Are you a subcontractor owed money by your superior contractor (e.g. a builder) for work completed on a construction site? Has the builder told you that they are in financial difficulty and that they are owed payment by their principal or employer (e.g. the developer) that is being withheld by the developer? Is the builder telling you that they cannot afford to pay you for your work until they themselves have been paid by the developer?
Unfortunately, for many subcontractors, this is an often too familiar story. Ensuring that you are paid for the work that you perform can often involve more effort and stress than actually performing the work in the first place. There is also the risk that if you receive payment from a builder in financial difficulty that it might be the subject of a preferential payment claim by a liquidator or trustee in bankruptcy if the builder is wound up or made bankrupt. If you find yourself in this type of situation, the provisions of the Subcontractors’ Charges Act 1974 (Qld) (“SCA”) provide a useful mechanism which can help ensure that you are paid for the work that you have performed.
The SCA allows subcontractors the ability to secure moneys owing for building work they have performed from moneys which a developer has withheld which is owing to a builder. To make use of the SCA a subcontractor is required to give a “Notice of Charge” to the developer and a “Notice of Charge Being Given” to the builder.
A Notice of Charge can be given at any stage during the subcontract period, but the following time restrictions apply after the completion of the subcontract:-
- For contract monies – within three (3) months after the completion of works.
- For retention monies – within three (3) months of the expiration of the maintenance period.
- For monies held under a security – within three (3) months of the expiration of the release period.
When a builder provides a notice accepting the liability, the developer will pay the amount to the subcontractor. If the builder does not accept the liability, the subcontractors must enforce the charge, by commencing Court Proceedings to prove the debt and, in addition, complying with the provisions of the SCA.
Without the benefit of the SCA, a developer is under no obligation to pay monies directly to a subcontractor because it has not contracted directly with that party. However, once a valid Notice of Charge under the SCA is given, a developer must retain the amount which has been withheld from the builder for the benefit of the subcontractor. This requirement continues throughout any subsequent Court Proceedings that are required. A developer who fails to retain the amount of the charge can become liable to pay the claim themselves.
The SCA also ensures that, in the event that the builder becomes insolvent, any payments made pursuant to SCA are not able to be clawed back if the builder is wound up or made bankrupt.
There are a number of complex issues associated with this Act that subcontractors must be aware of so it is important to get legal advice before lodging your notices or commencing a claim.
For advice on whether lodging a Subcontractors Charges act claim is the best option for you, or other advice on recovering payment for work performed, contact Steven Hayles.
