As a subcontractor claimant – what are my biggest risks?
Updated: Jul 17, 2020
As subbie lawyers, we have witnessed our fair share of subbie tragedies. We have seen families losing homes, businesses liquidated, personal bankruptcy and licences lost. Sometimes the tragedies are completely uncontrollable, but frequently, subbies have come to us as a last ditch effort; their risks, which were controllable 6-12 months earlier have at this last ditch stage now become an avalanche three quarters of the way down the cliff.
For us it is both heart breaking and frustrating. With so many of our enforcement tools time barred, it is like changing a tap washer with both hands tied behind our backs; it is difficult, maybe possible, but it takes time, which increases your costs and your risks.
This article explains how to manage your risks before they control you, your business and your family’s future, because we don’t want to see any more subbie tragedies.
Basically, as we see it, there are two massive risks for subcontractors:
Not getting paid.
Not enforcing your right to be paid in time.
However, only one of these risks you have complete control over. That’s right, it’s when you choose to enforce your right to be paid.
As subbie lawyers, we understand:
You don’t want to enforce a debt unless you absolutely have to; and
You are always concerned about keeping your relationships with your headcontractors for the next job.
As a result, it can be months before you even look to consider enforcing a debt or a dispute. Let’s face it, in our industry it is not unknown for subbies to wait an additional 60 to 90 days before being paid. Despite "pay when paid" being illegal since 2004, it has run rampant for years.
So how do you take control?
1. Identify non-payment
Under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) this is going to be a lot easier because unless a payer is going to pay you in full by the due date, the payer MUST give you a payment schedule within 15 business days of receiving your payment claim.
The payment schedule must:
Identify the payment claim it relates to;
State the amount the payer is going to pay you; and
If the amount the payer is going to pay you is less than what you claimed the payer MUST state its reasons for not paying you.
If the payer does not send a payment schedule to you within 15 business days, the payer is not only liable for the full amount you claimed for, but also could be fined by the QBCC up to 100 penalty units.
2. Know your Time Frames and your Rights under the BIF Act
During the BIF consultation period the Government was told that the endorsement, “This is a payment claim in accordance with the Building and Construction Industry Payments Act 2004”, was a barrier for subcontractors to use security of payment. Subcontractors felt pressure from payers to not put the endorsement on their invoices. So as part of the BIF Act changes this endorsement requirement has been removed.
In other words, under BCIPA, the trigger for security of payment to start working was a positive action by the subcontractor to send a payment claim with the endorsement. This usually meant the subcontractor knew that BCIPA at least existed and hopefully knew that security of payment and the tight time frames had been triggered.
Under the BIF Act, the first invoice sent after the reference date (the date from which you are entitled to send a payment claim) is more than likely to be considered a payment claim. The subcontractor does not need to know about the BIF Act to trigger its security of payment protections (which is great), but also at the same time its tight time frames are triggered too (not so great).
This means whether you intended it or not, you have probably sent a payment claim since 17 December 2018, but do you know:
Which of the invoices you have sent are valid payment claims?
What is the correct action to take in response to receiving a payment schedule or not?
What time frames apply to which action?
Knowing the correct actions (or tools), your time frames and acting quickly are going to be crucial in this new BIF world.
What are your tools?
For debt collection your tools include:
Suspension of work;
Adjudication (where the payer cannot raise a defence because the payer has not provided a payment schedule); and
Court proceedings (where the payer cannot raise a defence or counterclaim because the payer has not provided a payment schedule).
For disputes, your tool is adjudication.
What are the time frames?
The longest time frame to take action under the BIF Act is 30 business days, which is 6 weeks, and the shortest is 20 business days, which is 4 weeks. That means that if you want to enforce your right to be paid, you need to be contemplating what you are going to do, within 2-3 weeks of finding out about a non-payment.
To see how the tools and the time frames work, see the link: [add link]
3. Take Action
The BIF Act, like all security of payment, is about increasing cashflow fast. So if you are a claimant and you don’t keep up with the BIF Act’s time frames – you can kiss goodbye to using its protections.
I hear what you are saying, “But Fionna, the BIF Act is about effecting cultural change in the industry to make the payers pay on time.”
That is the purpose and it can do that, but there is still a responsibility on YOU, the claimant, to enforce your right to be paid within the strict time frames.
There is still a responsibility on you to know how the law works to your benefit – otherwise, 6 months after you leave site, don’t expect security of payment to help you.
In other words, to effect cultural change in Queensland’s building and construction industry, subbies and tradies are going to have to change their behaviour too. This means not waiting to be paid and instead using the BIF Act’s enforcement measures to get paid.
Do you want to know more about how you can use the BIF Act to get paid? Check out our new video based online course that we created to help subbies and tradies just like you! Go to https://courses-arbuildinglaw.thinkific.com to find out more.
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