Services > Building and Construction Law > Subcontractors’ Charges Act

Subcontractors’ Charges Act

What a Subcontractors’ Charge?

The Subcontractors’ Charges Act 1974 (Qld) provides a mechanism for subcontractors to secure money owed to them by a head contractor or superior contractor.

Under normal circumstances, the building owner or employer (“the employer”) would pay the head contractor pursuant to the contract between the employer and head contractor. It is then the head contractor’s responsibility to pay the subcontractors which the head contractor has engaged. Refer to the following flow chart.

Subcontractors' Act Charge

However, in some circumstances, the head contractor fails to pay the subcontractor the money owed pursuant to the subcontract, although the head contractor may still be receiving payment from the employer. The subcontractor is placed in a difficult position as there is no contract between the employer and the subcontractor which would allow the subcontractor to seek payment directly from the employer.  The Subcontractors’ Charges Act provides a solution for subcontractors from the difficulties which arise from being outside the ‘protection’ of the head contract.

The Subcontractors’ Charges Act allows the subcontractor to lodge a charge requiring the employer to set aside money that would have otherwise been paid to the head contractor. This money is ‘earmarked’ for the subcontractor who has not been paid. Refer to the following flow chart.

Subcontractors' Act Charge

How do I lodge a charge?

To lodge a charge on money owed by the head contractor, the subcontractor must give a notice of claim of charge to the employer. The Act requires the notice to include certain information including the amount and particulars of the claim supported by a statutory declaration. The subcontractor must also give notice to the head contractor that the claim has been made.

 

What happens after I give notice of a claim of charge?

The employer is then obliged to hold the monies due by the head contractor to the subcontractor. The subcontractor is then considered a secured creditor. If the employer fails to comply with this obligation, they can be held liable for the amount owing to the subcontractor.

The money held by the building owner may need to be shared between subcontractors in the event that a number of subcontractors lodge a charge.

Within 14 days after the notice of the claim of charge is given to the head contractor, the head contractor must give to the employer and the subcontractor a notice (“contractor’s notice”) that:

(a)  accepts liability to pay the amount claimed; or

(b)  disputes the claim; or

(c)  accepts liability to pay the amount stated in the contractor’s notice, but otherwise disputes the claim.

 

Can the employer pay the money being held directly to me?

Subcontractors should note that money held by the employer can only be paid to the subcontractor in the event that the head contractor consents or the Court makes an order that the money is to be paid.  While the Subcontractors’ Charges Act provides a useful mechanism for subcontractors to secure money owed to them, it is important to be aware that it frequently results in litigation.

The subcontractor does not always receive the full amount claimed, particularly in the event that the head contractor becomes bankrupt or goes into liquidation. However, even in these circumstances the subcontractor is in a position to recover some of the money owed to them which might otherwise be unavailable in the case of bankruptcy or liquidation.

 

Can I ‘leapfrog’ to the owner?

The Subcontractors’ Charges Act allows subcontractors to lodge a charge directly with the owner or employer. This means that even in the event that you are a subcontractor with a number of head contractors or developers between you and the owner, you can still lodge a charge directly with the owner. This may ensure a better return for the subcontractor as it ‘leapfrogs’ directly to the entity who is making the payments. Refer to the following flow chart.

Subcontractors' Act Charge