SUBCONTRACTOR CHARGES QLD STEP-BY-STEP GUIDE

WHAT IS A SUBCONTRACTOR’S CHARGE?

If you have done ‘work’ as a subcontractor, you may be eligible to lodge a subcontractor’s charge over money that would be payable to the head contractor by a principal.

WHEN TO SUBMIT A SUBCONTRACTOR’S CHARGE

Prior to issuing the Notice of Claim you must ensure that monies are ACTUALY owing to you as a Subcontractor for ‘work’ performed as defined in section 105 of the Building Industry Fairness (Security of Payment) Act 2017 (“Act”).  

HOW TO IDENTIFY THE PRINCIPAL

It is not unusual for a Subcontractor to not know who the principal is on a construction project as most contractors only have eyes for the party they contracted with (typically the Head Contractor). This perception needs to change if subcontractors want to get paid for the work they perform, especially if the Head Contractor is a small cog in a bigger operation (make this process your contingency plan). 

To identify the Principal (if not known), the Subcontractor should serve a section 119 BIFSOPA and a request for information notice on the Head Contractor, asking the Head Contractor to:

1.    name of the person who engaged the Head Contractor under the contract;

2.    state the address of:

(a)         the person’s place of business; or

(b)         if the person does not have a place of business—the person’s place of residence;

3.    state the information about the contract that would enable the subcontractor to give a notice of claim to a person under section 122 (Notice of Claim);

4.    advise as to whether there are any securities in existence for the contract; and

5.    if known to the Head Contractor, the name and address of the holder of each security mentioned in paragraph (4).

A failure by the Head Contractor to provide the above information is an offence and should be reported to the QBCC to investigate… you can do this by using the notice of offence form on myQBCC.

NOTICE OF CLAIM

The result of the Form 119 notice should be such that a subcontractor receives all the relevant information needed to submit a section 122 Notice of Claim to serve on the Principal and Head Contractor (you must serve both parties).

To be clear, a Notice of Claim form MUST be submitted using the approved form, which can be found here (https://www.qbcc.qld.gov.au/sites/default/files/S122_Notice_Of_Claim.pdf).

The subcontractor MUST give the Notice of Claim to the person obliged to pay the money under the contract and the Notice of Claim:

1.    must state the amount of the claim;

2.    include details of work done;

3.    may be given even if the work is not yet completed, or payment of the money is not yet due by the contractor;

4.    must be certified by a qualified person, as per section 147(1) of BIFSOPA;

5.    if the work has been completed the Notice of Claim must be given within 3 months after practical completion of the work; and

6.    if the notice relates only to a retention amount, this notice can be given at any time whilst work is underway and up to 3 months from the end of the defect liability period.

SERVICE OF NOTICE OF CLAIM

If you are going to serve a Notice of Claim or the Principal, you will need to serve one on the Head Contractor also.

REQUIRMENTS ON THE PRINCIPAL

When the Principal receives the Notice of Claim, they MUST, and until a court order is made, retain the amounts in the claim that may become payable to the Head Contractor. The Principal can do this by:

1.    retaining the money itself; or

2.    pay the money into court (the most normal approach).

If the Principal fails to do either of the above options, the Principal will become liable to the Subcontractor.

RESPONSE OF THE HEAD CONTRACTOR

As stated above, the Subcontractor MUST serve the Principal and the Head Contractor with the Notice of Claim form. This gives the Head Contractor 10 business days to respond using the prescribed form, which can be found here… (https://www.qbcc.qld.gov.au/sites/default/files/S128_Response_Notice_Of_Claim.pdf). To be clear, the Head Contractor must state what amount, if any, they agree the Subcontractor should be paid, either in whole, in full or not at all. If the Head Contractor accepts that part or the whole of the Notice of Claim is payable, then those accepted amounts must be paid to the Subcontractor, as per section 129 of the Act. In the event that the notice of claim is rejected, then the money retained by the Principal must be paid into court.

ENFORCEMENT OF SUBCONTRACTOR’S CHARGE

Pursuant to section 134 of the Act, a Subcontractor may recover the amount claimed from a Principal as a debt owing to the subcontractor, in any court of competent jurisdiction. The court will regard payment into court as a satisfactory arrangement for paying an amount claimed with the ultimate questions of fact and law to be determined by the court.

SECURED CREDITOR BENEFITS

Issuing a Notice of Claim will mean that if a Head Contractor subsequently goes into liquidation, then the Subcontractor with the subcontractor’s charge will be classed as a secured creditor under section 471C of the Corporations Act 2001 (Cth)… Meaning you will get paid before unsecured creditors. This is becoming more and more important in today’s construction sector. It seems like every couple of days another reputable builder is entering administration/ liquidation… Therefore, the proper use of the subcontractor’s charge may become the most important tool a tradie has moving forward in our current climate.

We trust this article was insightful. If you would like to talk to our experienced construction law team, please do so by contact chelsey@wallaceweir.com.au or catherine@wallaceweir.com.au of Wallace Law Group.

Please note that this article is written as an informative piece and that you must not take the contents of this article as legal advice. Wallace Law Group accepts no liability from your reliance on this article.