Subcontractors' Charges: A Subby's Ultimate Guide to Getting Paid in Queensland

For subcontractors in Queensland's dynamic construction industry, the frustration of not being paid for your hard work is a severe and all-too-common problem. When the contractor who engaged you fails to pay your invoices, the financial pressure can be immense, jeopardising not just your cash flow but the very survival of your business. You have delivered on your promises and completed the work to standard; you should not be left bearing the financial burden of someone else's poor business practices. Fortunately, Queensland law provides a powerful legal remedy specifically designed to protect you in these situations. This is where the Subcontractors' Charges Act provides a critical safety net.

This comprehensive guide is designed to give you, the subcontractor, a clear and practical understanding of your rights under this vital piece of legislation. We will explore the legal framework that governs subcontractors' charges, which is now found within the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). You will learn precisely what a subcontractor's charge is, how it functions to secure your payment, the strict procedures you must follow to use it effectively, and who is eligible to make a claim. Arming yourself with this knowledge is the most important step you can take towards ensuring you are paid in full and on time.

What is the Subcontractors' Charges Act and How Does it Work?

The Subcontractors' Charges Act establishes a powerful legal mechanism that allows subcontractors to secure payment for work they have completed on a construction project. It gives a subcontractor the ability to lodge a "charge" over money that is owed by a principal (like a property developer or landowner) to the contractor directly above them in the contractual chain. In simple terms, it acts like a legal injunction, intercepting payments that are flowing down from the top of the project before they can be paid to the contractor who has failed to pay you. This process freezes the funds, which are then set aside to cover your unpaid invoices.

Under section 109 of the BIF Act, each subcontractor for a contract is entitled to a charge over money payable to the contractor under the contract, or to another subcontractor under a higher subcontract. This charge also extends to any security held for the performance of the contract, such as retention monies or performance bonds, if the available money cannot satisfy the claim (section 109(2)). However, section 110 limits the total amount recoverable under all subcontractor charges to the amount payable under the relevant contract or subcontracts.

This essential protection for subcontractors is now located in Chapter 4 of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). While the original Act has been incorporated into this newer, more comprehensive legislation, its fundamental purpose remains unchanged. The BIF Act aims to promote fairness and financial security throughout the construction industry, a sector historically troubled by payment disputes, delays, and corporate insolvencies. For any subcontractor facing payment issues, engaging an expert construction lawyer is a crucial first step to navigating this legislation.

The Contractual Chain and the Power of a Charge

To fully grasp how a subcontractor's charge operates, it helps to visualise the structure of a typical construction project. This structure is often referred to as the "contractual chain."

• The Principal: At the very top is the principal, which is the entity commissioning the project. This is usually the landowner or a property developer.

• The Head Contractor: The principal enters into a contract with a head contractor (or main contractor) to deliver the entire project.

• Subcontractors: The head contractor then engages numerous subcontractors to perform specific trades and supply materials, such as electrical, plumbing, carpentry, and concreting.

• Sub-subcontractors: In turn, these subcontractors may engage their own sub-subcontractors or suppliers to carry out more specialised parts of their work.

Money flows down this chain. The principal pays the head contractor, who then pays the subcontractors, and so on. The problem arises when a link in this chain is broken—specifically, when the contractor who hired you fails to pass on the payment you are owed.

This is where the subcontractor's charge proves its immense value. By lodging a charge, you, the unpaid subcontractor, can legally require the principal (or a higher-tier contractor) to stop payment of funds to the contractor who owes you money. Under section 113 of the BIF Act, all money paid or payable in reduction of the contract price is generally subject to the charge, unless it was paid in good faith without notice of the charge and not for the purpose of defeating the charge.

The charge "attaches" to the money that is payable to that contractor, effectively quarantining it. The principal is then legally obligated to hold onto that money instead of paying it out, pending the resolution of your claim. Section 114 reinforces this protection by making assignments of money due to the contractor generally ineffective against a subcontractor's charge.

This provides a vital security net, especially in the frightening scenario where a contractor becomes insolvent. In a standard liquidation, an unpaid subcontractor is typically an "unsecured creditor," meaning you join a long queue of other creditors with very little chance of recovering your debt. However, a validly lodged subcontractor's charge elevates your status, making you a secured creditor. This dramatically increases your prospects of recovering the money you are rightfully owed, even if the contractor goes out of business. Section 115 provides that if there is insufficient money available to satisfy all claims, the claims are to be reduced proportionately. This makes understanding the charge a critical part of risk management for your business.

The BIF Act and Its Role in Strengthening Protections

The integration of the Subcontractors' Charges Act into the BIF Act has helped to modernise and streamline the process for subcontractors. The BIF Act as a whole is designed to ensure that money flows fairly and promptly through the contractual chain. It creates a more secure financial environment by working alongside other protective measures, such as statutory payment claims and the rapid adjudication process for building and construction disputes.

Section 101 of the BIF Act clarifies that the subcontractor charge provisions do not affect any rights a party may have under their construction contract or under other parts of the Act. However, in any proceedings, courts must allow for any amount paid under the BIF Act and may make appropriate restitution orders.

For subcontractors, the BIF Act provides a robust and integrated system for enforcing your right to payment. It is not merely a tool for debt recovery; it is a fundamental component of your business's financial protection strategy. By understanding and using the mechanisms within the BIF Act, you can take proactive and decisive steps to safeguard your cash flow and avoid the crippling effects of non-payment. The legislation is complex, and seeking guidance from a specialist building and construction law firm is essential to ensure you are taking the right steps for your specific situation.

How to Serve a Notice of Claim for Subcontractors' Charge

Successfully using a subcontractor's charge depends on following a formal legal process with absolute precision. The requirements are strict, and any error can render your claim invalid. The process involves several critical steps, each with its own set of rules and non-negotiable timeframes.

Step 1: The Notice of Claim of Charge Form

The process begins with completing the prescribed legal form, the Notice of Claim of Charge. This document is your formal declaration of the debt owed. Under sections 122 and 123 of the BIF Act, you must provide specific and accurate information, including:

• The exact amount of your claim.

• A clear description of the work you performed or the materials you supplied.

• The full legal name and details of the contractor who engaged you and owes you the money.

• The full legal name and details of the principal (or the contractor directly above your debtor) to whom the notice will be sent.

A critical requirement under section 147 is that this form must be certified by a "qualified person" as defined in the BIF Act. This person must be independent and cannot have a financial or personal interest in the claim. A qualified person can be:

• A registered architect.

• A registered professional engineer of Queensland (RPEQ).

• A licensed builder under the Queensland Building and Construction Commission Act 1991.

• A quantity surveyor who is a member of the Australian Institute of Quantity Surveyors.

• An expert agreed to by both the subcontractor and contractor.

This certification provides an independent verification that the work included in your claim has been performed. It adds significant weight and credibility to your notice.

Step 2: Serving the Notice Within Strict Timeframes

Once the form is completed and certified, it must be formally "served" on multiple parties under sections 122-124 of the BIF Act. The notice must be given to:

• The contractor who owes you the money

• The person who is or may become liable to pay money to the contractor (usually the principal)

• If applicable, any person who holds security for the performance of the contract

This act of serving the notice is what legally triggers the obligations of all parties under the BIF Act.

Time limits are absolutely critical under section 121. Failure to comply with these deadlines will extinguish your right to the charge:

• For claims relating to progress payments: The notice must be given within three months of the completion of the work to which your claim relates.

• For claims relating only to retention money: You have three months after the defects liability period expires to serve the notice.

Section 125 makes it clear that if the notice is not given within the required time, or is not properly served, the charge does not attach to any money.

Given these tight windows, it is vital to act the moment a payment becomes overdue. Delaying action can mean losing your rights entirely.

Step 3: The Contractor's Response (or Lack Thereof)

After you have correctly served the Notice of Claim of Charge, section 128 requires the contractor who owes you the money to respond within 10 business days. They must provide a written notice to both you and the person liable to pay money to the contractor, stating whether they:

• Accept liability to pay the amount claimed

• Dispute liability to pay the amount claimed (with detailed reasons)

• Accept liability for part of the amount and dispute the remainder

If the contractor disputes the claim, they must provide detailed reasons for why they believe the amount is not payable. If they fail to provide this response notice within the 10-day timeframe, they are legally deemed to have accepted your claim in full. This is a powerful advantage for the subcontractor, as it significantly strengthens your legal position and can help accelerate the process of recovering a debt.

Step 4: Commencing Court Proceedings

Your charge does not last forever. Under section 136, if court proceedings are not commenced within the prescribed time, the charge is extinguished. You must start court proceedings:

• Within one month after the end of the period for the contractor's response (generally within one month and 10 business days after serving the notice)

• For retention claims only, within four months after serving the notice

Section 134 allows you to recover the amount claimed as a debt if it is not paid after the contractor accepts liability or fails to respond. For disputed claims, sections 138-141 provide for summary court proceedings, with courts having power to dismiss vexatious or frivolous claims and award costs.

Again, a strict time limit applies. If you do not commence proceedings within this timeframe, your charge is automatically extinguished.

Navigating the court system for the purpose of resolving a dispute is a complex legal task. This is a point where professional legal representation is not just recommended, but essential. An experienced construction lawyer will ensure all documents are filed correctly, deadlines are met, and your case is presented effectively to protect your rights and enforce your charge.

Eligibility Requirements for Subcontractors' Charges in Queensland

Before embarking on the process of lodging a charge, it is essential to confirm that your work and your situation meet the eligibility requirements set out in the legislation. Not all work or every type of contract is covered, and understanding these criteria is the first step in building a successful claim.

What Kind of Work is Covered?

Under section 105 of the BIF Act, the right to claim a subcontractor's charge applies to payment for "work" performed or "materials" supplied for a construction project. The Act defines "work" broadly, covering most activities on a construction site. This includes:

• The construction, alteration, repair, restoration, maintenance, or demolition of buildings, structures, or any works forming part of the land.

• Activities such as excavation, earthmoving, scaffolding, and landscaping.

• The installation of fittings and fixtures, including heating, lighting, air-conditioning, ventilation, power supply, and drainage.

• The supply of materials that are intended to be incorporated into the construction work.

However, section 103 excludes certain domestic building work. The provisions do not apply to contracts for work on buildings that are detached dwellings unless the work is carried out for business purposes or the dwelling is intended to contain more than one residence.

The definition is not without its limits. For instance, the simple hire of plant or equipment without an operator is generally not considered "work" for the purposes of a charge. Likewise, the supply of goods or materials that are not intended for direct incorporation into the project may not be covered. If you have any doubt about whether your specific contribution is eligible, it is wise to seek early legal advice.

Who is Eligible to Claim a Charge?

Under section 108, any person who contracts with another person for the carrying out of work can be subject to subcontractor charges. Any person who meets the definition of a "subcontractor" under the Act and has not been paid for eligible work can claim a charge. This right extends down the contractual chain. It includes not only the subcontractors engaged directly by the head contractor but also sub-subcontractors and suppliers who have a contract with another subcontractor. This ensures that protection is available to all parties who contribute labour and materials to a project, regardless of their position in the hierarchy.

Section 118 limits each subcontractor to one claim for each amount owing for work, preventing multiple claims for the same work.

The key requirement is the existence of a contract to perform the work or supply the materials. This is why having a clear, well-defined contract is so important for protecting your rights.

The Critical Importance of a Valid Contract

A robust, clearly written contract is the bedrock of any successful construction project and a vital piece of evidence in any payment dispute. Your contract should meticulously set out the rights and responsibilities of both parties, including a detailed scope of work, the agreed price, and the terms for payment.

Section 111 of the BIF Act provides that a charge is valid even if conditions precedent to the contractor's liability to pay have not been fulfilled, which strengthens the position of subcontractors. However, section 112 clarifies that subcontractor charges do not extend to damages for breach of contract or other non-contractual claims.

When it comes to lodging a subcontractor's charge, your contract is your primary evidence. It establishes the work you were engaged to do and the payment you are entitled to receive. While the Act does apply to oral or partially written contracts, proving the terms of such agreements can be incredibly difficult and costly. A vague or incomplete contract can create ambiguities that a debtor may try to exploit. Having a construction contract lawyer assist with reviewing your building contract before you sign is a prudent investment that can prevent significant problems down the line.

Information Rights and Obligations

Section 119 of the BIF Act gives subcontractors important information rights. If you are considering a subcontractor's charge, you can request in writing that the contractor provide you with:

• A copy of the contract between the contractor and the person liable to pay money to the contractor

• The name and address of that person

• Advice about any security held for performance of the contract

• Any other information prescribed by regulation

Section 120 provides that failure to provide this information within a reasonable time makes the contractor liable to pay damages to the subcontractor. This information is crucial for preparing an accurate notice of claim.

Trust Fund Protections

Section 117 provides an important clarification: no subcontractor's charge exists over money held in trust under a project trust or retention trust established under the BIF Act. This is because money in these trusts is already held for the benefit of subcontractors and has separate statutory protections.

Security and Enforcement Mechanisms

The BIF Act provides detailed procedures for dealing with security held for contract performance. Under sections 130-131, where a contractor accepts liability for a claim or fails to respond, and there is insufficient retained money to satisfy the claim, the security holder must either:

• Pay the amount from the security, or

• Retain the security pending a court order

Section 132 allows courts to order the realisation of security to satisfy subcontractor claims. These provisions ensure that bonds, guarantees, and other forms of security can be accessed to pay legitimate subcontractor claims.

Proportional Payment System

Where multiple subcontractors have valid charges and there is insufficient money to satisfy all claims, section 115 establishes a proportional payment system. Claims are reduced proportionally based on the available funds, ensuring fair treatment of all valid claimants.

Interplay with Other Payment Recovery Options

The BIF Act provides several mechanisms for recovering payments, and it is important to understand how they interact. The two primary avenues are lodging a subcontractor's charge and making an adjudication application for a disputed payment claim. For a deeper dive into the complexities of payment disputes, you might find value in our Comprehensive Guide to Resolving Payment Disputes in Queensland.

Crucially, you cannot pursue both options for the same payment dispute simultaneously. If you give a notice of a subcontractor's charge, you are barred from starting an adjudication application for the same money, and vice versa. This requires a strategic decision based on the specifics of your situation.

• Adjudication is generally a faster and less formal process, designed to get a quick decision and restore cash flow.

• A Subcontractor's Charge can be a more powerful tool if there is a risk of the contractor's insolvency, as it secures the money at the source.

Section 100 of the BIF Act provides a streamlined debt recovery process for unpaid adjudicated amounts, allowing claimants to sue for judgment without the respondent being able to raise counterclaims or certain defences.

Choosing the right path requires careful consideration of the amount owed, the financial health of the debtor, and the complexity of the dispute. This is a strategic decision where advice from our team of experts can be invaluable. For more detailed information on the broader payment framework, the Queensland Building and Construction Commission (QBCC) is an excellent resource. For further guidance, the Business Queensland website offers practical information, and if your dispute involves QBCC decisions, specific legal expertise is highly recommended.

Conclusion

The legal framework once known as the Subcontractors' Charges Act remains one of the most powerful tools available to a subcontractor in Queensland. Now contained within the BIF Act, it provides a direct and effective way to secure payment for the work you have performed. By understanding your rights and the precise legal steps required, you can take decisive action to protect your business from the damaging effects of unpaid invoices.

Here are the key takeaways:

• A subcontractor's charge allows you to freeze money owed to the contractor who engaged you, securing it at the source.

• The process is now governed by the Building Industry Fairness (Security of Payment) Act 2017, specifically sections 103-148.

• You must serve a formal, certified Notice of Claim of Charge on both the contractor and the principal.

• Strict time limits apply to every step of the process, and missing a deadline can be fatal to your claim.

• If your claim is disputed or remains unpaid, you must commence court proceedings within a specific timeframe to enforce the charge.

• Section 148 preserves your general right to recover debts, so the charge process complements rather than replaces other legal remedies.

• Given the complexity, seeking expert legal advice is essential to ensure full compliance and maximise your chances of success.

Do not allow the stress of unpaid debts to overwhelm you. The law provides a clear path forward, and with the right professional guidance, you can enforce your right to be paid.

If you're facing a building dispute or struggling with an unpaid invoice, the next step is to seek expert legal advice. Contact Merlo Law today for a consultation to understand your position and explore your options.

Frequently Asked Questions

Q: What is the main purpose of the Subcontractors' Charges Act?

A: Its primary purpose is to provide a legal pathway for subcontractors to secure payment for completed work. It allows them to "charge" money that is payable to the head contractor, effectively intercepting the payment to settle their own unpaid invoices and protecting them from the head contractor's potential insolvency.

Q: How has the Building Industry Fairness (BIF) Act changed things?

A: The BIF Act has incorporated the principles of the Subcontractors' Charges Act into a broader framework aimed at improving payment security. It has streamlined some processes and works in conjunction with other protections, like adjudication, but the core mechanism of the subcontractor's charge remains a powerful tool for payment recovery.

Q: Can I still use the Subcontractors' Charges Act if I have a verbal agreement?

A: Yes, the Act applies to contracts that are written, oral, or a combination of both. However, a written contract is always strongly recommended as it provides much clearer evidence of the agreed terms, which is crucial if a dispute arises and you need to prove the specifics of your claim in court.

Q: What happens if I miss the deadline for lodging a Notice of Claim?

A: The time limits for lodging a Notice of Claim are absolute under section 125. If you miss the deadline, which is generally three months after the completion of the relevant work, your right to the charge is extinguished, and your claim will be invalid. It is vital to act promptly as soon as a payment becomes overdue.

Q: Do I need a lawyer to lodge a subcontractor's charge?

A: While not technically mandatory, it is highly advisable. The process is legally complex with strict procedural requirements and deadlines. A minor error in the notice or a missed deadline can invalidate your entire claim. An expert construction lawyer ensures the process is handled correctly, protecting your rights and maximising your chances of success.

Q: What is the difference between a subcontractor's charge and an adjudication application?

A: A subcontractor's charge secures your claim by freezing money owed to the head contractor and is ultimately enforced through the courts. Adjudication is a faster, more informal dispute resolution process that results in a binding decision on payment. You generally cannot pursue both options for the same claim, so you must choose the best strategy.

Q: Where can I find the official legislation and more government information?

A: The relevant law is the Building Industry Fairness (Security of Payment) Act 2017, which can be found on the Queensland Legislation website. The Queensland Building and Construction Commission (QBCC) and the Queensland Civil and Administrative Tribunal (QCAT) websites also provide valuable resources.

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This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law.

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