the decision
of Fryberg J in Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd 324, secondly in
the matter of QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty
Ltd325 but that was in relation to an unrelated point and thirdly in the very recent
decision of McNab NQ Pty Ltd v Walkrete Pty Ltd & Ors326
Fryberg J rejected Thiess’ argument that Warren Brothers’ entitlement to a final
claim did not survive termination on the basis of the construction of the contract
before him. That part of His Honour’s decision was not the subject of appeal in
Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd327, which appeal was in any
event dismissed.
However, in the matter of McNab the Chief Justice applied the decision in Walton.
At [28] - [29] His Honour said:
“[28] As to whether a “reference date” (s 12 and schedule 2) can arise, for the purposes of
the Act, subsequently to the effectual termination of the relevant contract, I respectfully
adopt the reasoning of Lyons J in Walton.
[29] I do not regard the absence, from the instant sub-contract, of an express provision in
terms of cl 44.10 of the contract which was before that Judge, as warranting a different
conclusion here. That clause equated the rights and liabilities of the parties on termination to
the common law situation where a repudiation is accepted. Such a provision does no more
than reflect the common law. See also Re Dingjan; ex parte Wagner (1995) 183 CLR 323,
341.”
The concern that I have with respect to the affect of the decisions in Walton and now
McNab is that an unscrupulous contracting party may wait right up to the point just
before the reference date prior to practical completion and could terminate the
contract for any number of valid reasons, leaving the contracted party unable to
claim under the BCIPA for the work performed since the last progress claim.
In my view, this is a matter which the Legislature should clarify. That is, in
circumstances where a contract has been terminated, a claimant retains the
statutory entitlement to serve a payment claim. I would however place one
qualification on such a recommendation and that is that the claimant should be
restricted to making one final payment claim for the construction work carried out up
to the time of termination. This should also enable the claimant to claim for any
retentions or the return of security.
324
[2012] QSC 373 at [80]
[2011] QSC 292 at footnote [4] to paragraph [39]
326
[2013] QSC 128, delivered on 17 May 2013
327
[2012] QCA 276
325
269
Unnecessary and unwelcome intrusion
I accept the submissions of those opposed to the suggested amendment in Question
17 that the Legislature should not intrude upon the rights of the parties in respect to
making void a termination for convenience clause. I am of the view that particularly
in construction contracts involving major projects, it is important for principals and
therefore head contractors to retain the right to terminate a contract for convenience.
If that right was removed, it could have significant consequences for the number of
projects that may be commenced in this State.
Equally, I am not convinced that a case has been made out to legislate, much less to
provide for such in the BCIPA, to protect a contracted party’s entitlement to a loss of
profits.
However, legislating to declare void a termination for convenience clause is a far cry
from ensuring that the object of the Act is not defeated by a calculated attempt to
remove a claimant’s entitlement to claim under the Act post-termination.
I am of the view that the Legislature should expressly provide in the BCIPA that a
claimant’s entitlement to serve a final payment claim is not extinguished post
termination.
Suggested Legislative Amendments
Refer to the Office of the Queensland Parliamentary Counsel.
Q17 - Recommendations
45.
There is no demonstrable case for Government intervening in construction
contracts by introducing amendments to the BCIPA or the enactment of any
other legislation which would declare void a termination for convenience
clause.
46.
There is no demonstrable case for Government intervening in construction
contracts by introducing amendments to the BCIPA or the enactment of any
other legislation which would mandate a contracted party’s entitlement to a
loss of profits in the event that a construction contract was terminated by
invoking a termination for convenience clause.
47.
The BCIPA should be amended to expressly provide that a claimant’s
entitlement to serve a final payment claim is not extinguished post-termination
of the contract.
270
Question 18: Do you believe that the BCIP Act requires amendment
to specifically address preconditions and other contractual
provisions which purport to unreasonably and unfairly restrict the
application of BCIP Act?
If so: What do you consider to be unreasonable and unfair
preconditions and what approach do you believe should be taken
to address such preconditions?, Do you believe adjudicators
should be given the statutory power to declare such contractual
provisions void?
Background
Many contracted parties have argued since the commencement of the Act that
drafters of construction contracts are attempting to set certain pre-conditions to the
arising of a ‘reference date’, that is the date under a construction contract, from
which a person is entitled to a progress payment.328
Proponents of legislative reform in this area argue that the provisions in some
construction contracts set a multitude of quite onerous pre-conditions which
purportedly must be satisfied by a contracted party before it has an entitlement to a
progress claim under the contract.
The Discussion Paper provides a number of examples of these pre-conditions
commonly contained in construction contracts, that requires a supplier of
construction work or related goods and services to issue a payment claim only if the
payment claim is:







328
Calculated for the periods and/or by the method and within the timeframes
required by a referenced schedule and clause in the contract;
In a format the head contractor requires, such as in the form of a statutory
declaration;
Delivered to the head contractor or other nominated person;
Includes the evidence reasonably required by the head contractor regarding
the value of work completed in accordance with the subcontract and the
amount claimed;
Sets out the total value of work completed in accordance with the subcontract
to the date of the payment claim, the amount previously paid to the
subcontractor and the amount then claimed;
Is delivered only if the conditions precedent to the subcontractor’s entitlement
to make a payment claim are satisfied; and
Does not include any claims which are barred by a referenced clause or
otherwise.
See s.12 of the BCIPA
271
Feedback outcomes
Of the written submissions provided to the Review, 27% of submitters were in favour
of legislative intervention to make void such pre-conditions, while 29% were opposed
and 43% did not respond to the question.
Support for change
The submissions made in favour of legislative intervention included:
Adjudicators should be able to ignore unfair clauses
It was submitted by one ANA that adjudicators should be empowered under the Act
to ignore contract provisions that they consider to be unreasonable or unfair.329
ACL unfair contract provisions should be adopted by the BCIPA
Another submitter argued that the provisions of the Australian Consumer Law with
respect to unfair contracts should be adopted. The same submitter however rejected
the proposal that adjudicators should be able to declare some terms unreasonable or
unfair. It was submitted that that was the purview of the Courts. 330
Unfair and unreasonable contract terms restrict the BCIPA
A quantity surveyor argued that the many construction contracts now contained
unfair and unreasonable preconditions that restrict the effectiveness of the Act. He
provided the following list of what he regarded as restrictive preconditions:






329
330
Special ‘delivery requirements’ for payment claims;
The requirement for excessive detail and repeated information;
Unreasonable timeframes;
Enforcement of ‘in-house’ dispute resolution processes;
Limiting the extent of amendments to standard Australian building contracts;
and
Enforcement of ‘in-house’ payment systems;
Written submission to the Review
Written submission to the Review
272
Standardisation of contracts
The Major Subcontractors Group in its written submissions recommended that
standardised contract clauses be utilised in all Queensland Government commercial
contracts with the requirement that such clauses be replicated in subcontracts and
that there be a contractual requirement for parties to act reasonably and in good
faith.331
Mandated Reference Dates
A number of submitters raised an alternative approach to the issue of pre-conditions.
Essentially, these argued that the Act be amended so that a reference date is
mandated to occur at least once each named month. It was argued that this
amendment would overcome the current practices of onerous pre-conditions to
reference dates occurring and would reduce disputes about jurisdiction that arise as
a result of these pre-conditions.332
Pre-conditions to payment cf. an entitlement to serve a payment claim
Another submitter argued that all pre-conditions, including statutory declarations
should be pre-conditions to payment rather than a pre-condition to an entitlement to
serve a payment claim.333
Support for status quo
The submissions made which opposed legislative intervention included:
An exercise in futility
One submitter argued that any attempt by government to address contractual preconditions “will not stop the creative genius of lawyers in developing new contract
provisions that in the future may be of concern to government.”334
331
Written submission to the Review
Written submissions to the Review
333
Written submissions to the Review
334
Written submission to the Review
332
273
Section 99 of the BCIPA adequately deals with pre-conditions
Another submitter similarly argued that any attempt to “close specific preconditions
will only complicate the Act”. It suggested that s.99 of the Act which prevents
contracting out, adequately deals with the issue.
A number of other submissions argued that the issue of pre-conditions has already
been dealt with in favour of claimants in the matter of John Holland Pty Ltd v Coastal
Dredging & Construction Pty Limited335 and that in any event, s.99 of the BCIPA acts
as a sufficient measure against contractual provisions which seek to restrict access
to the Act.336
The Act should expressly permit pre-conditions
In a written submission to the Review, it was argued by a large building contractor
that legislative intervention of the type envisaged was not warranted. In fact the
submitter argued,337 the Act should be amended to specifically allow such preconditions so as to establish the clear requirements for a valid claim.
Adjudication decision intended to be interim
The Housing Industry Association was “fundamentally” opposed to amending the
legislation in the manner proposed, arguing that an adjudicator’s decision is intended
to be interim in nature and that any power given to an adjudicator to decide or
declare a contractual provision void would be a shift from the object of the Act.338
Pre-conditions necessary for business efficacy
In the written submissions of a resources sector company, it was argued that preconditions are necessary for a principal or head contractor to:
(i) Make a proper and informed assessment of the payment claim and to prepare
its payment schedule in response;
(ii) Process the claim in an efficient manner, it is desirable that it be received in a
particular format;
(iii) Be fully informed of possible future expenses for which it may become liable.
335
[2012] QCA 150
Written submissions to the Review
337
A number of similar written submissions were provided to the Review
338
Written submissions to the Review; A number of similar submissions were provided to the Review
336
274
The submitter also argued that to legislate against such pre-conditions is
“paternalistic and overly protectionist” and unnecessary given that if a claimant does
not comply with the contractual pre-conditions, it can simply re-serve another
payment claim on the next reference date.
Consideration
Mandating of Reference Dates
Firstly, I shall deal with the alternative submission that the Act should simply
mandate that reference dates arise at least once each named month. Under the
current regime, such an amendment would effectively change the way that milestone
contracts are administered.339 It would represent a significant departure from the
principle of how payments are made under a milestone contract and would have
significant affects in the domestic building industry. On that basis I reject the
submission.
Australian Consumer Law
Secondly, whilst I consider there is some attraction to incorporating the Australian
Consumer Law into the matters which an adjudicator may take into consideration
under s.26(2) of the Act, given that there is no requirement upon an adjudicator to be
legally qualified, I am reluctant to recommend the suggestion. It is likely that
including the Australian Consumer Law as a matter for some adjudicators, would
create more problems than it would resolve.
Mandating Government commercial contract clauses
Thirdly, recommendations regarding mandating construction contract clauses on
Queensland Government projects are in my view, well outside the terms of reference
of this Review and I decline to consider those submissions.
Validity of contractual pre-conditions
Finally, I turn now to the issue of the validity of contractual pre-conditions. In the
New South Wales Court of Appeal decision in Plaza West Pty Ltd v Simon’s
Earthworks (NSW) Pty Ltd & Anor340, Hodgson JA said:
339
340
A “progress payment” includes a payment made under a milestone contract – see Schedule 2 of the Act
[2008] NSWCA 279
275
“53 I adhere to the view I expressed in Transgrid v Siemens Limited [2004] NSWCA 395,
(2004) 61 NSWLR 521 at [35] and John Holland Pty Limited v Road and Traffic Authority of
New South Wales [2007] NSWCA 19 at [38], to the effect that ‘calculated in accordance with
the terms of the contract’ in s 9(a) of the Building and Construction Industry Security of
Payment Act 1999 (the Act) does not engage contract mechanisms determining what is due
under the contract, independently of calculations referable to the work performed.
54 This means that contractors are not deprived of entitlement to payment under the Act
because a condition precedent, such as the obtaining of a superintendent’s certificate, has
not been satisfied; …”
As was submitted by many of those opposed to the suggested amendments, John
Holland Pty Ltd v Coastal Dredging & Construction Pty Limited 341 has definitively
dealt with the issue of contractual pre-conditions being no impediment to an
entitlement to a progress payment under the Act. Fraser JA who delivered the
leading judgment said at [18]-[19]:
“18 …Accordingly, the contractual provisions to which reference may be made for the
purpose of ascertaining the “reference date” are those which state, or provide for the
working out of, the date on which a progress payment claim “may be made”. The latter
expression refers to an entitlement to make a progress claim. It does not comprehend
reference to warranties which concern the form and content of progress claims or the
consequences of breaching warranties about the form and content of progress claims.
19… Bearing in mind the statutory object and the role of s 12
and the definition of “reference date” in giving effect to that object, those provisions are
incapable of justifying an implication that the date upon which the statutory entitlement to a
progress payment accrues may be qualified by contractual provisions other than those
captured by the unambiguous terms of the definition of ‘reference date’.”
Fraser JA also said at [21] that the impugned clauses operated to defer what would
have otherwise been the subcontractor’s statutory entitlement to a progress payment
from the reference date ascertained in accordance with the Act and as such is void
under s.99 of the BCIPA.
The decision in John Holland v Coastal Dredging has been followed in BHW
Solutions Pty Ltd v Altitude Constructions Pty Ltd 342. In State of Queensland v T & M
Buckley Pty Ltd343 Margaret Wilson J in considering the decision of Douglas J in
Simcorp Developments & Constructions Pty Ltd v Gold Coast Titans Property Pty
Ltd344 found at [40]-[43] that:
“40 In Simcorp Developments the right to deliver a payment claim was held not to accrue
until a progress certificate was issued or deemed to be issued. Because the time for
payment claims in Item 28 was calculable by reference to the delivery of the progress claim,
and not the progress certificate, it seems to me arguably incorrect that the issue of the
progress certificate was a pre-condition to the accrual of the statutory reference date.
341
[2012] QCA 150. An application for special leave to the appeal to the High Court was withdrawn – State of
Qld v T & M Buckley Pty Ltd [2012] QSC 265 per Margaret Wilson J at footnote [2]
342
[2012] QSC 214 per Mullins J at [13]343
[2012] QSC 265
344
[2010] QSC 162
276
In any event, I agree with the counsel for the first respondent that that decision should be
confined to its own facts.
41 In the present case, the right to deliver a contractual claim on the date stated in the
Annexure is conditional upon the prior delivery of the statutory declaration. The condition
affects the right to deliver the contractual claim, but not the date on which it may be
delivered once there is an entitlement to do so.
42 The statutory reference date is the date worked out under the subcontract on which a
claim for a progress payment may be made. That date is the monthly anniversary of the
commencement of the work, regardless of whether the subcontractor has delivered the
statutory declaration required by clause 43.2 of the subcontract. In other words, accrual of
the statutory reference date is not conditional upon the prior delivery of the statutory
declaration.
43 In the circumstances, the question of whether the pre-condition is void under s 99 does
not arise.” [Emphasis added]
Given that the issue appears now to have been settled, I am reticent to recommend
changes to the BCIPA which would seek to declare void an unreasonable or unfair
contractual pre-condition. I accept the submission that adjudicators are already
empowered to make a decision that a clause is contrary to s.99 of the Act. In light of
the recent authorities referred above, I do not consider it necessary or desirable to
recommend further changes to the BCIPA which would themselves only leave the
door open for further statutory interpretation skirmishes.
Suggested Legislative Amendments
Nil
Q18 - Recommendation
48.
There is no demonstrable case for Government intervening in construction
contracts by introducing amendments to the BCIPA which would make void
any preconditions or other purported unreasonable or unfair contractual
conditions to a statutory entitlement to a progress payment.
277
Question 19: Do you have any concerns about a legislative
amendment being made to the BCIP Act to make clear that a
statutory declaration attesting to the payment of workers,
subcontractors and sub-subcontractors is a valid precondition to
the submission of a payment claim?
Background
Many commercial building contracts require subcontractors to provide a statutory
declaration which is said to confirm that the subcontractor has paid all of its subsubcontractors and suppliers as a pre-condition to its entitlement to raise a progress
claim under the contract.
The question posed in the Discussion Paper suggests that such a clause may
become enshrined in the BCIPA as a further statutory measure 345 to ensure that
monies are paid down the contractual chain.
Feedback outcomes
Of the written submissions provided to the Review, 28% of submitters were in favour
of legislative intervention to require statutory declarations as a precondition to the
submission of a payment claim, while 33% were opposed and 39% did not respond
to the question.
Support for change
The submissions made in favour of legislative intervention included:
Precondition to payment cf. precondition to an entitlement to serve a payment claim
A number of submissions made to the Review, whilst in favour of the requirement
that a statutory declaration be required, suggested that it should be a precondition to
payment rather than an entitlement to serve a payment claim.346
345
346
Assumedly in conjunction with the Subcontractors’ Charges Act 1974
Written submissions to the Review
278
Consistent with the object of the Act
Master Builders in supporting the proposal, acknowledged the rationale for the
request for head contractors to provide statutory declarations on the basis that their
subcontractors and workers have all received their just entitlements as part of the
claims process.
Falsification of statutory declarations
One building contractor complained that the existing contractual procedure was open
to such abuse by subcontractors falsifying statutory declarations that legislative
intervention was required. He suggested that:
•
•
•
•
An adjudicator should not be able to award a decided amount unless he [or
she] has been provided with a signed declaration that all subcontractors [and
presumably suppliers] had been paid;
If a respondent has advanced evidence that a statutory declaration is false,
then there must be some mechanism to address the inconsistency;
There must be “serious and immediate consequences for signing a false
statutory declaration … including impacts on the declarant’s licence”; and
The current process allows subcontractors to circumvent the requirement to
act honestly by enabling them to argue that they are in dispute with its subsubcontractor or supplier.347
Potential inconsistency with s.99 of the Act should be removed
A government department submitted that such an amendment is consistent with
clause 43 of the General Conditions of Contract in AS2124 and that it would be
beneficial if any potential argument were removed regarding the interaction of the
precondition and s.99 of the BCIPA.
Support for status quo
The submissions opposing legislative intervention included:
Restriction of cash flow: contrary to the object of the Act
A number of submissions made to the Review argued that any requirement to
provide a statutory declaration as a precondition to either the submission of a
payment claim or payment defeated the object of the Act because often the
contracted party, particularly smaller subcontractors are relying upon payment by the
347
This was a common complaint of the existing contractual requirement to provide statutory declarations
279
contracting party to be able to pay its own subcontractors and suppliers.
These submitters argue that to introduce such an amendment to the Act would
increase insolvency in the building industry, rather than provide better “security for
payment”.348
“Putting the cart before the horse”
One stakeholder described the proposed amendment as “putting the cart before the
horse”. The same stakeholder suggested that the “Construction Trust” model
recommended in the Collins Inquiry349 should be adopted to ensure adequate
security of payment for all involved in the industry. 350
Statutory declarations: inconvenient, routinely abused
Another stakeholder dismissed the suggestion on the basis that it is a “massive
inconvenience” trying to find an appropriate officer to witness the declaration. He
also suggested that statutory declarations are “routinely abused thereby rendering
them useless.” The submission also commented that there is no policing of false
statutory declarations which removes any incentive for them to be honestly made.
Penalty Clause – Andrews v ANZ
Another submitter argued that the contractual precondition to provide a statutory
declaration offends the penalty doctrine enunciated by the High Court in Andrews v
Australia and New Zealand Banking Group Ltd.351
A matter for commercial negotiation
Another submitter arguing against the suggested legislative amendment said that
such matters should be left to the parties to the contract and was not a proper matter
for inclusion into the BCIPA. He also said:
“The determination of the proper amount a claimant is entitled to be paid for construction
work is independent from whether employees, subcontractor or sub-subcontractors have
been paid or not. In particular (a sub-subcontractor) (i.e. a subcontractor of a subcontractor)
would not have a contract with the claimant, so it may be difficult for the claimant to attest to
payment that far down the contractual chain.”352
348
Written submissions to the Review
See Recommendation 6 of the Final Report into Construction Industry Insolvency in NSW, November 2012
350
Written submission to the Review
351
[2012] HCA 30
352
Written submission to the Review
349
280
Unnecessary administrative burden
The Housing Industry Association was again “fundamentally opposed” to the
suggested amendment arguing that it was an “unnecessary administrative burden”
on small business.
“Catch-22” for subservient contractors
Another submitter described the process of requiring statutory declarations as
“abject nonsense and serves only to harm subservient contractors… due to the most
absurd catch 22” situation it places them in. He stated that the process “can be
devastating” to those at the bottom of the contractual chain because they rely upon
the monies owed to them to be able to pay their own sub-subcontractors and
suppliers.
Consideration
I have already dealt with the issue of the “Construction Trust” model proposed in the
Collins Inquiry above. It is not necessary for me to re-consider that submission.
The Review received a number of accounts from submitters where statutory
declarations had been allegedly “routinely abused”. I note that these accounts
accord with the evidence received in the Collins Inquiry where it was noted that: 353
“The use of statutory declarations in ensuring subcontractors get paid has been described
by witnesses to the Inquiry as “mass dishonesty”, “a joke” and that “they appear
more comforting than what security they actually provide”. The Inquiry further heard that
although it is an offence to swear a false statutory declaration for material benefit under
section 25A of the Oaths Act 1900, punishable by maximum imprisonment for seven years,
one of the reasons why the practice is widespread, is that it is not policed.”
I acknowledge the recommendations made by Collins QC that the NSW cognate
legislation be amended to include a provision that it is essential to provide a statutory
declaration and makes it an offence to declare a false oath and for that provision to
be enforced by the proposed NSW Building and Construction Commission.354
I also acknowledge that the NSW Government has accepted those submissions in
principle but proposes that a “written statement” be used cf. statutory declaration and
that any offence provisions for making a false statement be contained in the NSW
Act cf. Oaths Act 1900 (NSW).355
353
See p. 58 of the Final Report into Construction Industry Insolvency in NSW, November 2012
See Recommendations 20-23 of the Final Report into Construction Industry Insolvency in NSW, November
2012
355
http://www.services.nsw.gov.au/sites/default/files/pdfs/20130418-collins-inquiry-recommendations-andresponses.pdf
354
281
Respectfully however, I have reached a different view to those expressed by Collins
QC. I prefer and accept the submissions of one stakeholder who gave this salutary
warning:
“[The suggested amendment] would appear to have the intention of having Adjudicator’s
making a finding of fact as to the truth or otherwise of a declaration (there being no point in
not having the validity of the document challenged and decided). That finding would be in
effect a finding of a breach of the Oaths Act ….. What would be the level of proof required
and does the standard of proof change to beyond a reasonable doubt? Proceeding with a
requirement that sub-subcontractors be paid renders the superior contracting parties with a
potential positive obligation to investigate and decide these issues which goes beyond the
requirements of the relevant legislation.”
In my view, the suggested amendment raised in the Discussion Paper may require
an adjudicator in some circumstances to make a decision on the papers as to
whether a statutory declaration had been made honestly. I note that if a statutory
declaration made under the Oaths Act 1867 (Qld) is made which “the person knows
is false in a material particular” that person commits a crime and is liable to
imprisonment for up to 7 years.356 The burden of proof for the commission of such
an offence is beyond reasonable doubt. Whilst no one is seriously contemplating
that an adjudicator should be given powers to convict a person who made a false
statutory declaration, the proposed amendment may require an adjudicator to make
an adverse finding against a claimant if a respondent’s argument was to be made
out. The suggested amendment is moving far beyond the metes and bounds of the
object of the Act.
Notwithstanding these views, if a contracting party has sufficient evidence that a
statutory declaration is false in a material particular, it should bring that to the
attention of the Queensland Police Service. If successfully prosecuted, apart from
any criminal sanction imposed, a licensed contractor could have their licence
suspended or cancelled by the QBSA pursuant to s.48(c) or (j) of the QBSA Act. As
has however been noted, the difficulty is in proving that the declaration was known to
be false.
I shall put to one side the legalities of making a false statutory declaration. Whether
the requirement to provide a statutory declaration is a precondition to serving a
payment claim or to actual payment is based in contract or in the BCIPA, the result in
my view would be the same. That is, it will prevent many smaller subcontractors in
particular from being able to recover amounts otherwise due and owing. I accept the
submissions that many subcontractors rely upon monies paid to them, to be able to
pay their own sub-subcontractors and suppliers.
To legislate such a provision would truly “put the cart before the horse”. The very
concept in my view is an anathema to the object of the Act and should in my view be
rejected.
356
See s.193(1) of the Criminal Code Act 1899 (Qld)
282
I should add that were the Queensland Legislature to adopt the NSW Government
response to Recommendation 21 of the Collins Inquiry, that is to require a written
statement that all subcontractors and suppliers had been paid rather than a statutory
declaration, the strangulation effect on subcontractors cash flow would be identical to
that proposed in the Discussion Paper.
It is also pertinent to note that the question whether a contractual precondition which
requires a claimant to provide a statutory declaration that it has paid its workers, subsubcontractors and suppliers to gain an entitlement to a progress payment under the
BCIPA has been specifically rejected in BHW Solutions Pty Ltd v Altitude
Constructions Pty Ltd357 applying the Court of Appeal’s reasoning in John Holland v
Coastal Dredging.
Suggested Legislative Amendments
Nil
Q19 - Recommendation
49.
357
The BCIPA should NOT be amended to require a claimant to provide a
statutory declaration attesting to the payment of workers, subcontractors, subsubcontractors or suppliers as a valid precondition to the submission of a
payment claim.
[2012] QSC 214 per Mullins J at [13]283
Consultation Questions
Question 1: Do you think the jurisdiction of BCIP Act should be reduced to specifically exclude payment
claims for some types of work or work over a stated value?
If so, what should be excluded?
Question 2: Do you think that the respondent needs to be more clearly identified in the contract in
relation to who should receive a payment claim under the BCIP Act?
Question 3: Do you believe that the BCIP Act should allow other types of payment claims, including
claims by purchasers, to be subject to adjudication?
If so, what changes would you suggest?
Question 4: Should the BCIP Act be amended to allow an adjudicator to direct payment in favour of the
respondent for an amount greater than the claim?
Question 5: Do you believe the type of payment claim under the BCIP Act should be restricted?
If so should payment claims under the BCIP Act be restricted to:
• contract price for the work;
• any other rates or prices stated in the contract; and
• any variation agreed to by the parties of the contract by which the contract price, or any other
rate of price stated in the contract, is to be adjusted by a specific amount; and
• the estimated cost of rectifying any defects in the work?
Question 6: Should BCIP Act be expanded to allow adjudicators to require the release of a security,
such as a bank guarantee?
Question 7: Should claimants be required to reference BCIP Act on payment claims if they want to be
entitled to rely on the BCIP Act?
Question 8: Do you consider the current process of authorised nominating authorities appointing
adjudicators appropriate?
If not, what alternate system would you propose?
Question 9: Do you believe that the timeframes for the making of and responding to claims under the
BCIP Act are appropriate?
If not, how could the timeframes be changed or otherwise improved? In considering this issue you may
also wish to consider whether the provisions under the BCIP Act are adequate for the Christmas and
Easter periods?
Question 10: Do you believe the BCIP Act allows persons who carry out construction work or supply
related goods and services to serve large and complex payment claims in an untimely and unfair
manner?
If so, are changes necessary to address this and what would they be?
Question 11: Should the BCIP Act allow claimants, at the lodgement of an adjudication application, to
place a charge on monies owing to a respondent head contractor by a principal?
Question 12: Is security of payment an issue for retentions? If so how do you think this could be
improved?
Question 13: Do you believe that some respondents are misusing the legal process by commencing
Supreme Court proceedings to delay the payment of an adjudicated amount?
If so, what if any changes to the BCIP Act should made to help address this issue?
Question 14: Are there any other issues you wish to raise in relation to the effectiveness of the BCIP Act
process or the jurisdiction of BCIP Act?
Question 15: Would you support the making void of any unreasonable timeframes for notification of
extension of time requests within contracts?
If a minimum timeframe was set by legislation how many business days do you believe are reasonable
for an extension of time request?
Question 16: Would you support the making void of any unreasonable timeframes for notification of
variations within contracts?
If a minimum timeframe was set by legislation how many business days do you believe are reasonable
for a variation to be lodged?
Question 17: Would you support making void a construction contract which entitles a purchaser to
terminate a contract for convenience?
Alternatively, do you believe that all construction contracts should provide for a party to be able to claim
for loss of profit when a contract is terminated for convenience by the other party?
284
Question 18: Do you believe that the BCIP Act requires amendment to specifically address
preconditions and other contractual provisions which purport to unreasonably and unfairly restrict the
application of BCIP Act?
If so:
• what do you consider to be unreasonable and unfair preconditions and what approach do you
believe should be taken to address such preconditions?
• do you believe adjudicators should be given the statutory power to declare such contractual
provisions void?
Question 19: Do you have any concerns about a legislative amendment being made to the BCIP Act to
make clear that a statutory declaration attesting to the payment of workers, subcontractors and subsubcontractors is a valid precondition to the submission of a payment claim?
285
TABLE OF CASES:
AE Smith & Son Pty Ltd v Coastline Constructions Pty Ltd [2006] QDC 510
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR
27; [2009] HCA 41
Allpro Building Services Pty Limited v Micos Architectural Division Pty Ltd [2010]
NSWSC 474
AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63
Andrews v Australia and New Zealand Banking Group Ltd (2012) 290 ALR 595;
[2012] HCA 30
Anstee-Brook, Re; Ex parte Karara Mining Ltd [2012] WASC 129
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33
Bezzina Developers Pty Ltd v Deemah Stone (Qld) Pty Ltd [2007] QSC 286
BHW Solutions Pty Ltd v Altitude Constructions Pty Ltd [2012] QSC 214
Birdon Pty Ltd v Houben Marine Pty Ltd (2011) 197 FCR 25; [2011] FCAFC 126
BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd (No.2) [2013] QSC
67
Bolton, Re; Ex parte Beane (1987) 162 CLR 514; [1987] HCA 12
Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394
Cant Contracting Pty Ltd v Casella [2007] 2 Qd R 13; [2006] QCA 538
Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012)
293 ALR 412; [2012] HCA 56
Conneq Infrastructure Services (Australia) Pty Ltd v Sino Iron Pty Ltd [2012] WASAT
13
Cook's Constructions Pty Ltd v Stork Food Systems Aust Pty Ltd [2008] QSC 179
Cornall v Nagle [1995] 2 VR 188
Doolan v Rubikcon (Qld) Pty Ltd [2008] 2 Qd R 117; [2007] QSC 168
Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69
286
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63
Ed Ahern Plumbing (Gold Coast) Pty Ltd v J M Kelly (Project Builders) Pty Ltd [2007]
QCA 452
Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106
Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA
32
Hamilton Australia Pty Ltd v Milson Projects Pty Ltd [1997] 2 Qd R 355
Hanave Pty Ltd v Nahas Construction (NSW) Pty Ltd [2012] NSWSC 888
Hervey Bay (JV) Pty Ltd v Civil Mining & Construction Pty Ltd [2008] QSC 58
Hitachi Ltd v O’Donnell Griffin Pty Ltd [2008] QSC 135
HM Hire Pty Ltd v National Plant and Equipment Pty Ltd [2013] QCA 6
Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd (2006) 22 BCL
285; [2005] NSWSC 1129
Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR
292; [2008] NSWCA 310
John Goss Projects Pty Ltd v Leighton Contractors Pty Ltd (2006) 66 NSWLR 707;
[2006] NSWSC 798
John Holland Pty Ltd v Coastal Dredging & Construction Pty Ltd [2012] 2 Qd R 435;
[2012] QCA 150
John Holland Pty Ltd v Roads & Traffic Authority of New South Wales (2007) 23 BCL
205; [2007] NSWCA 19
John Holland Pty Ltd v Schneider Electric Buildings Australia Pty Ltd [2010] QSC
159
John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302; [2009] QSC 205
John Holland Pty Ltd v Walz Marine Services Pty Ltd [2012] 28 BCL 62; [2011] QSC
39
Johnson v Johnson (2000) 201 CLR 488; [2000] HCA 48
Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1
Laing O’Rourke Australia Construction v H & M Engineering & Construction [2010]
NSWSC 818
287
Legal Services Commissioner v Walter [2011] QSC 132
Livesey v New South Wales Bar Association (1983) 151 CLR 288; [1983] HCA 17
Mansouri v Aquamist Pty Ltd (2011) 27 BCL 201; [2010] QCA 209
McGovern v Ku-ring-gai Council (2008) 72 NSWLR 504; [2008] NSWCA 209
Minister for Immigration and Multicultural Affairs v Jia (2001) 205 CLR 507; [2001]
HCA 17
McNab NQ Pty Ltd v Walkrete Pty Ltd [2013] QSC 128
Minister for Immigration and Multicultural and Indigenous Affairs v SBAN [2002]
FCAFC 431
Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] All ER (D)
79 (Mar); [2007] BLR 195; [2007] EWHC 447
Najjar v Haines (1991) 25 NSWLR 224
NAKF v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 130
FCR 210; [2003] FCA 730
Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2011] 2 Qd R 114; [2010]
QCA 119
Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525;
[2011] QCA 22
Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd [2005] NSWSC 45
Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1994) 11
BCL 360
Pavex Constructions, Ex parte [1979] Qd R 318
Penfold Projects Pty Ltd v Securcorp Limited [2011] QDC 77
Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd [2008] NSWCA 279
Prentice Island Limited v Castle Contracting Limited [2003] ScotSC 61
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998]
HCA 28
Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248
288
QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2011]
QSC 292
Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd (in liq)
(2009) 26 BCL 360; [2009] QSC 165
Queensland Bulk Water Supply Authority t/as Seqwater v McDonald Keen Group Pty
Ltd (in liq) [2010] 2 Qd R 322; [2010] QCA 7
R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256
R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390; [2008] QCA 397
Radair Pty Ltd, Re [1998] 2 Qd R 539
Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6
Reiby Street Apartments Pty Ltd v Winterton Constructions Pty Ltd (2006) 22 BCL
426; [2005] NSWSC 545
Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71
Sea Containers Ltd v ICT Pty Ltd [2002] NSWCA 84
Shell Refining (Australia) Pty Ltd v AJ Mayr Engineering Pty Ltd [2006] NSWSC 94
Simcorp Developments & Constructions Pty Ltd v Gold Coast Titans Property Pty Ltd
[2010] QSC 162
Spankie v James Trowse Constructions Pty Ltd [2010] QCA 355
Spankie v James Trowse Constructions Pty Ltd [2010] QSC 29
State of Queensland v T & M Buckley Pty Ltd [2012] QSC 265
Systech International Ltd v PC Harrington Contractors Ltd [2013] 2 All ER 69; [2012]
EWCA Civ 1371
Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2011] QSC 345
Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QSC 373
Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QCA 276
Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134
Vanbeelen v Blackbird Energy Pty Ltd [2006] QDC 285
289
Vine v National Dock Labour Board [1957] AC 488
Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2012] 2
Qd R 90; [2011] QSC 67
Watpac Constructions (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 347
Webb v The Queen (1994) 181 CLR 41; [1994] HCA 30
Yeldham v Rajski (1989) 18 NSWLR 48
290
Table of Statutes:
Queensland
Acts Interpretation Act 1954
Building and Construction Industry Payments Act 2004
Building and Construction Industry Payments Bill 2004, Explanatory Notes
Building and Construction Industry Payments Bill 2004, Second Reading Speech
Building and Construction Industry Payments Regulations 2004
Civil Proceedings Act 2011
Crime and Misconduct Act 2002
Criminal Code Act 1899
District Court of Queensland Act 1967
Electronic Transactions Act 2001
Fair Trading Act 1989
Judicial Review Act 1991
Justice and Other Legislation Amendment Act 2007
Legal Profession Act 2007
Legislative Standards Act 1992
Oaths Act 1867
State Development and Public Works Organisation Act 1971
Subcontractors’ Charges Act 1974
Sustainable Planning Act 2009
Queensland Building Services Authority Act 1991
Queensland Building Services Authority Regulation 2003
Queensland Civil and Administrative Tribunal Act 2009
Queensland Civil and Administrative Tribunal Rules 2009
Uniform Civil Procedure Rules 1999
Other Australian
Building and Construction Industry Security of Payment Act 1999 (NSW)
Building and Construction Industry Security of Payment Act 2009 (SA)
Building and Construction Industry Security of Payment Act 2009 (Tas)
Building and Construction Industry Security of Payment Act 2002 (Vic)
Building And Construction Industry Security Of Payment (Amendment) Act 2006
(Vic)
Building and Construction Industry Security of Payment Bill 1999 (NSW), Second
Reading Speech
Building and Construction Industry Security of Payment Regulation 2011 (SA)
Construction Contracts (Security of Payment) Act 2004 (NT)
Competition and Consumer Act 2010 (Cth)
Construction Contracts Act 2004 (WA)
Corporations Act 2001 (Cth)
Oaths Act 1900 (NSW)
291
Other Jurisdictions
Construction Contracts Act 2002 (NZ)
Housing Grants, Construction and Regeneration Act 1996 (UK)
292
Bibliography:
Material cited in Report
Australian Corporate Finance Law, Lexis Nexis Australia, March 2013
Australian Government, Administrative Review Council, A Guide To Standards of
Conduct for Tribunal Members (revised August 2009)
Bar Association of Queensland, Continuing Professional Development Rules
(updated 12 December 2011)
Brand, MC and Davenport, P, “Proposal for a ‘Dual Scheme’ model of statutory
adjudication for the Australian building and construction industry” (2011) 3(3)
International Journal of Law in the Built Environment 252
Cole QC, Hon. TRH, Final Report—Royal Commission into the Building and
Construction Industry (NSW Government, February 2003)
Collins QC, B, Final Report—Independent Inquiry into Construction Industry
Insolvency (NSW Government, November 2012)
Cremean DJ, Shnookal BA, Whitten MH, Brooking on Building Contracts (LexisNexis
Butterworths Australia 2004, 4th ed)
Davenport, P, Adjudication in the Building Industry (Federation Press, 2010, 3rd ed)
Davenport, P, “A possible end to time-bar clauses” (2013) 51(2) Law Society Journal
(NSW) 2
Government of South Australia, Consumer and Business Services, Code of Conduct
for Authorised Nominating Authorities, <
http://www.cbs.sa.gov.au/securityofpayment/pdf/ANACodeofConduct.pdf> (accessed
May 2013)
KPMG, Stakeholder Consultation Report on the Recommendations of the Inquiry into
the Operation and Performance of the Queensland Building Services Authority (April
2013)
Pearce, DC and Geddes, RS, Statutory Interpretation in Australia (7 th ed, 2011)
Queensland Government, Building and Construction Industry Payments Agency,
Conditions of Registration of Adjudicators,
<http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/Adjudicators
ConditionsofRegistration.pdf> (accessed May 2013)
Queensland Government, Building and Construction Industry Payments Agency,
Conditions of Registration of an Authorised Nominating Authority,
293
<http://www.bcipa.qld.gov.au/SiteCollectionDocuments/Fact%20Sheets/ANAConditi
onsofRegistration.pdf> (accessed May 2013)
Queensland Government, Queensland Commission of Audit, Final Report—
Executive Summary (March 2013)
Queensland Parliament, Transport, Housing and Local Government Committee,
Inquiry into the Operation and Performance of the Queensland Building Services
Authority 2012—QBSA Review Panel Response to the Minister for Housing and
Public Works—Supplementary Information (April 2013)
Scurr MBE, Hon. AT, Inquiry into Security of Payment Within the Building and
Construction Industry (Queensland Government, September 1996)
Additional material used in preparation of Report
Adjudication Reporting Centre, Research Analysis of the Progress of Adjudication
Based on Returned Questionnaires From Adjudicator Nominating Bodies (ANBs)
And From a Sample of Adjudicators (Glasgow Caledonian University, Report No 10
June 2010)
Australian Government, Department of Education, Employment and Workplace
Relations, Australian Government Implementation Guidelines for the National Code
of Practice for the Construction Industry (August 2009)
Australian Procurement and Construction Council, National Code of Practice for the
Construction Industry, Towards Best Practice Guidelines (1999)
Bailey SC, I and Bell, M, Construction Law in Australia (Lawbook Co, 3rd ed, 2011)
Borg, P and Walton, L, Australia: Achieving practical justice: ‘upsetting the applecart’
of relief on jurisdictional challenges to adjudication decisions (Mondaq, 2 April 2013)
http://www.mondaq.com/australia/x/229866/Building+Construction/Achieving+practic
al+justice+upsetting+the+applecart+of+relief+on+jurisdictional+challenges+to+adjudi
cation+decisions (accessed 4 April 2013)
Brand, MC and Uher, T, “Follow-up empirical study of the performance of the New
South Wales construction industry security of payment legislation” (2010) 2(1)
International Journal of Law in the Built Environment 7
Carter, JW and Harland, DJ, Contract Law in Australia (Butterworths, 3rd ed, 1996)
Construction Industry Payment and Adjudication Act 2012 (Malaysia)
Council of Australasian Tribunals, Practice Manual for Tribunals (2nd ed, 2009)
Dun & Bradstreet, Trade Payments Analysis (December quarter 2012)
Ford, HAJ, Austin, Hon. RP, Ramsey, IM, Ford’s Principles of Corporations Law
294
(Butterworths, 9th ed, 1999)
Glover, J, United Kingdom: Defining The Difference Between On-demand Bonds and
Guarantees (Mondaq, 25 March 2013)
http://www.mondaq.com/x/227802/Building+Construction/Defining+The+Difference+
Between+Ondemand+Bonds+And+Guarantees (accessed 2 April 2013)
Hanks, P, Constitutional Law in Australia (Butterworths, 2nd ed, 1996)
Housing Industry Association, Summary of HIA’s Response to the
Recommendations of the Parliamentary Committee’s 2012 Inquiry into the Operation
and performance of the Queensland Building Services Authority, (January 2013)
Hunter, R, Ingleby, R and Johnstone, R, Thinking About Law: perspectives on the
history, philosophy and sociology of law (Allen & Unwin, 1995)
Kelly, R, Home Building Review Report (Queensland Government, Office of the
Deputy Premier, December 1990)
Pettersson S, The Annotated Building and Construction Industry Payments Act (Qld)
(Electronic Service – Adjudicate Today, March 2013)
Pettersson S, The Annotated Building and Construction Industry Security of
Payments Act (NSW) (Electronic Service – Adjudicate Today, March 2013)
Pyman, S, Queensland Building Service (Thomson Reuters, March 2013)
Pyman, SJ and Brown, NA, Annotated Subcontractors’ Charges Act (1999)
Queensland Government, Code of Practice for the Building and Construction
Industry (August 2000)
Queensland Government, Department of Public Works, Securing Our Industry's
Future: Report of the Implementation Steering Committee on Security of Payment in
the Building and Construction Industry (October 1997)
Risgalla, R and Smithies, T, Statutory Adjudication The Integrity of the NSW Building
and Construction Industry Security of Payment Act 1999 (Paper presented at
International Conference on Multi-National Construction Projects, Shanghai, China,
November 2008)
Victorian Government, Victorian Auditor-General, Compliance with Building Permits
(December 2011)
Victorian Government, Victorian Ombudsman, Own motion investigation into the
governance and administration of the Victorian Building Commission (December
2012)
295
ANNEXURES
296
ANNEXURE A:
Q1:
Q2:
Q3:
Q4:
Q5:
Q6:
Q7:
Q8:
Q9:
Q10:
Q11:
Q12:
Q13:
Q14:
Q15:
Q16:
Q17:
Q18:
Q19:
Confide ntial 1
Confide ntial 2
Confide ntial 4
Confide ntial 5
Confide ntial 6
No
No
No
No
No
Ye s
Ye s
No
Ye s
Ye s
No
No
Ye s
Ye s
No
No
Ye s
Ye s
Ye s
No
No
No
No
Ye s
No
No
Ye s
Ye s
No
Ye s
Ye s
No
No
Ye s
Ye s
No
No
Ye s
Ye s
No
No
Ye s
Ye s
No
No
Ye s
Ye s
No
Ye s
Ye s
N /R
N /R
Ye s
No
No
No
No
Ye s
No
No
Ye s
Ye s
No
N /R
No
Ye s
Ye s
No
No
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
Ye s
Ye s
No
Ye s
No
No
No
No
No
Ye s
Ye s
No
No
Ye s
Ye s
Ye s
Ye s
No
No
Authorise d
N om inating Authority
No
Ye s
No
No
No
No
Ye s
Ye s
No
No
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
No
No
Ye s
Ye s
No
Ye s
No
Ye s
No
No
Ye s
Ye s
Ye s
Ye s
No
No
No
Ye s
Ye s
No
No
No
Ye s
Ye s
No
Ye s
No
No
Ye s
No
No
No
Ye s
No
No
No
No
No
Authorise d
N om inating Authority
M ining &
Infrastructure
Building contractors/sub
Adjudicator
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Adjudicator
Building contractors/sub
Building contractors/sub
Adjudicator
Le gal - Building &
Construction
Building contractors/sub
Adjudicator
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Authorised
Nominating Authority
Building contractors/sub
Building contractors/sub
Resources Sector
Confidential 7
Adjudicator
Adjudicator
Building contractors/sub
Building contractors/sub
Building contractors/sub
Legal - Building &
Construction
Adjudicator
Adjudicator
Building contractors/sub
Building contractors/sub
Building contractors/sub
No
Ye s
No
No
No
Ye s
No
No
Ye s
No
Ye s
Ye s
N /R
N /R
Ye s
Ye s
Ye s
N /R
No
Ye s
Ye s
Ye s
Ye s
N /R
Ye s
Ye s
Ye s
Ye s
Ye s
N /R
Ye s
Ye s
N /R
N /R
N /R
N /R
N /R
N /R
Ye s
Ye s
Ye s
No
No
Ye s
No
No
No
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
No
Ye s
No
Ye s
No
Ye s
Ye s
Ye s
Ye s
No
No
Ye s
Ye s
No
Ye s
Ye s
Ye s
Ye s
No
No
Ye s
Ye s
Ye s
No
Ye s
No
Ye s
No
Ye s
N /R
Ye s
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
No
Ye s
No
No
No
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
No
No
No
Ye s
Ye s
No
Ye s
No
Ye s
No
Ye s
Ye s
Ye s
Ye s
Ye s
No
No
No
Ye s
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
Ye s
No
Ye s
No
Ye s
No
Ye s
No
Ye s
No
No
Ye s
No
No
No
Ye s
No
No
Ye s
No
No
Ye s
No
Ye s
No
No
No
No
No
No
No
Ye s
No
No
No
No
Ye s
No
Ye s
No
No
No
Ye s
Ye s
No
Ye s
Ye s
Ye s
Ye s
Ye s
No
No
Ye s
No
Ye s
No
Ye s
No
Ye s
No
Ye s
No
Ye s
No
No
No
Ye s
No
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
No
Ye s
No
No
Ye s
No
No
No
Ye s
No
No
No
Ye s
Ye s
N/R
No
N/R
No
N/R
No
N/R
No
N/R
No
N/R
Yes
N/R
Yes
No
No
No
Yes
N/R
No
N/R
Yes
N/R
No
No
Yes
N/R
No
N/R
No
N/R
No
N/R
No
N/R
Yes
N/R
No
No
Yes
Yes
No
Yes
Yes
No
No
No
N/R
Yes
Yes
N/R
Yes
Yes
Yes
No
Yes
Yes
No
N/R
No
No
No
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
No
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
Yes
No
No
No
Yes
No
Yes
Yes
Yes
No
Yes
No
N/R
No
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
No
N/R
N/R
Yes
No
No
No
No
No
No
No
No
No
No
Yes
No
No
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
No
No
No
Yes
Yes
UC
No
No
Yes
Yes
Yes
Yes
No
No
No
No
UC
No
Yes
No
No
UC
No
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
No
No
Yes
Yes
No
No
No
Yes
Yes
No
No
No
UC
Yes
Yes
Yes
N/R
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
No
No
N/R
Yes
No
No
No
Yes
Yes
No
No
No
Yes
No
Yes
N/R
No
Yes
Yes
Yes
No
No
N/R
Yes
Yes
Yes
Yes
Yes
N/R
No
Yes
No
Yes
No
No
No
No
No
Yes
No
No
Yes
No
No
No
Yes
No
No
No
N/R
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
N/R
No
No
N/R
Yes
No
N/R
No
No
N/R
No
Yes
N/R
Yes
Yes
No
No
Yes
Yes
No
No
N/R
Yes
No
N/R
No
Yes
N/R
No
Yes
N/R
No
N/R
N/R
Yes
Yes
N/R
No
No
N/R
No
No
N/R
No
No
N/R
No
No
N/R
Yes
Yes
N/R
No
Yes
No
No
No
Yes
Yes
Yes
Yes
No
Yes
N/R
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
N/R
Yes
N/R
N/R
No
UC
Yes
Yes
Yes
Yes
Yes
UC
Yes
Yes
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
No
297
Building contractors/sub
A uthorise d
N om inating A uthority
Building contractors/sub
Building contractors/sub
A djudicator
Building contractors/sub
Building contractors/sub
Building contractors/sub
A djudicator
A djudicator
A djudicator
Le gal - Building &
Construction
A djudicator
A djudicator
Le gal - Building &
Construction
Building contractors/sub
Re source s Se ctor
Le gal - Building &
Construction
Building
Re source s Se ctor
Building contractors/sub
A djudicator
Confide ntial 8
Building
A uthorise d
N om inating A uthority
Resources Sector
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Local Government
Adjudicator
Legal - Building &
Construction
Building contractors/sub
Resources Sector
State Government
State Government
Building contractors/sub
Building contractors/sub
Resources Sector
Building contractors/sub
Resources Sector
Resources Sector
Resources Sector
No
No
No
No
No
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
No
No
Ye s
No
No
UC
UC
No
Ye s
Ye s
Ye s
Ye s
No
Ye s
Ye s
N /R
Ye s
N /R
N /R
N /R
N /R
N /R
No
No
No
No
No
Ye s
No
Ye s
Ye s
No
Ye s
Ye s
No
Ye s
Ye s
Ye s
Ye s
Ye s
Ye s
No
N /R
N /R
N /R
No
N /R
No
N /R
Ye s
N /R
No
N /R
Ye s
N /R
No
No
Ye s
N /R
No
N /R
No
N /R
No
N /R
No
N /R
Ye s
N /R
No
N /R
No
N /R
No
N /R
No
N /R
No
N /R
No
No
No
No
No
Ye s
Ye s
No
No
Ye s
No
No
No
Ye s
No
No
No
No
Ye s
No
No
No
No
No
Ye s
Ye s
UC
Ye s
No
No
Ye s
UC
No
Ye s
Ye s
N /R
N /R
No
No
Ye s
No
No
No
Ye s
Ye s
Ye s
No
No
No
No
No
No
Ye s
Ye s
No
Ye s
Ye s
No
No
No
No
Ye s
Ye s
Ye s
Ye s
Ye s
No
No
No
Ye s
No
No
No
Ye s
Ye s
Ye s
Ye s
No
No
No
No
No
UC
N /R
N /R
UC
No
No
Ye s
N /R
No
No
Ye s
Ye s
No
No
No
No
No
No
No
No
No
No
No
Ye s
No
No
Ye s
No
No
No
No
UC
No
No
No
N /R
No
No
No
Ye s
No
Ye s
Ye s
No
Ye s
No
No
Ye s
Ye s
Ye s
Ye s
No
Ye s
No
No
Ye s
No
No
No
Ye s
Ye s
Ye s
No
No
No
No
Ye s
No
No
Ye s
Ye s
No
Ye s
No
No
Ye s
Ye s
No
Ye s
Ye s
No
No
No
No
Ye s
No
No
Ye s
Ye s
N /R
No
No
Ye s
No
Ye s
Ye s
No
No
Ye s
Ye s
N /R
Ye s
Ye s
No
No
No
No
Ye s
No
No
No
N /R
No
Ye s
Ye s
No
No
Ye s
No
No
No
Ye s
N /R
N /R
N /R
N /R
No
Ye s
Ye s
No
N /R
N /R
No
Ye s
No
Ye s
Ye s
No
No
No
Ye s
No
No
No
No
No
No
Ye s
Ye s
No
N /R
Ye s
No
N /R
No
No
Ye s
No
No
N /R
Ye s
Ye s
N /R
No
Ye s
Ye s
Ye s
Ye s
Ye s
No
No
Ye s
No
Ye s
N /R
Ye s
Ye s
N /R
No
Ye s
N /R
No
No
N /R
No
Ye s
N /R
Ye s
Ye s
No
No
Ye s
No
No
Ye s
N /R
No
Ye s
N /R
No
No
N /R
No
No
No
No
Ye s
Ye s
No
No
Ye s
No
UC
No
No
No
UC
No
Ye s
No
No
No
Ye s
No
Ye s
Ye s
No
Ye s
UC
Ye s
Ye s
No
Ye s
No
No
No
Ye s
Ye s
No
Ye s
Ye s
No
Ye s
No
Ye s
UC
Ye s
No
Ye s
Ye s
No
No
UC
Ye s
No
Ye s
Ye s
Ye s
No
No
N /R
No
No
No
N /R
No
No
No
N /R
Ye s
No
No
N /R
No
Ye s
No
N /R
Ye s
No
No
No
Ye s
Ye s
No
Ye s
No
Ye s
No
No
No
Ye s
Ye s
N /R
Ye s
Ye s
No
Ye s
Ye s
Yes
No
No
No
No
Yes
No
Yes
No
No
Yes
N/R
Yes
Yes
No
No
Yes
Yes
Yes
No
No
No
No
No
Yes
No
Yes
Yes
Yes
No
No
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
No
No
No
Yes
No
No
No
No
No
No
Yes
No
No
No
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
No
Yes
No
Yes
No
No
Yes
No
No
No
No
No
Yes
Yes
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
Yes
No
No
No
Yes
No
Yes
No
Yes
No
No
Yes
No
Yes
Yes
No
Yes
No
Yes
No
No
No
No
No
Yes
Yes
No
No
Yes
N/R
No
No
Yes
No
No
No
No
No
No
Yes
No
Yes
N/R
Yes
Yes
Yes
No
No
No
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
Yes
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
No
No
No
No
UC
Yes
Yes
Yes
Yes
Yes
Yes
UC
Yes
Yes
Yes
Yes
UC
UC
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
No
Yes
Yes
No
No
No
No
Yes
Yes
No
No
No
No
No
No
Yes
Yes
Yes
No
Yes
No
No
No
Yes
No
No
No
N/R
N/R
N/R
N/R
N/R
N/R
N/R
No
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
Yes
No
Yes
No
No
Yes
No
Yes
Yes
No
No
Yes
Yes
No
No
No
No
Yes
Yes
No
No
No
No
No
No
Yes
Yes
No
No
No
No
No
No
No
No
No
No
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
Repea t
Submis s
ions
Alternative
Responses - Provides
Other suggestions to
Security of Payment
Issues.
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
298
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Confidential 3
Other Responses Responses received
addressing other
issues - BSA and
other.
Building contractors/sub
Building contractors/sub
Building
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Non-Responses Responses received
not addressing any
matters.
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Unsupported
Responses Responses received
referring to BCIPA but
not answering
Discussion Paper.
Building contractors/sub
Building contractors/sub
BuildingBuilding Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
Building contractors/sub
299
Building contractors/sub
Building contractors/sub
TOTALS YES
TOTALS NO
TOTALS N/R
TOTALS UC
SUM
PERCENTAGE YES
PERCENTAGE NO
PERCENTAGE N/R
PERCENTAGE UC
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
Yes
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
N/R
20
61
45
1
127
16
48
35
1
40
36
51
0
127
32
28
40
0
18
59
47
3
127
14
47
37
2
32
45
47
3
127
25
35
37
2
24
53
48
2
127
19
42
38
2
53
28
46
0
127
42
22
36
0
64
18
44
1
127
50
14
35
1
35
50
41
1
127
28
39
32
1
33
50
44
0
127
26
39
35
0
49
30
48
0
127
39
24
38
0
35
40
51
1
127
28
32
40
1
44
34
46
3
127
35
27
36
2
29
43
52
3
127
23
34
41
2
77
17
33
0
127
61
13
26
0
38
39
50
0
127
30
31
39
0
37
39
51
0
127
29
31
40
0
17
57
52
1
127
13
45
41
1
34
37
54
2
127
35
42
49
1
127
27
28
29
43
2
33
39
1
300
ANNEXURE B:
Position
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Administrator
Director
Government Liaison & Communications
Administration
Manager
Manager
Director
Director
General Manager
Principal Policy Advisor
Administrator
Director
General Manager
Managing Director
Director
Director of Project Finance
Worplace Relations
Commercial Manager
Director
Executive Director - Qld
Members Advisor
Managing Director
Sector
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Adjudicator
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Authorised Nominating Authority
Building
Building
Building
Building
Building
Building
Building
Building
Building - Civil
Building - contractors/sub
301
Board member
CEO
Manager
Director - Construction Policy
Chief Executive
Senior Consultant
Executive Director - Qld
Chief Executive
Group Member
Workplace Relations Officer
State Manager - QLD
Manager
Commercial & Risk Director
Project manager
Project Manager
Senior Advisor
Administrator
Registrar
Building Commissioner
Solicitor
Partner
Committee Member
Solicitor
Solicitor
Solicitor
Solicitor
Commercial Lawyer
Senior Counsel - Mining & Metals
Senior Manager - Group Legal
Deputy CEO
Principal Consultant Counsel
Special Counsel
Legal Counsel
Chief Executive Officer
Legal Counsel
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Building - contractors/sub
Infrastructure
Infrastructure
Interstate Security of Payment
Interstate Security of Payment
Interstate Security of Payment
Interstate Security of Payment
Interstate Security of Payment
Legal - Building & Construction
Legal - Building & Construction
Legal - Building & Construction
Legal - Building & Construction
Legal - Building & Construction
Legal - Building & Construction
Legal - Building & Construction
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Senior Counsel - Mining & Metals
General Counsel & Company Secretary
Manager
Partner
Manager External Affairs - Metallurgical Coal
Vice President External Affairs - Metallurgical
Coal
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
Resource Sector
302
Manager
Resolution Manager
Policy Manager
Legal Manager
Senior Building Inspector
State Government
State Government
State Government
State Government
State Government
303
ANNEXURE C:
304
305
ANNEXURE D:
Comparison Table – Part 3 Procedure for recovering progress payments
Division 1 Payment claims and payment schedules
Service of the
payment claim
Within the later of the
period worked out under
the contract, or the period
of 12 months after the
construction work was last
carried out.
Current Legislation
Within the later of the
period worked out under
the contract, or the period
of 6 months after the
construction work was last
carried out.
“The existing scheme”
“The composite scheme”
Service of final
payment claim
Within the later of the
period worked out under
the contract, or the period
of 12 months after the
construction work was last
carried out.
Within the later of the
period worked out under
the contract, or within
28 days after the expiry of
the defects liability period
under the contract.
Within the later of the period
worked out under the contract,
or within 28 days after the
expiry of the defects liability
period under the contract.
Service of the
payment
schedule
Whichever is the earlier of:
Time required by the
contract or within
10 business days after
the payment claim was
served.
Whichever is the earlier of:
Time required by the
contract or within
10 business days after the
payment claim was served.
Whichever is the earlier of:
Time required by the contract or
within 15 business days after
the payment claim was served if
the payment claim was served ≤
90 days after the reference date.
Within the later of the period
worked out under the contract,
or the period of 6 months after
the construction work was last
carried out.
If the payment claim was served
≥ 91 days after the reference
date, the payment schedule may
be served 30 business days
after the payment claim was
served.
Making of the
adjudication
application
Provisions contained in
s.21(3)(c) remain unaltered.
Provisions contained in
s.21(3)(c) remain unaltered.
Provisions contained in
s.21(3)(c) remain unaltered.
Provision of the
adjudication
response
5 business days after
receiving a copy of the
adjudication application or
2 business days after
receiving notice of an
adjudicator’s acceptance,
whichever is the later.
10 business days after
receiving a copy of the
adjudication application or
7 business days after
receiving notice of an
adjudicator’s acceptance,
whichever is the later.
15 business days after
receiving a copy of the
adjudication application or
13 business days after
receiving notice of an
adjudicator’s acceptance,
whichever is the later; unless the
adjudicator grants a further
period not to exceed an
additional 15 business days
Ability to argue
matters in the
adjudication
response not
raised in the
payment
schedule
No
No
Yes, but claimant has a right of
reply.
Time to make an
adjudication
decision
10 business days after the
adjudicator received the
adjudication response (or
should have) or a longer
period if both parties agree
10 business days after the
adjudicator received the
adjudication response (or
should have) or a longer
period if both parties agree
15 business days after the
adjudicator received the
adjudication response (or should
have) or a longer period if either
of the parties agree
306