Settling BCIPA claims – fraught with peril

Written on the 15th of February 2010 by Warren Jiear

In a recent newsletter, we highlighted the technicality surrounding the operation of the provisions of the Building and Construction Industry Payments Act 1994 (‘the Act’). In a recent decision under the Act between National Vegetation Management Solution v Shekar Plant Hire Pty Ltd (2010) QSC 3, a builder found that their attempt to resolve a payment claim only resulted in them having a judgment against them.

Background

Under the Act, a payment claim can be submitted to a party owing money for building work. If a party serves a payment claim (‘the claimant’), the other side is entitled to respond with a payment schedule within ten business days of receiving the payment claim. The payment schedule must set out what they are willing to pay and (if there is any) why it is different to the amount claimed. If they accept a payment schedule, a claimant can still pursue the difference in court. If a contractor does not respond with a payment schedule within the ten days, then relevantly:

• they become liable to make the payments detailed in the payment claim; and
• the claimant is entitled to recover the sum claimed in a court and the party served with the payment claim is ordinarily not allowed to defend the proceedings.

There is no set form of a ‘payment claim’ or ‘payment schedule’ and often a payment claim will simply be an invoice with the words ‘payment claim pursuant to the Building and Construction Industry Payments Act’ or words of a similar effect. The aim of the legislation is to establish cash flow within the industry – ie pay now, argue later.

Facts

The claimant sent invoices in August 2009 which were payment claims. On 7 October 2009, the solicitors for the respondent sent a without prejudice letter to the claimant setting out an offer to settle the matter in respect of the payment claim. The letter also outlined issues with the payment claim and reasons why certain amounts were not due. Importantly, the offer was not a payment on account, rather it was to finally settle the claim.

Hearing

In court proceedings that later commenced, the crucial issue was whether the solicitor’s letter was really a ‘payment schedule’ within the meaning of the Act. We won’t deal here with arguments about whether it was not admissible because it was supposed to be a ‘without prejudice’ communication, which are usually privileged between the parties.

The judge found that there is a substantial difference between a payment claim under the Act and a letter written by a solicitor with an offer that is open for seven days to pay the claimant. Her Honour found that since the proposal was to finally settle the claim, there was no prospect of any further proceedings over the amount due, the letter was not a payment schedule. That meant that the party served with the payment claim was liable to pay the full amount of the claim (roughly $500,000). That amount was recoverable as a debt.

Conclusion

This decision highlights the technical nature of the area (even though designed to be operated by those in the industry). Should you have any questions or are in receipt of a payment claim, we suggest that you seek urgent advice about it.