It's always the poor subbie who cops the brunt in tough times

31st January, 2012

IT'S ALWAYS THE POOR SUBBIE WHO COPS THE BRUNT IN TOUGH TIMES:

The "who, what, when, where, how and why" of subcontractors' charges.

December and January are notoriously tough times for getting paid. This is particularly the case in the building and construction industry, known for its tight margins and even tighter deadlines. While the majority of contractors try to do the right thing, it is often the subcontractor at the bottom of the contractual chain who cops the brunt in tough times. However, the "poor subbie" has a couple of "tools" to recover debts owed for construction work.

WHAT are your options?

BE AWARE! If you are a construction subcontractor who has had problems securing payment for goods and services in the past, there are options available to you!

The Building and Construction Industry Payments Act 2004 ("BCIPA") gives subcontractors the right to claim prompt progress payments and fast-track adjudication of payment disputes for completed work under a construction contract by serving payment claims on the contractor or builder (exclusions apply).

However, a second and often forgotten option for pursuing payment is to lodge a notice of claim of charge under the Subcontractors' Charges Act 1974 (Qld) which allows sub-contractors to recover payment owed by a contractor (such as a builder) from higher parties in the contractual chain.

WHY should you consider a subcontractor's charge?

BUT...What happens if the builder or contractor is suffering financial difficulty, lacks the ability to pay you and is facing likely liquidation and / or bankruptcy? Such circumstances usually result in the subcontractor recovering very little money (if any). However, in our experience, the lodging of a subcontractor's charge can improve your chances of recovering money for the subcontract work.

Essentially, a subcontractor's charge under the Subcontractors' Charges Act 1974 is a form of statutory security which enables a subcontractor to recover a debt owed by a contractor for building works directly from the employer (such as a developer or owner) who engaged the contractor to perform the building works. Therefore, by allowing the subcontractor to recover the debt owed directly from the employer (subject to certain conditions), it allows a subcontractor to potentially recover money from a pecunious developer and effectively by-pass the insolvent builder. Furthermore, a valid charge protects your interests as it is regarded as a secured debt in the event of insolvency.

WHEN should you consider giving a subcontractor's charge?

A notice of claim of charge may be given although the work is not completed or the time for payment of the money in respect of which the charge is claimed has not arrived, but if the work is completed, it must be given within 3 months after such completion. A notice of claim of charge in respect of retention money only must be given within 3 months after the expiration of the period of maintenance.

WHO needs to be aware?

It is important for all participants in the building and construction industry to be aware of the procedures available to subcontractors to recover debts under a construction contract.

For subcontractors, both a BCIPA claim and a subcontractor's charge provide an effective and efficient means of recovering money owed under a construction contract. When considering a payment dispute, an election must be made between these options and in deciding, we consider the solvency of the parties involved a crucial consideration. However, irrespective of which option is selected, stringent time limits and procedural requirements apply and must be adhered to. In such circumstances, it is always advantageous to seek legal advice.

For contractors, employers, builders and developers, if you receive notices under either of these two procedures you are subject to strict time limits in which to dispute any claim and it would be wise to seek legal advice regarding your rights under the contract and statute so as not to unwittingly prejudice your position.

For accountants, when dealing with subcontractor clients who are experiencing cash flow issues it is prudent to recommend your client seek legal advice as a claim under the Subcontractors' Charges Act 1974 may result in a recovery even where the builder may enter into liquidation.

HOW do I get more information and WHERE do I go from here?

At Scoglio Law we can assist you with all aspects of construction dispute resolution - from issuing a Notice of Claim of Charge or BCIPA claim through to commencing court proceedings.

For more information on subcontractor's charges, please visit our previous article, Subcontractor's charge - an easier way to secure your money.

If you are a subcontractor who is looking to recover money owed, a contractor who has been given notice of a claim, or simply want more information about how our processes can work with you, please contact Tony Scoglio of Scoglio Law on (07) 3833 2100 or email tony@scogliolaw.com.au.

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