May 20, 2013

All construction industry participants, including principals, developers, contractors, suppliers, equipment hirers, project managers and consultants should be familiar with the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) as it may apply to circumstances of which you may not be aware.

Objects and operation of the BCIPA

The BCIPA establishes a statutory entitlement to recover a progress claim for construction work and/or supply related goods and services under a construction contract.[1]

This is achieved through the speedy adjudication of disputed progress claims by an appropriately qualified and independent adjudicator.

When does the BCIPA apply?

The BCIPA applies in circumstances where there is a “construction contract”, defined by the legislation to mean:

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.
(emphasis added)

 “Other arrangements”

The definition of “construction contract” and the words “other arrangement” within the definition have been interpreted by the courts on a number of occasions.

The courts have established:

  • A BCIPA “construction contract” means something beyond what is traditionally thought of as a contract, and picks up arrangements which otherwise may be enforceable at common law.
  • For there to be an “arrangement” for the purposes of the definition of “construction contract”, one party to whatever the arrangement is must undertake to perform construction work for another party to that arrangement.
  • An “arrangement” may exist alongside a formal contract, and that under the arrangement, different liabilities may attach to those existing under the formal contract.

Examples of “other arrangements” under BCIPA

A number of cases have considered the meaning of “other arrangement” under equivalent legislation in NSW (which is enacted in substantially similar terms to the BCIPA).

Direct payment provisions

One case[2] considered a situation involving a developer, a head contractor and a subcontractor.  The head contractor and subcontractor entered into a formal contract (to which the developer was not party) however the contract contained a condition that the subcontractor’s progress payments would be made directly by the developer.  In accordance with this condition, the subcontractor submitted progress claims to the developer and the developer paid the subcontractor directly.

After the head contractor went into liquidation, the subcontractor submitted a payment claim under BCIPA to the developer. The developer denied the validity of the payment claim on the basis that it was not a party to a “construction contract” under the BCIPA.

The court found that the BCIPA claim was valid because there was an arrangement under which the subcontractor undertook to carry out construction work and supply related goods and services for the developer (and the developer paid for the work performed). This amounted to an “other arrangement” within the meaning of “construction contract” for the purposes of the BCIPA.

Telephone negotiations

Another recent case[3] involved a developer, head contractor and a consultant. During a telephone conversation between the parties, the developer said he would “make sure” the consultant “gets paid”. After the head contractor became insolvent, the court determined the telephone conversation constituted an “arrangement” between the parties that was a “construction contract” under BCIPA. The consultant’s BCIPA payment claim was therefore valid, notwithstanding the conversation or “arrangement” may not have amounted to a construction contract (in the traditional sense of the term) enforceable at law.

Tips for industry participants

Claimants

The meaning of “construction contract” is so wide that even informal, loose arrangements may be captured by the BCIPA, providing a statutory right to recover progress claims through adjudication.

Respondents

One should be careful with language used when negotiating commercial deals on site or considering requests to make direct payments to parties (e.g. sub-subcontractors and suppliers) with which there is no contract. Doing so could inadvertently submit you to the jurisdiction of the BCIPA.

The authors would like to thank Andrew Hope for his contribution to this article.


[1] Building and Construction Industry Payments Act 2004 (Qld) s 7.

[2] Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd & Anor [2005] NSWSC 45.

[3] IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1439.