Is the BCIPA broken? Debunking 5 misconceptions about the adjudication of construction claims...

The BCIPA refers to the Building and Construction Industry Payments Act 2004 (QLD) ('BCIPA'). It provides the legislative framework (rule book) for the adjudication regime in Queensland.

In a nutshell, the BCIPA was designed to be a fast tracked alternative to debt recovery to avoid the need to use a court or tribunal. If you're a builder, subcontractor or a supplier and you're not being paid (or you've been short-paid) under a commercial building contract, the BCIPA is the fastest way to hurry a resolution and shake free a payment, if you are entitled to one.

The BCIPA got a really bad wrap during the Project Bank Account sessions that the Department of Public Works held for their proposed QLD Building Plan. I personally attended the Caboolture session on 21 February and there were five sweeping statements made by the Department that day that I believe urgently need debunking:

1) Even if you win, the other party can simply not pay

While technically correct, the other party can still withhold payment after an adjudicator makes a decision, what wasn't made apparent was how simple the solution to this can be using BCIPA, as opposed to what is involved if you win a court case, and the other party still doesn't pay (which also happens).

If the other party doesn't pay, a claimant can apply to the Queensland Building and Construction Commission (QBCC) for an adjudicator's certificate - I got one last month in a 2 business day turnaround. The certificate gets lodged with the appropriate court (this will depend on the amount for payment on the certificate) accompanied by a sworn affidavit (Form 46 under the Uniform Civil Procedure Rules 1999 section on the QLD Courts Forms Webpage).

The court will stamp your copies, and you can then take one stamped copy to the QBCC that very same day and lodge a complaint against the Respondent with the Financial Investigations Unit to report the unpaid debt. All of this can take place in less than a week.

The consequences for the Respondent if they still fail to pay the amount, is that the QBCC can decide to apply demerit points against the Respondent's QBCC license for that unpaid debt. If a licensee incurs enough demerit points, they can have their license taken off them so it's quite an incentive to pay.

If this still doesn't compel the Respondent's payment of the debt, you can use the Judgement Debt that you have requested from the court in the same way that an unpaid Judgement Debt arising from a decision in a court is used, but yes, you'll need a lawyer to help you with that. The key thing to note here is, because of BCIPA, you've completely skipped the need for a hearing in a court for a decision.

By comparison, chasing an unpaid debt through court involves engaging a solicitor and a barrister to handle your pleadings, discovery documents, a court ordered mediation/conciliation, all just to get to a hearing and is likely to take anywhere between six months and several years, depending on the complexity of the case.

2) That only half of the Claimants using BCIPA are successful in receiving a decision

Again, technically a correct statement - 50% of claimants don't get a decision but that's not because they've been unsuccessful! It's because typically, in more than 45% of instances, Claimants withdraw their applications because the Respondent simply pays them, or they settle for an agreed amount.

The other 5% weren't punished either, it was just at the time that the statistics were published 5% of adjudications were pending a decision.

You can read all about adjudication statistics for yourself on the QBCC website where they publish their Monthly Adjudication Statistics.

3) That adjudication isn't fast anymore because the 2015 amendments mean that a Respondent can change its reasons as many times as the adjudicator lets them

This is completely untrue. The 2015 amendments provided a 'second chance' for a Respondent to submit a payment schedule, but that is only in circumstances where it didn't submit one in the first place. Each party only gets one bite of the cherry.

The parameters of a dispute for adjudication are defined by the details/matters raised in the Payment Claim and the Payment Schedule. Both parties are barred from raising any new reasons outside of what is written on the face of those two documents.

In considering the legal rights of the parties in respect of the facts in issue between the parties as set out in the Payment Claim and Payment Schedule, an adjudicator can only look to the provisions of the BCIPA, the Queensland Building and Construction Commission Act 1991 (QLD) (to the extent that it applies), the construction contract and the submissions made by the parties in their adjudication application or response. New facts in issue can't be raised and if they are, can't be considered.

The only way that the standard adjudication time frames are extended is if an adjudicator asks for further information about a particular inclusion in a party's submissions, and in doing so they request an extension of time to consider that further information. The thing here is, the parties still can only answer the question posed by the adjudicator, and can't go back to the well for a whole raft of new arguments.

4) Adjudicator's fees are so high that the cost of chasing money in BCIPA isn't worth the exercise

This is a matter of opinion, and claimants should note two trends prevalent in the Monthly Adjudication Statistics when considering a commercial decision regarding cost/benefit of using BCIPA:

1) In the table typically titled Adjudicator Fee Statistics, note the percentage of the fee to be paid by the respondent compared to that of the claimant. Historically, the claimant is far better off than the respondent.

2) In the table typically titled Average Adjudicator Fee as % of Claim note that in circumstances where a claimant is seeking to recover less than $5,000.00, an adjudicator's fee is likely to be up near 50% of that amount but that above that there is a steep decline in adjudicator's fees. This is because an adjudicator, before he/she can even consider whether or not a claimant is entitled to an amount, must first check the rules of the BCIPA to make sure they have the jurisdiction (legal authority) to make a decision in the first place.

So there is a minimum number of hours that an adjudicator will need to spend, regardless on the value of the claim, in order to reach a decision. It's the 'get-out-of-bed' factor, and in all fairness, adjudicators are entitled to be paid.

It also pays to note that in 67% of instances, those fees will be paid by the respondent anyway, so hardly a deterrent for a claimant to chase their money.

5) You'll spend more with lawyers to use BCIPA than its worth to chase the money

I say, not at all true - unless you choose to. But there are other options.

Firstly, adjudication was designed to be a user based system, and there is no requirement for legal submissions in an adjudication.

Secondly, quite a lot of adjudicators have no form of legal training whatsoever, although they all must undergo adjudication training to become an adjudicator. The spirit of construction adjudication was intended to be that industry people would hear industry disputes, and in my experience serving up a bowl of legal jargon to a retired engineer or quantity surveyor rarely sways the decision in your favor.

Legal submissions are time consuming to consider, and expensive to prepare, so unless you're a respondent and you're looking to have a claimant kicked out of adjudication on a jurisdictional argument, lawyers are overrated.

The BCIPA can be a bit scary to navigate if you haven't dealt with it before, but for the most part standard contract administration procedure can ensure BCIPA compliance is maintained very simply, which means that if ever you do need to chase an unpaid amount, your right to use BCIPA should be preserved.

Should you find yourself needing to use adjudication, or you're a respondent and you've been served with an adjudication application, I can assist you in preparing your submissions.

If you would like a no-obligation run down on how you can best adjust your administrative procedures to preserve your BCIPA rights, contact me by email at [email protected] to arrange a meeting.