Government offers short term relief from statutory demands and bankruptcy notices, but not from BIFA or the QBCC

In light of the COVID-19 coronavirus pandemic, the Australian Government has proposed the Coronavirus Economic Response Package Omnibus Bill 2020 (Bill). The Bill aims to assist Australians cope with the pandemic’s widespread impact by providing for a range of measures to lessen the economic and financial burden caused by the virus. These amendments include a temporary extension of the short timeframes that relate to common debt recovery tools, statutory demands and bankruptcy notices.

Given the pressures faced by the construction industry in managing cash flow and debts, the proposed amendments to how demands and notices may be issued (and responded to) will likely effect the construction industry. The proposed amendments would see:

1. the statutory minimum for a creditor to issue a statutory demand or a bankruptcy notice to a debtor increased to $20,000; and

2. the response period extended from 21 days to 6 months.

The reasoning behind the proposed amendments is to assist businesses (companies and sole traders) facing financial strain as a result of the economic impact of the pandemic to avoid insolvency by reducing the circumstances (through the increase of the monetary threshold) for a demand or notice to be issued. Further, providing an extended timeframe to respond to a statutory demand or bankruptcy notice could allow businesses to negotiate and/or trade out of certain debts.  

The amendment will apply to statutory demands and bankruptcy notices served after the commencement of the Bill which is expected to be later this week.

However, regardless of these potential measures, it remains important to get on top of payment issues and cash flow as soon as possible. Not only does it make good business sense, but businesses in the construction industry face additional obligations relating to payment that are imposed by the  Building Industry (Security of Payment) Act 2017 (Qld) (BIFA) and the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) which can result in penalties if not met.

Even though the proposed amendments in the Bill may grant businesses relief from dealing with certain statutory demands, they will not stop the obligations to pay or the adjudication process under the BIFA. Perhaps more importantly, the proposed amendments do not extend the timeframes for payment under the QBCC Act nor do they alter the Minimum Financial Requirements imposed on builders by the Queensland Building and Construction Commission (QBCC) which require debts to be paid within industry trading terms. This means that, despite the protection afforded by the proposed amendments, businesses in the construction industry may still be at risk of recovery actions under the BIFA and also have to face QBCC audits, QBCC licence cancellation and monies owed complaints.

If you have any questions about payment rights and obligations, please do not hesitate to contact our team for assistance on (07) 3139 1874.

This article is provided for general information and educational purposes only and does not constitute legal advice. Readers should obtain appropriate independent legal advice based on their own specific circumstances