Subcontractors’ Charges Act
Subcontractors’ Charges Act 1974 (Qld)
The Subcontractors’ Charges Act is extremely powerful legislation which sub contractors (involved in work on land) can use to secure moneys owed to it by a head/superior contractor from the head/superior contractor’s principal (“employer”).
The effect of the charge is to take moneys due from the employer to the head/superior contractor out of circulation, to be earmarked for payment to the sub contractor. As you can appreciate the sub contractor does not have a contract with the employer, but the effect of this Act is that the sub contractor may get the money directly from the employer in certain circumstances.
The employer is obliged by the Act to retain the charge moneys, and if they fail to do so they are personally liable to pay its claim, not exceeding the amount that the employer was obliged to retain. The sub contractor lodging the charge (and any other sub contractors) become secured creditors for these monies retained by the employer, even against a liquidator of a head contractor.
It can have a devastating effect on the head contractor’s cash flow, so the sub contractor must have a justifiable basis for lodging a sub contractor’s charge. If a sub contractor vexatiously or without reasonable grounds lodges a subcontractor’s charge, a court can award damages to a person prejudicially affected by an unjustified lodgement of the subcontractor’s charge, which the sub contractor would be required to pay.
In our experience, generally the sub contractor does not receive all the monies it claims, but particularly in cases where the head contractor has already gone or later goes into liquidation, the subcontractor benefits by at least getting some monies which otherwise are likely to be unavailable to them in liquidation.
Nevertheless, it is important for sub contractors to realise that use of the Act means that generally they are “buying into litigation”, which can be slow and expensive. Furthermore, in cases where the head contractor is in liquidation, the sub contractor is sometimes confronted with a hostile liquidator who is legitimately trying to bring all assets into the company for distribution to creditors, and monies subject to a charge can be quite significant amounts that the liquidator would like to use to top up the assets in the insolvent company.
There are a number of complex issues associated with this Act that sub contractors must be aware of, and these brief summary notes (and the attached flow chart) provide some assistance, but they do not cover all possibilities, so it is important to get legal advice BEFORE and DURING the journey so as to maximise one’s return and limit one’s exposure as much as practicable.
For advice and assistance on getting paid, contact us or call 07 3220 0299.