BCIPA: comply first, negotiate later

The recent Supreme Court of Queensland case of National Vegetation Management Solutions Pty Ltd -v- Shekar Plant Hire Pty Ltd [2010] QSC 3 highlights the need to be cautious when dealing with payment claims under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA).

During the course of a dispute between the parties National sent a payment claim to Shekar under the BCIPA claiming a sum of $511,324.44.

In response, Shekar’s solicitor sent a “without prejudice” letter disputing the amount claimed but offering to make a payment to settle all issues in dispute between the parties.

One issue the court had to decide was whether the “without prejudice” letter was a payment schedule within the meaning of BCIPA. If it wasn’t, National would be entitled to payment of the full amount of the claim.
The court considered comments in other cases which indicated that the question of whether something was a payment schedule depended on the contents of the document rather than form.

The court did not rule out the possibility that a ”without prejudice” communication could be admissible as a payment schedule under BCIPA but ultimately did not express a concluded opinion on this point.
In the end the court found that the particular “without prejudice” letter being considered was not a payment schedule, as it did not state the amount of the payment, if any, that Shekar was prepared to make in relation to the BCIPA claim.

The court considered that there was a difference between proposing to settle a claim issued under BCIPA and making an offer in full and final satisfaction of all issues in dispute between the parties. The court said that an offer to settle all issues in dispute – if accepted – could not later be the subject to a “claw back” which was the case with payment made in response to a payment claim under the BCIPA.

Shekar was therefore liable to pay the amount of the full amount of the payment claim under BCIPA.

It is obviously preferable to resolve all disputes in a final sense as quickly as possible. However the onerous consequences of BCIPA mean that it is important to ensure a compliant payment schedule is given in response to a payment claim before seeking to negotiate a global resolution.