By Christopher Holland, Lawyer, Axia Litigation Lawyers – 19th January 2026

There is a common misconception within the construction industry that, upon a head contractor entering liquidation, subcontractors are left with no recourse to recover outstanding debts other than to lodge a proof of debt and await a potential distribution alongside unsecured creditors.

However, the statutory regime established by the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) provides a distinct mechanism for subcontractors to secure payment, even following the appointment of a liquidator to the head contractor.

The BIF Act empowers subcontractors to claim a charge over money payable to a contractor (head contractor) by a principal, thereby securing payment for all money due under the relevant subcontract. The regime operates as follows:

1. The subcontractor must give a written notice of claim to the principal (the party obliged to pay the head contractor) and to the head contractor.
2. Upon receiving notice, the head contractor is required to either accept or dispute liability for the amount claimed.
3. Where liability is accepted, the principal is obliged to pay the accepted amount directly to the subcontractor.
4. If the principal fails to pay, the subcontractor is entitled to recover the amount as a debt in any court of competent jurisdiction.
5. Importantly, the BIF Act imposes a strict timeframe for commencing proceedings to enforce a subcontractor’s charge, being that proceedings must be commenced within one month after the notice of claim is given.

Where a head contractor is placed into liquidation, section 500(2) of the Corporations Act 2001 (Cth) provides that no action or other civil proceeding may be commenced or continued against the company except by leave of the Court and subject to such terms as the Court imposes. In Queensland, the Supreme Court possesses jurisdiction to grant such leave.

The purpose of section 500(2) is to protect companies in liquidation from litigation which may disrupt the orderly administration of their affairs. Ordinarily, creditors are expected to lodge a proof of debt with the liquidator. However, the BIF Act confers a statutory right that is not abrogated by the mere fact of liquidation.

The courts have consistently held that the commencement of proceedings to enforce a subcontractor’s charge, even if done without first obtaining leave under section 500(2), is not a nullity.

The Court may grant leave retrospectively (nunc pro tunc), thereby validating the proceedings from the date of commencement. This approach was affirmed by the Courts on many occasions. (1)

In QNI Resources Pty Ltd v Park [2016] QSC 222, Bond J (as his Honour then was) summarised the Court’s discretion as follows:

1. The applicant must demonstrate a serious question to be tried, though it is not necessary to prove every element of the claim at the leave stage.
2. Ordinarily, creditors should proceed by proof of debt unless a good reason is shown. The enforcement of a statutory charge is recognised as such a reason.
3. Leave may be granted on terms, such as requiring further leave before any enforcement action is taken against company property.

A subcontractor who has issued a notice of claim and commenced proceedings within the statutory period is not prejudiced by the subsequent liquidation of the head contractor, provided that an application for leave to proceed is made at the earliest opportunity. Where proceedings have been commenced without leave, the Court has a settled practice of granting leave nunc pro tunc, recognising the necessity imposed by the BIF Act’s strict timeframes.

Enforcement of subcontractors’ charges under the BIF Act remains a viable and effective mechanism for securing payment, even in insolvency scenarios. The courts have demonstrated a willingness to facilitate enforcement by granting leave to proceed, recognising both the statutory purpose of the regime and the necessity for prompt action.

The subcontractors’ charge regime continues to be a powerful tool for security of payment in the Queensland construction industry, even where a head contractor enters liquidation. Subcontractors should not assume that insolvency extinguishes their rights. By adhering to the statutory steps and utilising the Court’s discretion to grant leave, subcontractors may enforce their charges and secure payment.

If you require advice or assistance in pursuing or enforcing a subcontractor’s charge, or have any queries concerning your rights under the BIF Act, we invite you to contact Axia Litigation Lawyers. Our experienced team is equipped to guide you through every stage of the process and ensure your interests are protected.

* This information is general guidance only and does not constitute legal advice. You should obtain tailored legal advice before taking any action in relation to your specific circumstances.