This is the second article in a series that focuses on the Building Industry Fairness Act of 2017 (BIF Act) and the Queensland Building and Construction Commission Act 1991 (QBCC Act) both important pieces of legislation that safeguard payment practices for those running businesses in Queensland’s building sector.
If you missed the introductory article on Payment Claims, it’s worth reading now to get up to speed before continuing with this one.
Understanding Payment Schedules
Under the Building Industry Fairness Act of 2017, both parties involved in a construction contract have certain payment obligations. The party who is performing the work must submit a Payment Claim to request payment for the work they have completed or costs incurred during each billing period.
The other party, known as the respondent, must respond to this Payment Claim by providing a Payment Schedule within, at most, 15 business days.
What actually is a Payment Schedule?
A Payment Schedule is a legally required document that must be sent in response to an issued Payment Claim in the construction industry. The Payment Schedule must be provided, at most, within 15 business days of receiving a Payment Claim.
Let’s break down what a Payment Schedule includes and why it’s so important:
Definition and Purpose:
A Payment Schedule is the response to a Payment Claim. It performs two main functions:
- It details the amount that’s going to be paid to the claimant, acting as a formal acknowledgment of the claimed payment amount.
- In cases where the full payment is not agreed upon, the Payment Schedule explains why certain amounts have been withheld or reduced.
Legal Requirements:
Under the Building Industry Fairness Act, responding to a Payment Claim with a Payment Schedule isn’t just good practice — it’s a legal requirement. The Act stipulates that the Payment Schedule must not only specify the amounts being paid but also respond to each line item in the Payment Claim.
Here’s what the BIF Act says about preparing a Payment Schedule:
- It must clearly identify the Payment Claim it’s responding to (generally by stating the reference number of the Payment Claim, the date of issue noted on the Payment Claim, or the Payment Claim number.)
- The Schedule must clearly state the amount the payer intends to pay and when.
- If this figure differs from the Claim, the Schedule must list a clear explanation for each deduction or rejection by way of specific legal or contractual reasons for payment adjustments or disputes
- The payer must issue the Payment Schedule within, at most, 15 days of receiving a Payment Claim. This period can be shorter if provided for in the contract.
Do I need to issue a Payment Schedule each time I receive a Payment Claim?
Yes, under the Building Industry Fairness Act, a Payment Schedule must be issued for every Payment Claim received. Failure to do so can result in penalties and legal consequences. The only exception to this is if the Respondent pays the amount of the Payment Claim in full.
What happens if I don’t issue a Payment Schedule?
If you fail to provide a Payment Schedule within 15 business days of receiving a Payment Claim, the BIF creates “sudden death” consequences for you. You will be legally required to pay the full payment amount requested in the Claim, and you are obligated to pay this even amount if you dispute it.
Sections 77 and 78 of the BIF explain how the contractor would be entitled to recover the full value of the claim as a liquidated debt, and that your ability to dispute the claim is very limited.
Specifically, you will be limited to only raising ‘jurisdictional issues’ with the validity of the claim. For example, asserting that it was not provided to you properly, or that it did not contain sufficient detail, etc. You will not be able to contest the substance of the claim, including by saying that the works were defective or incomplete.
This is why it’s crucial to understand the importance of issuing a Payment Schedule in response to every Payment Claim received.
Can the amount in my Payment Schedule be disputed?
Yes, if the claimant doesn’t agree with the amount stated in your Payment Schedule, they can take further action to resolve the dispute. This can include initiating adjudication proceedings or seeking assistance from the QBCC.
How much detail does my Payment Schedule require?
Your Payment Schedule must be detailed enough to provide a clear explanation for any adjustments or rejections of the Payment Claim, but it doesn’t need to be overly complicated.
Clearly stating the specific legal or contractual reasons for any deductions or rejections should be done carefully and thoroughly as, should you need to respond to an adjudication claim, you will be limited to rely only on only the reasons you gave for non-payment in your Payment Schedule and won’t be able to introduce new reasons.
Importantly, you must ensure that you respond to every single line item of the Payment Claim individually in your payment schedule. Global or generic responses to numerous line items may prejudice your ability to contest those claims in subsequent legal proceedings.
Responses in Payment Schedules which are non-final, or say words to the effect of “this claim will be considered once something else happens” are unacceptable as they do not provide a response to the substance of the claim item. The Respondent to a payment claim must make a decision on each claim item in the Payment Schedule and are not permitted to ‘hedge their bets’ by stating that a decision on the claim item will be made in future.
There are many examples adjudication outcomes where the consequences of failing to include all the reasons for non-payment have resulted in severe financial consequences. On such disastrous outcome occurred in the following decision – Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133.
When will a poorly prepared Payment Schedule start to Affect me?
A poorly prepared Payment Schedule will most likely harm you if the claimant commences an adjudication claim under the BIF Act. We have a detailed article about Adjudication claims here.
In short, an adjudicator considering the adjudication claim is far more likely to find against you if your Payment Schedule is poorly prepared, and you won’t significantly restricted in defending the adjudication claim if you haven’t given a proper Payment Schedule.
Conclusion
If you’re party to a construction contract in Queensland, it’s essential to understand the importance of issuing a Payment Schedule within 15 business days of receiving a Payment Claim. Failing to do this can leave you dealing with significant legal and financial consequences.
Simpson Quinn lawyers have extensive experience in providing advice and assistance on all matters related to the Building Industry Fairness Act. Contact us today for any legal guidance or representation you may need regarding Payment Schedules, Payment Claims, or any other aspects of construction contracts.