Payments Stopped? Project Stalled?… Secure Payment Up The Chain

#Topics Of Interest

May 16, 2022

In the current high-risk environment of increased products, materials and transport costs, labour shortages and flood water impacts, it is critical subcontractors and suppliers take prompt and effective action to recover payment. Given the risks of insolvency, enforcement options that allow recovery from parties higher in the contractual chain assume greater importance.

The subcontractors’ charges provisions of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) offer Queensland subcontractors and suppliers a valuable tool to secure payment from parties higher up the contractual chain (Subcontractors’ Charges). By properly giving a Form S122 within the applicable time frames under the BIF Act, subcontractors and suppliers immediately become secured creditors (i.e. with priority over unsecured creditors in the liquidation scenario) by charging money in the hands of the parties higher up the contractual chain (eg. owners, developers and head contractors). Payment can be secured for invoices long overdue by retention only Subcontractors Charges.

Likewise, third party enforcement provisions of the Personal Property Securities Act 2009 (C’th) (PPSA) offer suppliers of plant, scaffold, formwork and other goods and equipment a valuable tool to secure payment from parties higher up the contractual chain (PPSA enforcement). PPSA enforcement provisions permit direct recovery payment from parties higher up the contractual chain. Where valid priority PPSR registrations are in place, suppliers also increase their prospect of payment recovery in the liquidation scenario as priority creditors.

Successful claimants under Security of Payment regimes in Eastern States can also assign or secure payment from parties higher in the contractual chain (including financiers of head contractors under the BIF Act).

Troy Legal provides expert advice to commercial construction clients in relation to payment recovery options, including from parties up the contractual chain with Subcontractors Charges and PPSA enforcement.

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