How to serve a subcontractor's charge and commence proceedings to enforce it

The two most common pitfalls of subcontractors’ charges are: incorrectly serving the notice of claim and failing to properly commence a proceeding to enforce it.

In both cases, the charge fails; it either never attaches (BIF Act ss 122(9), 123(3), 124(3)) or it is extinguished (s 136(3)), and in almost all cases, it cannot be revived (s 118). Typically, there are three parties involved: the subcontractor, the contractor and the employer (often the principal). 

To properly serve a notice of claim, it must, unless it relates only to a retention amount, be given by a subcontractor to the employer within 3 months after practical completion for the work (s 122(5)). A copy of the notice must then be given to the contractor, along with advice as to the name and address of the employer who first received the notice (s 123(2)). There is no time specified for giving this second notice, so it must be given as soon as possible after the obligation to do so arises (Acts Interpretation Act 1954 (Qld) s 38(4)). There is, however, some uncertainty as to when that occurs.

Before the BIF Act, subcontractors’ charges were governed by the Subcontractors’ Charges Act 1974 (Qld) and, under that Act, the second notice could be given as soon as the subcontractor had taken the necessary steps to transmit the first (e.g. by posting it), irrespective of whether it had necessarily reached its intended recipient. The BIF Act, however, uses different language, suggesting that the first notice may need to be actually received by the employer before the second notice can be given. If that is so, prematurely serving the second notice—without prompt rectification—would result in the charge failing to attach (ss 123(3), 124(3)). 

Best practice, therefore, involves covering both possible interpretations until a court decision provides greater certainty on the proper construction of the BIF Act. This means sending the second notice twice: once after the first notice has been transmitted and then again once proof of service of the first notice can be established, either by direct evidence or by operation of ss 39 and 39A of the AIA.

Care also needs to be taken when completing the notice of claim document. It must contain the two matters required by s 122(2): the amount of the claim and sufficient details of the work done by the subcontractor, including certification by a qualified person. It must also be completed in substantial compliance with the prescribed form (AIA s 48A).

If any of these steps are not performed correctly, the charge is unlikely to attach and it usually cannot be revived (s 118), with the consequence being that the money the subject of the purported charge will not be set aside and, even if it is, the purported charge would be invalid, the subcontractor would remain an unsecured creditor and the monies would be returned to the employer or contractor, defeating the purpose of issuing a notice.