Payment disputes

What is a payment dispute?

A dispute relating to building and construction work may arise when parties to a contract or other agreement disagree about:

  • the amount of money being claimed
  • the amount of money proposed to be paid or that has been paid
  • the date payment is due or is proposed to be paid
  • whether an amount required to be paid has not been paid in full or at all
  • the quality and satisfactory completion of work in accordance with the contract.

 

Options for resolving disputes over payment

While there are a number of options to resolve disputes over payment, it’s really important to be aware of the following:

  • communication between the parties involved should always be the first step
  • not all options will be suitable or available for every dispute
  • some options have limited timeframes for commencing action
  • you should seek legal advice prior to pursuing options as there can be serious consequences (including financial costs) for taking actions when you’re not entitled to.

Options for resolving disputes – the pros and cons

To help you decide which options may be best suited to your situation, we’ve compiled a list of the advantages and disadvantages for each payment dispute resolution option.

Adjudication

When parties are in dispute about an amount owed for construction work, the person seeking payment can lodge an adjudication application with the Registrar.

Advantages

  • rapid decision on dispute (timeframes for adjudicator making decision apply)
  • the adjudicator’s decision is enforceable in court if not paid
  • non-payment of the decision is an offence enforced by QBCC
  • generally cheaper and faster than going to court (fees are capped for smaller claimed amounts under $25,000)
  • can be used at the same time as suspending work.

Disadvantages

  • fees apply and vary depending on the amount being claimed
  • strict time requirements for making application and limitations apply
  • can still end up in court if the adjudicator’s decision is not paid.

Charge over property

If you’re a head contractor and an adjudicated amount (as determined through the adjudication process) owing to you has not been paid in full by the due date, you may be able to register a charge over the property where the work took place (the relevant property).

Advantages

  • a charge over property is a form of security interest that  provides security to you for payment of the adjudicated amount
  • prevents the registered owner from selling or dealing with the property
  • creates a right for you  to apply to court to sell  the property  so you can be paid what is owed to you from the proceeds of the sale

Disadvantages

  • you may still be required to take action to recover the outstanding amount
  • a fee applies to request a charge over property be registered – contact the Lands Title Registry for more information
  • the charge expires after a two year period – you will need to apply to court to have the charge extended if you are still not paid
  • if you fail to release a charge over property (when it has expired or you have been paid) you may incur a fine.

Monies owed complaint

You can use a monies owed complaint to notify the QBCC when a QBCC licensee has not paid money they are liable and due to pay.  

Advantages

  • free to lodge a monies owed complaint
  • no time limitations on when the complaint may be lodged with the QBCC
  • investigation by QBCC with possible action against licensee, including licence suspension or cancellation
  • can be used at the same time (or after) suspending work, lodging subcontractors’ charges or commencing legal proceedings (QCAT or court) – but can only be used after an adjudication decision has been made.

Disadvantages

  • can only be used against a QBCC licensee
  • The QBCC can’t make a decision on who is in the right or in the wrong or settle the dispute
  • The QBCC can't make the other party pay, however action taken by the QBCC such applying demerit points or suspending or cancelling the person’s licence can encourage prompt payment of the debt.

Payment withholding request

Head contractors and subcontractors who have not been paid an adjudicated amount (amount decided by an adjudicator as owing) will be able to give a ‘payment withholding request’ to the party that is higher in the contractual chain than their contractor (the higher party). For the head contractor this can be the financier to the principal.

Advantages

  • the financier or higher party needs to withhold an amount, up to the same amount as owed under the adjudication decision, from money that would be payable to the respondent
  • safeguards the adjudicated amount until it is paid by the respondent
  • acts as an incentive for the respondent to pay the adjudicated amount owed
  • no cost to the higher party for complying with a payment withholding request – they are protected from any recovery action by the respondent for the withheld amount (but might be liable for the amount and subject to penalty if they ignore the payment withholding request).

Matters to note

  • payment withholding requests cannot be used if the higher party is a resident owner
  • can only be used if an adjudication decision has been awarded in your favour
  • legal action may still be required to enforce payment of the adjudicated amount (it safeguards money only).

Queensland Civil and Administrative Tribunal (QCAT)

The Queensland Civil and Administrative Tribunal (QCAT) is an independent, accessible and in some cases less expensive pathway to help resolve a construction contract payment dispute.

Advantages

  • QCAT can make a decision on the dispute
  • can be used at the same time as a QBCC monies owed complaint and suspending work
  • requires prior written notice of the intent to start legal proceedings to be given by the claimant to the respondent no later than 20 business days after the due date for the payment*.

Disadvantages

  • associated fees
  • has strict time requirements and limitations
  • can only hear commercial building disputes of up to $50,000 (unless both parties agree that QCAT can hear a dispute for a greater amount)
  • the claimant must wait five business days after giving the respondent written notice of intention to start legal proceedings, before taking further action*.

* Applies to payment disputes for construction work or supply of related goods and services under the Building Industry Fairness (Security of Payment) Act 2017.

Note: QCAT can hear a domestic building dispute of any amount – see more information about domestic building disputes.

Subcontractors' charges

Subcontractors’ charges provide a way for subcontractors to secure payment of amounts owed to them under a contract by someone who is higher in the contractual chain.

Advantages

  • freezes money owed by a higher person in the contractual chain
  • can be used at the same time as a QBCC money owed complaint, suspending work and court proceedings.

Disadvantages

  • is only effective if the higher person has money not yet paid to the contractor
  • strict time requirements and limitations
  • cannot be used in conjunction with adjudication – it’s one or the other
  • is only temporary until a court decision is made on the dispute​
  • needs legal advice 
  • costs of legal advice.

Suspending work

If you’re a subcontractor and someone owes you money, you have a choice to suspend work in order to encourage payment from that person.

Advantages

  • free, unless legal advice is sought
  • may influence a quicker payment result without the need to escalate through other channels
  • can be used at the same time as a QBCC monies owed complaint, adjudication, QCAT, court proceedings and subcontractors’ charges
  • stops further payment debt accruing.

Disadvantages

  • two business days’ notice is required
  • does not provide a decision on the dispute
  • fees may apply if legal advice is sought
  • may inflame the situation
  • other options to resolve the dispute are needed.

The courts

A claimant may choose to legally pursue an outstanding payment through the court system, which includes the Magistrates, District or Supreme Courts.

Advantages

  • delivers a decision on the dispute
  • can be used at the same time as a QBCC money owed complaint and suspending work.

Disadvantages

  • potentially costly legal advice and fees.
  • time requirements and limitations apply.
  • you don't receive a payment schedule or full payment by the due date;
  • you receive a payment schedule but don't receive the full amount stated in the payment schedule and the payment due date has passed;
  • you receive a payment schedule with a lower dollar amount than shown in your payment claim. 
     
    • the amount of money being claimed
    • the amount of money proposed to be paid or that has been paid is less than expected
    • the date payment is due or is proposed to be paid
    • if an amount required to be paid, has not been paid in full or at all
    • the quality and satisfactory completion of work in accordance with the contract.
    • communication between the parties involved should always be the first step
    • not all options will be suitable or available for every dispute
    • some options have limited timeframes for commencing action
    • you should seek legal advice prior to pursuing options as there can be serious consequences (including financial costs) for taking actions when you’re not entitled to.