Hanrick Curran Directors and Client Managers recently received a briefing on the changes to Building and Construction Industry Payments Act (BCIPA) which highlighted some key impacts for both suppliers and recipients of construction work or related goods and services to construction work.
Litigation specialists in ClarkeKann, lead by Partner Sarah Davies, explained the BCIPA changes in the amending Act will apply to contracts entered into on or after 1 October 2014. The aim of the amending Act is to address widespread dissatisfaction with the way adjudicators are appointed by claimants to resolve disputes and what was felt to be unreasonable timeframes for responding to adjudication applications.
The purpose of the BCIPA is to ensure that persons who carry out construction work under a construction contract, or who provide related goods and services in relation to construction work, are entitled to receive progress payments in an expedient manner. It also provides a clear path for the resolution of a payment dispute.
There are a number of key changes to the BCIPA.
Time to submit payment claims
Payment claims must now be served within six months after the construction work to which the claim relates was last carried out (unless the contract allows a longer period). For contracts entered into before 1 October 2014, claimants have 12 months to make a claim.
Final payment claims may only be served within 28 days after the expiration of the defects liability period, six months of completing all construction work (or supplying all goods), or the period stated in contract (whichever is later).
Introduction of Dual Model – "standard" and "complex" payment claims
Payment claims will fall under one of two categories – either standard or complex. Complex payment claims are those claiming more than $750,000.
Depending on the classification of the payment claim as standard or complex, two key matters are affected:
1. The time to prepare the payment schedule and adjudication response
Under the amendment Act, service of payment schedules in respect of standard claims continues to be 10 business days. However, for complex payment claims, payment schedules are to be served within 15 business days. Similarly, adjudication responses will need to be lodged within 10 business days for a standard claim (up from five business days) and within 15 business days for adjudications of complex claims. Extensions of time can be sought of up to three weeks.
2. Providing new reasons for withholding payment
Respondents are presently prohibited from including in the adjudication response reasons for withholding payment which are not identified in the payment schedule. The amendment Act will remove that prohibition for complex payment claims.
This is significant and eliminates adverse consequences which flow from preparing an incomplete payment schedule under time pressure in response to complex claims. Respondents are often constrained in their ability to properly defend a claim at adjudication because a reason for withholding payment has not been adequately described in the payment schedule.
Claimants will have 15 business days to respond to any reasons for withholding payment included in an adjudication response that were not included in the payment schedule (and can also apply for an extension of up to three weeks, if an extension is necessary, due to the volume or complexity of the new reasons, to adequately reply).
Second chance to serve payment schedules
Claimants will need to give notice to respondents before commencing court proceedings to recover an unpaid portion of a claimed amount where no payment schedule is provided by the respondent, or there is an unpaid scheduled amount.
That notice must state that the respondent may serve a payment schedule on the claimant within five business days after receiving the notice. No such notice needs to be given for payment claims issued under pre-1 October contracts.
- Suppliers should ensure invoices are issued in accordance with the BCIPA to rely on the adjudication procedures and other proceedings provided for by the BCIPA
- Recipients should review standard contracts to ensure the contract provides sufficiently favourable methods of service (e.g., service of notices by email) to ensure payment claims are received correctly and can be processed promptly to comply with the short timeframes under BCIPA.
- Suppliers and recipients should ensure their contract administrators know and understand the new timeframes under the Amendment Act and put procedures in place to identify all contracts they apply to.
Hanrick Curran is an active provider of Accounting and Audit services to the Building and Construction industry. Should you require additional information on the matters raised in this article, please speak to your usual Hanrick Curran adviser or ask for Matthew Green or Tim Taylor.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.