A building dispute should be effectively managed to minimise stress, delay and financial loss. Legislation sets out the processes required for resolving most building disputes. The prescribed process generally depends on whether the work is domestic or commercial, and the nature of the dispute.
Most building disputes concern:
- contractual issues including breach of essential terms;
- defective or incomplete building work / breach of statutory warranties;
- delays in building works;
- payment claims and disputes under security of payments legislation;
- release of security or retention monies;
- licensing and registration issues;
- debt recovery matters.
Where a dispute cannot be resolved through negotiation, it may be necessary to take legal action through a tribunal or court, or by applying for adjudication.
Queensland Civil & Administrative Tribunal
The Queensland Civil and Administrative Tribunal (QCAT) may determine a range of domestic and commercial building disputes. The supporting legislation encourages claims to be settled quickly, fairly and economically.
Disputes concerning disciplinary proceedings against building certifiers and contractors may also be determined.
Before proceeding with an application, the parties to the dispute must have already participated in a dispute resolution process with the Queensland Building and Construction Commission (QBCC). The application to QCAT must be supported by a letter from QBCC certifying participation in dispute resolution and advising of the outcome.
Applications to QCAT may be made by a consumer, contractor, subcontractor or building professional regarding domestic or commercial building work. Typical matters for determination may include:
- unpaid debts;
- defective or incomplete building work;
- contractual disputes;
- claims for negligence, nuisance or trespass;
- review of disciplinary decisions made by QBCC against building certifiers and contractors (including decisions about rectification of work, insurance claims, exclusions and bans for domestic building work and licensing);
- review of decisions made by an adjudication registrar.
Payment disputes for building work
The Building Industry Fairness (Security of Payment) Act 2017 (Qld) is used to resolve payment disputes in the building industry between principal / head contractors and sub-contractors.
The Act grants an entitlement for contractors to claim progress payments for work performed whether or not a contract provides for progress payments. It establishes a process for making and responding to payment claims and for resolving disputed claims through adjudication as opposed to expensive and timely litigation.
The Act enables the use of a statutory charge in favour of a contractor for work performed and requires establishment of a ‘project bank account’ for certain building contracts.
The Act comprises recent reforms to security of payments legislation and imposes strict timeframes and compliance, with adverse consequences for non-complying or defaulting parties. Those in the construction industry should ensure they are familiar with the provisions, and that appropriate systems are in place to deal with claiming and responding to payment claims under the Act.
Release of security disputes
A building contract may allow a principal to require a subcontractor to provide a form of security aimed at protecting against loss should the subcontractor fail to perform its contractual obligations. The simplest form of security constitutes a principal withholding a specified sum of money from a contractor’s payment, known as a retention amount.
The timely release of a retention amount can be critical to a subcontractor’s cashflow. Similarly, a principal may wish to avoid the premature release of security monies to ensure it is protected from future claims concerning a subcontractor’s work.
Some contracts have provisions allowing a principal to retain security monies until certain events under the head contract are achieved. These conditions however may be onerous for a subcontractor and, if they constitute a ‘pay when paid’ provision, will likely be void.
The timing of release of a retention amount can be contentious, and it is important for all building professionals to understand their rights and obligations and to obtain legal advice before a dispute becomes protracted.
Generally, the first step in resolving a building dispute is for the parties to attempt to negotiate through mediation or conciliation. These forms of alternative dispute resolution can help avoid costly litigation, achieve workable outcomes, and preserve relationships.