Owed Money? Weapons that get Contractors Paid!

Summary: Suspension of work's, Letter of demand, Material repossession, Creditors statutory demand, Adjudication, Factoring service, Property repossession, and more.

(Traditional forms of litigation and debt collection have not been included.)

Dear reader,

This article showcase's the best options you may have to retrieve funds from a non-paying customer.

I have assumed you are dealing directly with the principle of the works and there is no intermediary such as a developer or agent between you and the withheld funds.

I must also mention if you have a contract in place, you need to read it!

Boring I know, but Contracts are king!

Top tip

Listen to your contract on any Microsoft office application by; Clicking the review tab and select 'Read Aloud'. You’re welcome.

1. Suspend work’s

Under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), you are entitled to suspend work or the supply of related goods and services if;

-You’ve submitted a payment claim to the respondent but they do not pay you in full on or before the due date for payment.

Unfortunately the BIF act does not apply to; construction contracts involving domestic building work if a resident owner is a party to the contract and lives in or intends to live in the building; your contract will set out what you can do in this situation.

If your contract falls silent on this point nor could you become liable for liquidated or general damages under the contract; You may suspend works. (Prior notice recommended).

To suspend work under the BIF act, you must:

·?????Give the person who owes you money (the respondent) written notice of your intention to suspend work. The notice must state that it is made under the BIF Act 2017.

·?????Wait at least two business days before suspending work after giving your written notice.

You may wish to use the following notification and add any documents supporting the reason for suspension.

(Notification of suspension of works)

“Notification of intent to suspend works at _Address_ In 2 business days under the Building Industry Fairness (Security of Payment) Act 2017. We will require immediate payment in order to reinstate works.”

2. Charge interest

If your contract allows, charge interest on unpaid invoices beyond there due date.

The below statement is one in which I have used in the past on my invoices and I was surprised how many late paying builders, paid with the interest.

"2% interest will be charged on the commencement of each week this invoice exceeds its due date."

On the commencement of each week the builder exceeds the due date, I would simply follow up with an updated invoice including the additional interest.

3. Letter of demand

Address a letter of demand to the person whom owns the company your doing work for or if the works a personal project, the person whom ultimately the book stops. The signatory of a contract may merely be an agent of the end client.

-Ensure this letter will reach the person in question.

-Send the letter by registered post and request a 'signed proof of delivery' card. Keep this card in case you need it as evidence in court later.

Please see three templates for “Letters of demand” below:

Letters of demand can also be sent via debt collection agencies and lawyers on your behalf.

Side note, I've known people to make up their own headed paper of a fictional debt collection firm to send these kind of demands and it worked.

Keep a copy of the original documents and the signed letter of demand.

4. Material repossession

This is an option; I’ve seen it done and it can work BUT err on the side of caution. (This will be a more detailed topic due to the minefield you must navigate).

Firstly, check your contract to whom owns the materials used/ delivered to site.

It is relatively common for construction contracts to provide that:

-The Contractor is to supply everything necessary to execute the work under the contract. This includes the materials, equipment and machinery required.

- Title in unfixed plant or materials will pass to the principal when it is paid for (unless and until additional security for the unfixed goods is provided). For example, the unamended Australian Standard Contract 2124-1992 provides that unfixed plant and material will be property of the principal once paid for, free of any lien or charge.

Which could mean you still own the product and therefore may retrieve said product.

A critical consideration will also be whether the goods in question have been fixed to the land. That is because where the plant and equipment are fixed to land, it is typically no longer considered personal property of the contractor/subcontractor regardless of whether it has been paid for or not.

If your contract is silent on this topic or you don’t have a contract in place, the Sale of Goods Act 1896 (QLD) aka SOGA will apply.

Which uncommittedly states:

(1)When there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intended it to be transferred.

(2)For the purpose of ascertaining the intention of the parties regard is to be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.

For the 5 defining (& complex) rules see "Division 1-Transfer of property as between seller and buyer", section 21 on the link below.

To save you that headache consider the below;

quicquid plantatur solo, solo cedit*

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*Latin for, whatever is affixed to the ground belongs to the ground. (but you knew that).

The rule of thumb is; if its fixed its not recommended you retrieve.

Unless your king Arthur.

5. Creditors Statutory demand

A Statutory Demand is a formal written request for payment of debts owed by a company, issued pursuant to Part 5.4 of the Corporations Act 2001 (Cwlth) (‘Act’).?The core intention of the legislation is to prevent companies from trading whilst insolvent, and thereby incurring further debts which will not be repaid.

This is the step before putting a company (The debtor) into liquidation before the court system.

The value of your claim must be at minimum $4000 aud to utilise this mechanism.

Before following this procedure you must:

1- ascertain that the debt is due and payable and not in dispute.

2- Prepare the statutory demand and affidavit.

(Affidavit definition; a written statement confirmed by?oath?or?affirmation, for use as evidence in court.)

3- Serve the original statutory demand and affidavit to the company. (Not a copy).

Where a customer doesn’t reply to your statutory demand with 21 days, There is an automatic assumption of insolvency by the court.

The court may then appoint a liquidator to the company in question.

See Form 509H below which explains in more specific terms what's required.

There are many requirements you must fulfil before serving a Statutory Demand. Ensure your clear on the process before application or use legal assistance.

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?6. Hire a factoring service

If you’re short for money and don’t know when a customer will pay, an invoice factoring service can provide the money you need while you’re waiting.

With a factoring service, you sell your accounts receivable to a company for a certain percentage of the accounts’ value (usually 70% to 90%).

The service then advances you the money within a few days.

The factoring service proceeds to collect your customers’ payments and sends the rest of the cash to you, minus a service fee.

7. Adjudication

If the invoice amount is in dispute. You could propose adjudication to resolve the issue.

Although this will come at a cost. It will be marginal compare to court proceeding and is far quicker. An adjudicator is required to decide matters referred to them?within 28 days.

The Qbcc do offer adjudication but this is not applicable in the case of a residential property owner. There are many alternatives available.

Guide to an adjudication process:

8. Charge over property

This step would become available to you if you've been awarded funds in adjudication but the payment remains unpaid past the due date.

I'd suggest the Qbcc's video explanation for more information on this matter.

Look, I understand these aren't bulletproof methods of recovering funds but they are the best, cost effective and legal methods currently available to you.

Do you want to eradicate this problem from happening to you in the future?

Simply register your next project with Wediate below and take back control of your cashflow!

Author

Reece Barnes

Founder of Wediate

& Construction Professional

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