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Subcontractor Charges

On 17 December 2018, the Subcontractors’ Charges Act 1975 was repealed and replaced by Chapter 4 of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). The new requirements for Subcontractors’ Charges apply to both contracts entered into before or after this date but only to notices of claim issued after 17 December 2018

What are the changes to Subcontractors’ Charges?

The subcontractors’ charges provisions have been modernised and simplified. Under the new requirements, if given a subcontractors’ charge, a contractor must respond within 10 business days otherwise penalties may apply.

What is Subcontractor’s Charges?

Subcontractors’ charges provide a way for subcontractors who are not being paid to secure a claim over monies owed to them by a contractor.

Who can claim a Subcontractors’ Charge?

A subcontractor who has been engaged to undertake work by a contractor can give a notice of claim of a subcontractors’ charge over money payable to the contractor by the principal.

Also, if the principal is a developer who engages a builder or contractor, who engages a subcontractor, who engages a  sub-subcontractor, the sub-subcontractor can “leap frog” the contractor in the chain and give a notice of charge to the developer instead.

To claim a charge over money payable, the work undertaken by the subcontractor must be within the definition of work under the BIF Act.  For the charge to ‘attach’, the person served with the charge must have money due to be paid but not yet paid to its contractor (or subcontractor).

The definition of work “includes work or labour, whether skilled or unskilled, done or commenced upon the land where the contract or subcontract is being performed by a person of any occupation in connection with –

  • the construction, decoration, alteration or repair of a building or other structure upon land; or 
  • the development or working of a mine, quarry, sandpit, drain, embankment or other excavation in or upon land; or 
  • the placement, fixation or erection of materials, plant or machinery used or intended to be used for a purpose specified in paragraph (a) or (b); or 
  • the alteration or improvement of a chattel; 
  • and includes also the supply of materials used or brought on premises to be used by a subcontractor in connection with other work the subject of a contract or subcontract but does not include—
  • the mere delivery of goods sold by a vendor under a contract for the sale of goods, to at or upon land; or 
  • work or labour done or commenced by a person— 
  • under a contract of service; or 
  • in connection with the testing of materials or the taking of measurements or quantities; or 
  • the supply under a contract of hire of materials, plant or machinery not intended to be incorporated in the work.”

How can you claim a Subcontractors’ Charge?

A subcontractor will need to complete a Notice of claim of a subcontractors’ charge.  The one notice can be used to claim a charge on both progress payments and retention money that may be payable by the principal to the head contractor (or head contractor to the higher subcontractor as applicable). 

In order to complete the notice, a subcontractor must know:

  • The name and registered office of the principal
  • The name and registered office of the contractor
  • The specifications of the contract
  • The address the works are being carried out
  • The amount being claimed (including GST)
  • The particulars of the claim (e.g. details of the work undertaken)
  • The dates between which the work was undertaken.

The claim must be certified by a qualified person who is:

  • A registered architect;
  • A registered professional engineer;
  • A QBCC Licensee qualified to carry out or supervisor work to which the claim relates;
  • A quantity surveyor; or
  • A person having expert knowledge of the work to which the claim relates who is accepted in a particular case as a qualified person by the contractor and subcontractor

The qualified person can’t have performed any of the work or have a direct or indirect financial interest in the work.

A notice of claim of charge must also be supported by a statutory declaration (PDF) from the subcontractor about the correctness of the claim and the amount claimed. Once completed, it must be served in accordance with the contract.

When should a notice of claim be given?

A subcontractor can make a claim over money paid prior to completion or the due date for payment but no later than three months after practical completion. If the claim is for retention amounts the claim may be given at any time while the work is underway but must be given within 3 months after the end of the defect liability period for the contract.

What happens if you issue a notice of claim?

Once you have given a notice of claim, the principal (or higher contractor if applicable) must retain the money to be paid to the contractor until the court makes a decision about how the money is to be paid. A principal who fails to retain the money is personally liable to pay the subcontractor the amount of the claim.  A principal can elect to make the payment into court.

What are the steps of enforcing the notice of claim?

A proceeding for a subcontractors’ charge must commence within 1 month after the notice of claim is given (or, for a claim for retention only, within 4 months after the balance of the retention amount is payable).

We suggest you seek independent legal advice before giving a notice of claim of charge. 

You can’t give a charge if you are already using adjudication or intend on using adjudication to resolve your payment dispute.

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