In Queensland, there is the Subcontractors' Charges Act, which is only state in Australia to have this type of legislation.

It requires building owners or "Principals" as referred to in contract terms, to set aside money, which would otherwise be paid to a contractor if a Subcontractor lodges a Charge. Generally, money may not be secured wholly or solely for the Subcontractor who lodges a charge. The money may be shared between a numbers of Subcontractors, but if one does not lodge, a Charge that person may end up with nothing. Strict time requirements apply for a Charge to be effective.

If one believes that the Contractor has not paid all that it is required to, does not sign the Proof of Payment Form and advise the Superintendent or Superintendent's Representative immediately, then under certain circumstances the Superintendent or Superintendent's Representative can require when a payment is to be made to the Contractor and if it includes an amount for work carried out.

It is important to note that from the time a claim for payment is received from the Contractor it usually takes about seven days to issue a Certificate of Payment. It is during this time that a Charge must be lodged to give the best possible chance of securing your payment. If one decides not to lodge a Charge then the extent of assistance is dramatically reduced.

If the Contractor goes into liquidation, receivership or bankruptcy the law prevents further payments to the Contractor. If this happens, Subcontractors' Charges may be ineffective and entitlements are likely to be reduced. The Principal may be able to pay directly but this can only happen by agreement with the Contractor or if one obtains a Court Order.

Further protection is contained in the Queensland Building Services Authority Act 1999. Provisions include that:

• Any building contract, which contains clauses where payment is dependent upon payment from a third party, is void.
  
  
• Subcontractors are entitled to payment once per month and must be paid within 35 days of lodgement of claim for payment (unless the Subcontractor deliberately contracts out of it).
  
  
• Subcontractors may suspend work if they have not been paid.
   

The following is found in the Act itself:

The Act provides that if an employer contracts with a contractor for the performance of work upon or in respect of land or a building, or other structure or permanent improvement upon land or a chattel, every subcontractor of the contractor is entitled to a charge on the money payable to the contractor or a superior contractor under the contractor/superior contractor’s contract/subcontract and (if this charge is not sufficient to meet the debt), a charge on any security for the contractor/superior contractor’s contract/subcontract (s 5(1))

The charge secures payment in accordance with the subcontract of all money payable or to become payable to the subcontractor for work done by the subcontractor under the subcontract (s 5(2))

Generally, ‘work’ includes the provision of labour on land in respect of construction, alterations to the land such as mining, etc., and materials supplied. Work also specifically includes the manufacture or fabrication of project-specific components for a contract or subcontract (unless the components could without substantial change be used other than for the purposes of the contract/subcontract or where the manufacture/fabrication simply consists of cutting something to size or mixing things together) (s 3AA)  

DEFINITIONS (SECTION 3)

Security for a contract/subcontract is defined to mean something given to, or for the direct or indirect benefit of, the party to the contract for whom the work the subject of the contract is to be performed, by or for the party to the contract who is to perform the work the subject of the contract; and intended to secure the performance of the contract. Security can be either/combination of money or one or more valuable instruments, whether or not exchanged for, or held instead of, retention money

Valuable instrument means any of banker’s undertaking, bond, inscribed stock, guarantee policy, interest bearing deposit or another instrument convertible into an amount of money  

NOTICE

A subcontractor that intends to claim a charge on money payable under the contract to the subcontractor’s contractor or to a superior contractor must give notice to the employer/superior contractor who owes the money (s 10(1))

Notice must:

• Include specification of the amount and particulars of the claim as prescribed by a qualified person (architect, engineer, etc., as per s 10A) and stating that the subcontractor requires the employer/subcontractor to take the necessary steps to see that it is paid or secured (s 10(1)(a))
  
  
• Be supported by a statutory declaration of the subcontractor (or an officer if of the subcontractor corporation) (s 10(1B))
  
  
• Be given within 3 months after the completion of work, where the money is to become payable, but the subcontractor has already completed the work as per s 10(1A)) (s 10(3))
  
  
• If notice is not given as prescribed, the charge does not attach (s 10 (4))
  
  
• Claims can be made in respect of money payable to the subcontractor at the date of the notice, or money to become payable to the subcontractor for work already done by the contractor at the date of notice (s 10(1A)).
   

CONSEQUENCES OF A COMPLYING NOTICE OF CLAIM OF CHARGE

Where a complying notice of claim of charge is given, the person to whom it is given must retain, until the court directs to whom and in what manner the same is to be paid, a sufficient part of the money that is payable or is to become payable by the person under the contract to satisfy the claim (s 11(1)). Failure to do so makes the person personally liable to pay the subcontractor the amount of claim (s 11(2))

Within 14 days after notice is given to the contractor, the contractor is required to give to:

• The employer or superior subcontractor by whom the money is payable and
  
  
• The subcontractor who gave notice of the claim
  
  
• A notice (‘contractor’s notice’) stating that the contractor:
  
  
• Accepts liability to pay the amount claimed; or
  
  
• Disputes the claim; or
  
  
• Accepts liability to pay an amount (stated in the contractor’s notice), but otherwise disputes the balance of the claim.

Where liability (a) or partial liability (c) is expressed, the employer or superior contractor by whom money is payable must pay to the subcontractor the amount the employer or superior contractor is required to retain under s 11(1) (s 11(4), s 11(4A))

If an employer or superior contractor pays into court the amount they are required to retain, they are discharged from any further liability in respect of the amount paid and of the costs of the proceedings. However, money paid into court can only be paid out of court by an order of the court (s 11(5), (6), (7))  

USE OF THE SECURITY FOR BENEFIT OF SUBCONTRACTOR IF NO CONTRACTOR ACCEPTS LIABILITY FOR ALL CLAIMS

Note: the s 11A security is a security for the contract in which all of the following apply:

• The security is held by an employer, superior contractor or other person; and
  
  
• A person is subject to a requirement to retain money that is payable or is to become payable by the person under the contract, to satisfy a subcontractor’s claim or the claims of 2 or more subcontractors; and
  
  
• There have been no acceptances of liability under s 11(3)
  
  
• If at any time the unsatisfied amount for a contract is more than the retained amount for the contract, the holder of a s 11A security for the contract must retain the security until the court makes an order about it or pay the amount into court (if money) or convert the security wholly or partly into money and pay the amount, up to the difference amount for the contract, into court (s 11A (1))
  
  
• If the holder of the s 11A security does not comply with this provision, it is personally liable to pay to a subcontractor the amount of the subcontractor’s claim to the extent that the security would have been capable under the Act
  
  
• Despite the above, the holder of the security can still exercise an entitlement to use the security for securing the performance of the contract (s 11A (4))
  
  
• If provisions of the contract or another arrangement (including provision for the surrender of the security) prevents the holder of the security from complying with the s 11A (1) security or would operate to the detriment of a person, such provisions are void
   

USE OF SECURITY FOR BENEFIT OF SUBCONTRATOR IF CONTRACTOR ACCEPTS LIABILITY FOR ALL CLAIMS

Note: s 11B security is a security for the contract in which all of the following apply:

• The security is held by an employer, superior contractor or other person; and
  
  
• A person is subject to a requirement to retain money that is payable or is to become payable by the person under the contract, to satisfy a subcontractor’s claim or the claims of 2 or more subcontractors; and
  
  
• There have been acceptances of liability under s 11(3)
  
  
• If at any time the unsatisfied amount for a contract is more than the retained amount for the contract, the holder of a s 11B security for the contract must retain the security until the court makes an order under s 11C about enforcing the charge over the security (see below) or convert the security wholly or partly into money and pay the amount, up to the difference amount for the contract, into court (s 11B (1))
  
  
• If the holder of the s 11B security does not comply with this provision, it is personally liable to pay to a subcontractor the amount of the subcontractor’s claim to the extent that the security would have been capable under the Act
  
  
• Despite the above, the holder of the security can still exercise an entitlement to use the security for securing the performance of the contract (s 11A (4))
  
  
• If provisions of the contract or another arrangement (including provision for the surrender of the security) prevents the holder of the security from complying with the s 11B (1) or would operate to the detriment of a person, such provisions are void
   

AUTHORITY OF COURT FOR SECURITY

Where the holder of a security retains the security or pays an amount into court for the security, the court may make orders as it considers appropriate for enforcing the charge over the security to which a subcontractor is entitled under s 5, including ordering the release of the security. (Specific provision is also made for when the court can order the release of the security).  

CERTAIN SUBCONTRACTOR SECURITIES OF NO EFFECT

Security given by/for a subcontractor for securing (wholly or partly) the performance by a contractor or superior contractor of the contractor’s/superior contractor’s contract or sub-contract is of no effect (s 11D)  

OTHER PROVISIONS

Employers/superior contractor have a duty to comply to the greatest practicable extent to reasonable requests from the security holder about information the holder requires in order to comply with s 11A or s 11B circumstances (s 11E)

If the person to whom notice is given does not pay or make satisfactory arrangements for payment, the subcontractor may recover the amount of the charge from the person by whom the money subject to the charge is payable (s 12(1))

Proceedings in respect of retention money must be commenced within 4 months after the retention money or the balance thereof is payable, and in all other cases must be commenced within 1 month after the notice of claim of charge has been given (s 15(1))

Those who give vexatious notices of charge (including claiming more than is actually payable) are liable to pay damages of those prejudicially affected by the claim (s 22)

It appears this Act has been engineered and aimed at remedies for unpaid subcontractors on building sites and the like.

Under the Act, the rights of a subcontractor do not appear to constitute a lien (although I am not sure whether the word ‘lien’ is used to mean charge in, the email supplied). You may need to closely examine the contract and see if the contract gives rise to either a common law or contractual lien.

NEED MORE INFORMATION

Behan Legal assists and advises on these important issues only in conference. For an appointment, call 03 9646 0344.