What you need to know about breaches of leasehold covenants

Tips for landlords – and tenants!

A tenant who is in breach of a commercial lease can be in a world of hurt. That’s particularly the case if their business relies heavily on its location to trade successfully (for instance, a service station, drive through fast food chain, or childcare centre).

If the tenant is in breach of a covenant under the lease, and that covenant is capable of remedy (let’s say they are in arrears of rent), then the landlord’s right to re-enter the premises is subject to the right of the tenant to be given a notice under section 124 of the Property Law Act (Qld).

That notice must contain particulars of the alleged breach (with reference to the covenants breached), the actions required by the tenant to remedy that breach, and the timeframe within which the breach must be remedied (which must be reasonable!).

Handling breaches not capable of remedy

If however, the breach by the tenant is a breach not capable of remedy (for instance, abandonment of the premises or non-permitted assignment), then this may constitute a repudiation of the lease which, if the landlord so chooses, may be accepted.

In those circumstances, a notice pursuant to section 124 is not required before the landlord re-enters the premises. 

Dealing with breaches capable of remedy

For breaches capable of remedy, once the section 124 notice has been given and the timeframe prescribed in that notice has passed, the landlord will be entitled to re-take possession of the premises at that time.

The lease may also give other rights to the landlord including the right to convert the balance of the term to a periodic (month to month) tenancy, etc. If the landlord wishes to re-enter the premises, they need not give a further notice to the tenant of that fact.

With that in mind, it might be prudent to give the tenant a notice of the landlord’s election to re-enter or re-lease or convert the tenancy to a periodic tenancy. It is also prudent to reserve any rights the landlord has to compensation for loss connected with the tenant’s breach at this time.

But BEWARE, a delinquent tenant may see further notice as an opportunity to take out any lurking frustrations on the landlord (or its property). If the tenant is already “in the hole” with respect to rental arrears, the bond held by the landlord might not be sufficient to cover arrears AND malicious damage to the premises.

For advice on breaches of leasehold covenant, talk to MDL

If you require advice or assistance with respect to issuing (or, heaven forbid, receiving) a notice of a breach of leasehold covenant, call the experienced Business Law team at McCarthy Durie Lawyers today on 3370 5100 or fill out the contact form here.

Time limitations and debts `payable on demand`

Issues to consider when you have an outstanding debt

When you contract with someone, and a debt becomes owing to you by the other party to that agreement, the Limitation of Actions legislation in Queensland provides that if the debt remains unpaid, you will generally have 6 years to bring an action against that person for breach of contract from the date that the debt arose. This type of legislation is commonly referred to by the general population as a ‘Statute of Limitations’.

Most of the time, it is clear when the debt arises. For example, an invoice issued by a person that specifies ‘Net 30’, this will generally mean that the sum per the invoice is payable in 30 days. Therefore, if the amount is not paid within that time, the debt will arise 30 days from the date the invoice was issued.

In some transactions however, such as personal loans between family members or friends, this may not always be clear. For example: 

A provides a loan of $50,000 to B.

A does not specify when the loan is required to be repaid. However, there is no question that it was the intention of the parties for the $50,000 to be a loan. 

Impliedly, the loan would be ‘payable upon demand’.

B does not make any repayments towards the loan from the date of receipt.

7 years after the sum of $50,000 was transferred to B, A makes a demand for the repayment of the loan in full.

Given the above, when did the debt arise?

Was the debt payable from the date the sum was transferred from A to B, or when A made the demand for repayment?

The date at which the debt arose will determine whether A is entitled to sue B for the outstanding balance.

When does the time limit start for debts payable on demand?

In the case of Ogilvie v Adams [1981] VR 1041., the plaintiff, as trustee of a bankrupt’s estate, sued the defendants, who were the executors and trustees of the will and estate of the bankrupt’s wife, for money lent by the bankrupt to his wife in April 1957.

His case was put as one where all of the terms of the loan were to be found in the one written instrument, which was in the following terms:

… I, Doris Melba Adams hereby acknowledge to have received from you the sum of 31,600 pounds being a loan to me repayable on demand. Dated this 29th day of April 1957. Signed D M Adams.

Demands for the repayment of the loan were made in July and October of 1972. These demands were admitted to have been received by the defendants who refused to make any payment on the grounds that the alleged debt was, and had been at all material times, barred by the Limitation of Actions Act 1958 (Vic). On this issue, his Honour, Justice Fullagar J, stated the following: 

The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor’s money, and thus whether the creditor brought an action of debt or an action in indebitatus assumpsit. Therefore if A lends money to B, then instantly B is detaining A’s money.

In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan. 

The lender’s cause of action still arises instanter on the receipt of the money by the borrower, so that the lender’s cause of action becomes statute barred at the expiry of six years after the receipt of the money.

His Honour cited a line of authority, including most importantly, the unanimous decision of Young v Queensland Trustees Ltd (1956) 99 CLR 560, which provided that:

“A loan of money payable on request creates an immediate debt”.

Of course, whether or not the loan creates an immediate debt is a matter of construction of the relevant term; the judgment in Ogilvie leaves no doubt as to this.

For example, if a term provided that the debt was not payable until such time that the debtor was served with a written demand for payment, it could be argued that the debt arises from the date that the written notice is served.

Get advice or assistance with an outstanding debt

From the examples above, the key point to remember is that if you enter into an agreement, careful attention should be given to the terms of repayment. To attempt to avoid any such issues arising, we would suggest that a written agreement with clear and concise terms as to the sum loaned, the terms of repayment etc, is prepared.

If you need assistance or advice with respect to an outstanding debt, or if you wish to seek advice in relation to the preparation of a formal written agreement, call the experienced commercial or Litigation Law team at McCarthy Durie Lawyers on 07 3370 5100 or fill out the contact form here.

Is your business’s independent contractor actually an employee?

How to find out whether your arrangements are compliant

As a business owner or manager, it can be tempting to consider and treat those working for you as “independent contractors” rather than employees.

But with the Australian Taxation Office and the Fair Work Ombudsman beginning to take a greater interest in this issue, it’s a good idea to check whether your existing arrangements pass muster.

Not only that, but it can be difficult to determine whether a casual employee should be considered a contractor or not.

In this news post, the MDL Employment Law team take a look at the crucial differences between a contractor and an employee, and show you what you need to do to make sure your business is compliant.

How to determine if your contractor is in fact an employee

If a Court is asked to determine whether a contractor should actually be considered an employee, there are a number of factors that are taken into account. There’s no one indicator that will determine the actual status of a person’s employment.

Each determination is based on a work arrangement’s individual merits; and the Court will always look at the totality of the relationship between the parties. Some of the factors which will be considered are:

1) Is the person entitled to leave?

Let’s start with the basics. While an independent contractor doesn’t receive paid leave from their employer, an employee is of course entitled to receive paid leave.

That means a full-time employee will qualify for annual leave, personal or carers’ leave and long service leave; while casual employees receive a loading in lieu of leave entitlements.

New Call-to-action

2) Does the person have a degree of control over how their work is performed?

Naturally, an employee of your business must work under your direction and control as their employer, on an ongoing basis.

By contrast, if the person has a high level of control in how their work is done, they may be considered a contractor.

3) What are the person’s hours of work?

While an employee will generally work standard or set hours, an independent contractor will decide what hours they’ll need to work to complete the specific task under their agreement.

You should also note the complicating factor that a casual employee’s hours may vary from week to week.

4) Is there an expectation of ongoing work?

While an independent contractor is usually engaged by a business to complete a specific task, an employee will usually have an expectation of ongoing work.

Note though that some employees may be engaged for a specific task or specific period, so there can be some grey area in this consideration. 

5) Does the person bear an element of risk?

While an employee bears no financial risk (which is the responsibility of their employer), an independent contractor bears the risk for making a profit or loss on each task they undertake.

Contractors also usually bear responsibility and liability for poor work or injury sustained while they perform their assigned task. As such, they will generally have their own insurance policy to manage this risk.

6) Does the business pay superannuation to the person?

Where an employee is entitled to have superannuation contributions paid into their nominated superannuation fund by their employer, an independent contractor is responsible for paying their own superannuation.

Be aware though that in some circumstances, independent contractors may be entitled to be paid superannuation contributions.

7) Who provides the necessary tools and equipment?

While an independent contractor is responsible for providing their own tools and equipment, an employer will generally provide an employee with the tools and equipment they need (or else provide a tool allowance).

Note that alternative arrangements may be made within a contract for services.

8) Is the business responsible for paying the person’s tax?

Where an employee has income tax deducted from their pay by their employer (the ‘PAYG’ system), an independent contractor is responsible for paying their own tax and GST to the ATO.

9) How is the person paid by the business?

While obviously an employee is paid regularly (whether that’s weekly, fortnightly, or monthly) an independent contractor has an ABN, and will either submit an invoice for the work they complete, or be paid at the end of the contract or project. 

New Call-to-action

What you need to know about “sham contracting”

It’s a sad fact that some employers do attempt to disguise an employment relationship as an independent contracting arrangement – usually in an attempt to avoid responsibility for employee entitlements such as annual leave. This is known as “sham contracting”.

The sham contracting provisions of the Fair Work Act (sections 357 – 359) state that an employer must not:

  • Misrepresent an employment relationship or a proposed employment arrangement as an independent contracting arrangement;
  • Dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor;
  • Make a knowingly false statement to persuade or influence an employee to become an independent contractor.

Heavy penalties apply for businesses that breach the sham contracting provisions of the Fair Work Act – so if you currently engage independent contractors at your business, it pays to have an Employment Lawyer review your current contractual arrangements to double check their validity.

Find out whether your business’s employment arrangements are compliant

When reviewing your arrangements, think about the true nature of the relationship between you and your contractor to determine if the person may in fact be an employee – despite the best intentions of both you and your ‘contractor’.

If you need assistance with reviewing your business’s current contractual arrangements, MDL’s Employment Law team are here to help.

To discuss your situation, contact McCarthy Durie Lawyers on 07 3370 5100 or fill out the contact form here.

Performance management for your business’ employees

Real world examples demonstrate what not to do

An unfortunate but necessary part of running or managing a business is performance management. And generally of course, when we talk about “performance management”, we really mean the process of managing underperformance.

Examples of underperformance include an employee’s failure to perform the duties of their position or to the required standard; non-compliance with workplace policies, rules or procedures; unacceptable behaviour in the workplace; or disruptive or negative behaviour that impacts on their co-workers.

Underperformance may occur when an employee:

  • Doesn’t know what is expected of them, because goals and standards or workplace policies and consequences are not clear, or don’t exist
  • Experiences personality differences at work
  • Doesn’t have the knowledge or skills to undertake the role
  • Is not provided with positive feedback or constructive criticism as necessary
  • Experiences a poor work environment or culture
  • Is suffering from personal issues such as family stress, or health problems
  • Is subjected to workplace bullying

In this news post, MDL’s Employment Law team take you through the steps needed for an effective performance management process, and give you some real-world examples of what not to do when you think an employee is underperforming. 

New Call-to-action

How to manage underperformance in your business

As we spoke about in our previous blog post, there is a formal process you should follow when managing underperformance. Ensure you:

  • Promptly identify the problem
  • Assess and analyse the problem (eg how serious it is; how long it has existed)
  • Meet with the employee to discuss the problem and how it impacts the workplace
  • Allow the employee to have a support person attend the meeting, and focus on the problem without making it personal
  • Jointly devise a solution if possible – it can significantly improve the chances of an employee improving their performance if they consider they had an active role in the process
  • Monitor the employee’s performance, and ensure you provide continued, regular feedback

How to approach the termination of employment

Obviously, the end of the line in performance management is termination of employment. If you’ve reached this position with an employee, the guiding principle is to ensure they receive “a fair go all round”.

Termination of employment is all about the process. It should only occur if every box is ticked and procedural fairness is provided.

The three examples below show cases where, for different reasons, the employment termination process wasn’t correctly followed, and the Fair Work Commission ordered various different means of redress for the affected employees.

Real-world case example #1

Why the proper performance management procedure must be followed

In our first example, the reservations assistant at a well-known Sydney restaurant was dismissed because of her poor telephone manner in a conversation with a key customer, who later complained to the business.

The restaurant’s owner immediately ordered the employee to be terminated, making the subsequent meeting with the General Manager “a complete sham” according to the Fair Work Commission.

The employee was summarily dismissed that same day, without warning or notice for her alleged misconduct.

The outcome

The Fair Work Commission found that the employee’s treatment was “nothing short of appalling” and “manifestly unfair”. She was not told of the reason for the meeting; had no reasonable opportunity to respond to the allegations; and wasn’t given the opportunity to have a support person present.

She was shocked and distressed, yet was given no chance to compose herself and respond appropriately to the allegations. The employee was not provided with any written warning regarding her conduct, nor a letter setting out the reasons for her dismissal.

The Fair Work Commission held that reinstatement was not appropriate, and the employee was offered 12 weeks full pay as compensation; which was the period from the time of the incident to when she would have taken maternity leave.

Real-world case example #2

Why performance management investigations need to be fair and thorough

Our second real-world example involves an employee who worked in the freezer section of a national supermarket chain’s warehouses. Employees were provided with Milo during their breaks, and the employee in question regularly took his allocated Milo home to prepare his own mix to bring to work.

When the employer was made aware of this, the employee was searched and Milo was found. The employee told the security officer that he brought the Milo and the container from home. His conduct was then subject to an investigation.

The employee later confessed that the Milo came from the work lunchroom. He said he had initially given an untruthful answer because he’d been shocked when asked about the Milo.

The employer then summarily terminated the employee’s employment for serious and wilful misconduct for taking the Milo home and then lying about it.

The outcome

The Fair Work Commission held that there was no valid reason for dismissal. It found that the employee’s shocked and confused state contributed to his inconsistent responses.

The employee was reinstated and was compensated for his lost income during the period of his dismissal.

Real-world case example #3

Why there must be a valid reason for performance management

In perhaps our most straightforward example of what not to do, the general manager of a Chinese language radio station was dismissed due to her ‘religion’.

The employer even confirmed with the employee that the decision was not for financial issues or relationship issues but because of her religion(!).

The outcome

Unsurprisingly the Fair Work Commission found that there was no valid reason for the employee’s dismissal, and awarded her the statutory maximum of 6 months’ pay.

The Fair Work Commission also noted that as well as being unfair, the employee’s treatment was also discriminatory, and that the employer required immediate education regarding this conduct.

New Call-to-action

What you can take out of these real world examples of poor performance management

As an employer you should ensure that you have appropriate policies and processes in place to manage alleged misconduct – and also make sure that you enforce those policies.

Furthermore, note that failure to follow appropriate policies and procedures, and failure to provide procedural fairness, can result in employers being ordered to reinstate employees and/or being ordered to pay substantial compensation to the effected employees.

Need advice on performance management at your business?

If you’d like more advice on the performance management process, including but not limited to the potential termination of employees, MDL’s Employment Law team can help.

To discuss your situation, contact McCarthy Durie Lawyers on 07 3370 5100 or fill out the contact form here.

How much does it cost to set up a franchise business?

The 9 potential franchising fees you need to be aware of

When you’re considering investing in a franchise, naturally it’s crucial that you have the complete picture of the business to help you with your decision making.

Under the Franchise Code your potential franchisor must provide you with the relevant documentation about their business model and financial information relating the franchise, before you enter into a franchise agreement. This can help you make an informed decision about whether the franchise business is right for you. Yet of course, there’s much more to the story.

It’s vital that you get a firm idea of your associated costs within your seven (7) day statutory cooling off period after you enter into a franchise agreement. That way, if you discover any fees you weren’t aware of that will change your investment decision, or if you decide that the franchise business isn’t right for you, you’ll still have the opportunity to change your mind after you sign. Note however that you may still lose your application fee (see below) in this circumstance.

Before you buy a franchise... See the 3 things you need to consider

Here’s what you need to take into account before you buy into a franchise – to make sure you don’t make a small fortune from franchising by starting with a big one!

1) Franchise fees

Let’s start with the most obvious fee. Most (if not all) of the time, the franchise group you’re buying into will charge you a franchise fee to be part of their operation.

Yet the details of this fee can be far from straightforward. You should ask the franchisor whether the fees are charged monthly or annually. And how are they calculated? Are they changed as a percentage of sales; as a fixed amount; or is it a base amount + a percentage of your sales?

Does the franchise fee increase annually? And what does the “franchise fee” actually include? Will you be obliged to wait for your trading figures for the first year of trading before paying your annual fee?

You can see how it’s worthwhile getting answers to all of these questions before you agree.

2) Administration fees

The second fee to be aware of is the franchisor’s so-called “admin fee”.

Some franchises may charge you an “application fee”, simply to consider your application to join the group. In the event that you’re unsuccessful – or you change your mind during the cooling off period – this admin fee may be non-refundable.

Franchise admin fees may sometimes – but not always – include things like marketing fees and legal costs. So before you agree to any administration fees, ask to see a breakdown of what they actually include. That way you’ll know exactly what you’re paying for, and can factor them into your budget more accurately.

3) Marketing fees

Another common fee in franchising is the marketing fee. Once again, find out whether any marketing fees charged are ongoing or a once-off fee.

Remember too that a franchise group’s marketing fee only covers activities that they undertake for you. That means you might also be liable for another batch of marketing fees, for example from the shopping centre where your business is located. Yes… that’s two lots of marketing fees payable by you, the franchisee. Welcome to the wonderful world of business ownership!

4) Training fees

When you’re starting out in a new business, you’ll understandably need training in all the new skills you’ll require. In many cases, that means paying for training from the franchisor to use their administration systems, to learn how to run their business model, or maybe to learn how to make the product you’ll actually be selling.

You’ll usually need to complete this training before you begin trading – and again, these training fees are potentially non-refundable depending on your franchise agreement. So be sure you fully understand your obligations before you commit to paying these costs.

5) System setup costs

Think about the software your new business will depend on. Setting up the type of reliable IT system you’ll need can amount to a serious cost – and note also that your franchisor may have a proprietary system, or standard software (such as MYOB) that you’ll be obliged to use.

If you’re buying into a retail franchise, there may be specific standards for the type of cash register you must use. And if you’re working with food, your franchisor may stipulate that you have to use a particular type of weighing equipment, for example.

All of these requirements will affect your costs.

6) Legal fees

Once the franchisor has provided you with all the necessary documents under the Franchise Code and the franchise agreement, it’s still really important that you get your lawyer to double check to make sure you have been provided with everything you need to comply with the relevant legislation.

To help you keep control of your legal costs, it’s a great idea to hire a lawyer (such as McCarthy Durie Lawyers) who will give you an estimate of your costs before you begin.

Here’s another crucial point to note – it’s very common that you as the franchisee will be responsible for paying not only your legal fees, but the franchisor’s legal fees as well. Something to look out for when you’re budgeting for your legal costs.

7) Financial costs

If you’re starting a new business, you most likely won’t have the full amount of capital you’ll need – which means you’ll be relying on obtaining finance. And of course, this comes at a price.

Make sure you get an estimate for your financial costs, such as interest, fees, and any other charges from your financial institution.

8) Leasing costs

If your franchise business will be operating from a leased premises, there are a wide range of costs that may apply. There will be costs involved in preparing the lease – plus you might also be liable to pay the landlord’s leasing costs!

Your lease may also need to be registered with the State Government body in charge of registering leases and property interests on the title of land – again with, you guessed it, a lease registration fee for you to pay.

Other potential leasing costs to be aware of include survey plan fees (if you’re building a new place of business), and mortgagee consent fees (which are often required if a mortgage is registered on the property you’ll be leasing).

See our dedicated blog post for more issues to be aware of with your lease.

9) Other franchising costs to be aware of

As you can tell by now, pretty well any fees that any of the concerned parties pay, can end up being payable by you as the franchisee.

For example, depending on the type of business you may need to buy stock to get your business up and running. Is this supplied by the franchisor? At what cost?

If you’re setting up a new retail business, you’ll likely need a fitout of your business premises, with all its associated costs. The landlord will probably require you to take out sufficient insurances as a condition of the lease – which will also need a security bond.

You should also consider your ongoing staffing and wages costs that are such a big part of running any business. While all these costs may not be prohibitive, you’ll still need to have a comprehensive grasp of them before committing to your franchise business.

New Call-to-action

Talk to MDL for advice on finding the right franchise business for your needs

If you’d like to get a full understanding of the costs involved in setting up a franchise business, a conversation with McCarthy Durie Lawyers can help. We’ll take the time to understand your situation, and offer you straightforward advice about your options and the best way forward.

For more information or advice about buying a franchise, contact the Business Law team at McCarthy Durie Lawyers on 07 3370 5100 or use the contact form here.  

How to avoid prime cost and provisional sum traps

What to look out for in your home building contract

When you set out to build a new home, or renovate your existing house, you’ll no doubt be motivated to keep to the budget you’ve set.

Yet there are a few different things that can cause you to go over budget on your home building project. Two of the most common reasons for this are the prime cost and provisional sum items listed in your contract.

Prime costs are items on a building contract for which a budget is set, but the exact price isn’t yet known. For example, if you haven’t yet chosen the exact taps you’d like in the bathroom, these will have to be listed as a prime cost.

provisional sum is an estimate of a cost for which an exact figure cannot be given. For example, excavation is a common provisional sum item, because the extent of the excavation required may be unknown until work has begun.

If provisional or prime cost items are included in your contract, it’s important to remember that these cost items are not fixed. They can potentially increase significantly.

Is your building contract up to scratch?

Fortunately, there are a couple of things you can do to make sure you’re aware of all the uncertain costs, and budget for them accordingly. Here’s what to remember when you’re looking at a domestic building contract.

When can provisional sums be used in a home building contract?

For domestic building contracts, there is protection provided to you under the Queensland Building and Construction Commission Act 1991 (‘the Act’). Under the Act the builder must first make all reasonable enquiries to ensure that they can’t include a definitive amount in the contract. Only then can the item be a provisional sum in the contract.

If you want to avoid uncertain costs, the best option is to ensure you have a fixed price for as many items as possible in your contract. To do this, you will need to select all of the items to be used in your contract (or at least as many as possible) prior to signing your contract.

For some items there simply may not be a choice. A provisional sum may be the only logical way to move forward.

How to deal with uncertain costs in your home building contract

If you see ‘prime cost’ or ‘provisional cost’ items proposed on your building contract, remember to:

1) Take the time with your builder to select as many items as possible. This helps fix a price for these individual items, and removes them from being a provisional sum or prime cost item.

2) For items that must be a provisional sum or prime cost item, make sure you completely understand that the figure provided is an estimate only. Make room in your budget for a contingency on these items.

Contact McCarthy Durie Lawyers for advice on domestic building contracts

If you are about to enter into a domestic building contract and you’re unsure about any aspect, McCarthy Durie Lawyers can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.

How to resolve a dispute with your home builder

The steps you can take to resolve your problem as soon as possible

While building a new home or completing a renovation can be very exciting, unfortunately sometimes it can also be a very stressful time. Most builders do great work – yet from time to time, disputes with your builder cannot be avoided.

If you do have a dispute with your builder, it’s important to follow the correct procedure to make the resolution process as straightforward and stress-free as it can be.

Here are three steps you can take to resolve a building dispute as soon as possible.

Step 1) Know your building contract

Depending on the nature of the dispute with your builder, you may have obligations under your contract to take certain actions. For example, this may involve serving written notices on your builder within specific time frames.

Certain rights under your contract may be limited if you don’t adhere to these time frames. That’s why it’s important that you understand your contract completely, and know what your obligations are.

Once you understand these obligations, ensure you comply with any required notices, and contact your builder to try and resolve the dispute.

Building or renovating your home?

Remember that it’s best to keep all negotiations with your builder in writing. That way you’ll have a complete record, and there are no misunderstandings as to your intentions.

When writing to your builder, make sure you:

  • Make it easy to understand
  • Keep your language professional, and avoid emotive language
  • Be clear as to how you would like the issue resolved, and
  • Provide clear time lines in which you would like a response, as required under your contract.

If you’re unable to resolve the dispute directly with your builder, the next step in the dispute resolution process is to make a complaint to QBCC.

Step 2) Make a complaint to the QBCC

The Queensland Building and Construction Commission (QBCC) is a statutory authority established to regulate the Queensland building industry.

You can lodge a complaint with the QBCC online. The QBCC will work with you to attempt to reach a resolution with your builder, including offering dispute resolution services.

If you’re unable to reach a resolution after following the dispute resolution process with QBCC, you should then file a claim with QCAT.

QBCC will issue you with a certificate that shows you’ve gone through the QBCC dispute resolution process – which is compulsory prior to commencing proceedings with QCAT.

Step 3) File a claim with QCAT

The Queensland Civil & Administrative Tribunal (QCAT)) is an independent, accessible tribunal that’s designed to provide a quick, inexpensive avenue to resolve disputes between parties and make decisions. You can access QCAT’s forms and process and forms online.  

While QCAT has a limit of $25,000 for minor debt claims, this does not apply to domestic building disputes. In fact the jurisdiction of QCAT for domestic building disputes is unlimited – so even if your dispute is for more than $25,000, you can still file a claim with QCAT.

Once you have filed your claim with QCAT, they will be in contact to advise you of the next steps you must complete to process your claim.

As an alternative to QCAT, you may choose to file a claim and statement of claim in the Magistrates Court. This may be more suitable for more complicated domestic building disputes.

If you’re successful with a QCAT hearing, the judgement can be registered in the Magistrates Court the same as any other judgement, and can then be enforced in the Queensland court system.

Contact McCarthy Durie Lawyers for advice on domestic building disputes

If you have a domestic building dispute and you’re unsure about your rights and obligations under your contract, McCarthy Durie Lawyers can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.

The Building Industry Fairness Act comes into effect 17 December 2018

The four major changes you need to be aware of:

Parts of the Building Industry Fairness Act (Security of Payments) Act 2017 (‘the BIF Act’) commenced on 1 March 2018 (Project Bank Accounts), but the major overhaul of the security of regime will finally start on 17 December 2018. See our previous Project Bank Account news post here.


What impact will the Building Industry Fairness Act really have?

1) All invoices will now be Payment Claims

You will no longer need to refer to the Act on your Payment Claims. What this means is any invoice sent will most likely be a Payment Claim.
You no longer having the ability to choose to make an invoice a Payment Claim, every invoice you issue will fall under the regime of the BIF Act, whether you like it or not.
This means the strict time frames that apply under the BIF Act will apply from the day you send an invoice.

2) Payment Schedules will be compulsory

Every time you receive a Payment Claim, no matter how small or large, you will be required to issue a Payment Schedule, the only exception to this requirement is if you pay the payment claim in full and on time.

Under the BIF Act, this means even a small invoice from a supplier, will require the issuing of a Payment Schedule. Heavy penalties of up to 100 penalty units (currently $13,055.00) can be issued if you do not issue a Payment Schedule in response to a Payment Claim received.

QBCC have advised, they will be taking an ‘educational’ approach at the first instance for breaches of the BIF Act. Regardless, the penalties do exist and it is yet to be seen in what circumstances fines will be issued.

3) Second Chance Payment Schedules abolished

Under the Building and Construction Industry Payments Act 2004 (‘BCIPA’), a notice was required to be delivered to give a second chance to issue a Payment Schedule, under Section 20A. This second chance Payment Schedule will no longer exist under the BIF Act.

However, the notice system has not been abolished entirely. Instead there will be a need to issue a notice, under Section 99 of the BIF Act, of your intention to commence legal proceedings. This notice will be required to be delivered:

  • After a Payment Claim has been issued; and
  • The Payment Claim is not paid in full by the due date; and
  • You intend to commence legal proceedings for recovery of the unpaid portion of the Payment Claim.

If you do not deliver this notice within the required time frames, you will not be able to rely on the BIF Act in any legal proceedings.

4) Significant changes in timeframes for Adjudication Applications

If you have previously used BCIPA you would be aware of the maze of time frames to navigate for Payment Schedules, Adjudication Application and Responses.

While the BIF Act was intended to streamline the process, unfortunately the complication with time frames has not been resolved, and there is a minefield of deadlines to comply with yet again.

The good news is, time frames to Applications for adjudications will be extended, giving more reasonable time frames to submit an application.

Talk to us for assistance with the new BIF Act

Not sure how to comply with the BIF Act? Download our BIF Act payment chart – a handy step-by-step diagram of the time frames applicable – below.Are you a Building Industry Fairness Act Claimant or Respondent?

For a personal approach in helping your business get ready for these changes, contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.

How does BIFSOPA apply to builders?

The ways your contracts and systems need to change

BIFSOPA is now in effect and applies to existing AND new contracts. All payment claims are claims under the new Act, which is important because it affects many aspects of your business.

For example, the Act affects:

  • Payment claims
  • Claims after practical completion
  • Payment schedules
  • Pre-conditions to payment
  • Liquidated damages
  • Security
  • Retentions
  • Warranties
  • Time bars
  • Set-offs

How your contracts need to change with BIFSOPA

To ensure your business complies with BIFSOPA, you need to:

  • Watch out for new terms and conditions in a developer’s contract, and
  • Make sure your contracts comply with the new Act.

Payment claims no longer need to be endorsed – which impacts on the automatic use of reference dates where time limitations for adjudication have changed. There is also relief from needing to issue a 2nd chance notice.

The reference dates you used to rely on may be automatically used and expired – and your cash flow can be set back to your next payment claim date.

How your systems need to change under BIFSOPA

You should immediately review the way your office currently operates. With BIFSOPA, all time limits are critical – and all have changed.

Download our free flowchart to see how BIFSOPA affects your business’s systems.

How forms have changed with BIFSOPA

  • If your payment claims are not compliant, they can be deemed invalid
  • The effect of not endorsing “This is a payment claim under the Act” is no longer an option, as it must be under the Act.
  • Some forms have disappeared – for example, the old “Section 20A second warning notice” is gone.

This means you:

  • Can adjudicate (and be adjudicated against) immediately
  • Can sue or be sued immediately, without an ability to defend.
  • May get a stay where the court won’t require that payment. But if that doesn’t happen, you may have to hand over the disputed sum — and only then set the wheels in motion to claim it back.

Got questions about BIFSOPA? Talk to MDL

If you’re not sure how the new BIFSOPA will affect your business, McCarthy Durie Lawyers can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here. 

How do I make a new payment claim if I’ve missed the BIFSOPA time limit?

What you can do to get paid, once the time limit has expired

If 25 days have gone by from your payment claim and you didn’t notice, you now have no payment and no payment schedule from the developer. The reality is, you have missed your chance for payment this month because under BIFSOPA you cannot re-issue a payment claim in the same calendar month.  Where to from here?

Your options for getting paid

Now that BIFSOPA is in effect, you have:

1) Contractual rights

2) BIFSOPA rights

If you haven’t received payment, you need to choose whether to take action through one, or do both.

In this news post the MDL Construction Law team run you through the consequences of each option, so that you can choose the right one for your situation.

Your contractual rights

If you decide to pursue your contractual rights, you have a few options to choose between:

  • Do you suspend works?
  • Do you issue notice of breach?
  • Do you terminate and walk away?

Each of these options has consequences – some very serious – which is why you should carefully discuss them with your lawyer before you decide on a course of action.

Your BIFSOPA rights

Note that you must take action immediately. You must issue a new form of tax invoice and payment claim that meets BIFSOPA requirements (not the former BCIPA requirements).

You then wait for a payment schedule (with a 25 day limit), or if none is forthcoming (or if you receive one and you want to dispute it), apply for adjudication to see if it is determined as a valid schedule.

Taking action on both your contractual and BIFSOPA rights

If you decide to simultaneously enforce your contractual rights and your BIFSOPA rights, you should talk to your lawyer before going down this path.

Action to take for your future contracts under BIFSOPA

You should double-check that your invoices are compliant under BIFSOPA. Note the new time limitations in your contractual administration systems, so you don’t get caught out next time.

As painful as it is to lose a month’s cash flow, it is still likely to be faster than working through contractual rights dramas.

Got questions about BIFSOPA? Talk to MDL

If you’re not sure how the new BIFSOPA will affect your business, McCarthy Durie Lawyers can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.