Once again, the construction industry is going through an upheaval.
On 22 August 2017 the Queensland Government introduced the Building Industry Fairness (Security of Payment) Bill (BIF Bill).
The BIF Bill was introduced as part of an overhaul by Queensland aiming to drastically change the legislation around payment to ensure subcontractors are paid on time and in full. The Bill will likely pass, and this will mean principals, head contractors and subcontractors will need to take steps to ensure compliance with the new regime.
What are the changes?
The changes include:
- The introduction of project bank accounts (PBAs) for certain government projects valued between $1 million and $10 million;
- The replacement of the Building and Construction Industry Payments Act 2004 (BCIPA);
- The replacement of the Subcontractors’ Charges Act 1974 (SCA);
- An aggressive stance against phoenix activity through changes to the Queensland Building and Construction Commission (QBCC)
- Tough penalties around unlicensed building work.
Project Bank Accounts
The introduction of PBAs is an attempt to try to secure monies for head contractors and subcontractors. The government, as principal, will pay money into the account with the money. That account will broadly work as a trust account for the distribution of monies from the principal to the head contractor and subsequently to subcontractors.
The trust account structure will be an attempt to ensure that subcontractors are properly paid but also create risks when there are shortfalls in amounts payable to subcontractors. Disputed amounts will need to be held for the benefit of subcontractors and the head contractor.
It is expected the PBAs will be in effect from January next year. If it is successful, it will be expanded the following year and may apply to any project over $1,000,000.
The changes to the security of payment regime are significant and aggressive. The changes appear to be heavily weighted to favouring a process to push claims through for subcontractors and, give limited time and difficult obligations, for contractors or principals disputing claims. The changes include:
- The requirement to provide a payment schedule in response to every payment claim, whether disputed or not. In addition, there will only be one opportunity to provide a payment schedule in response to a claim prior to adjudication. A failure to submit a payment schedule could also result in penaltie
- Mirroring NSW, there will no longer be a requirement to state a payment claim is made under the legislation. Every claim will be treated as a claim under the security of payment regime.
- The time to apply for adjudication will be increased to 40 business days after a payment was due.
- A further reference date post termination (whether or not provided under contract), which appears to be a sensible reaction after the High Court’s recent decision in Southern Han Breakfast Point Pty Ltd (in Liq) v Lewence Construction Pty Ltd  HCA 52.
- There will also be limitations around the length of submissions from both parties to an adjudication.
The provisions of the SBC will be adopted as part of this legislation.
A more powerful QBCC
Enforcement is also a primary focus of this new legislation with the QBCC powers being beefed up. Mandatory financial reporting for building companies will be reintroduced under this legislation, as well as the power for the QBCC to comply a building company to produce those records.
The legislation will also look to prevent and crackdown on phoenix activity. This will be done by excluding people from being a director or person or influence in the company in the 2 years following a liquidation.
We will provide a more detailed summary of the legislation before it comes into effect.
If you have any questions around the security of payment regime in Queensland or other states and territories, including in relation to managing or responding to a claim, or changes your business may need to introduce to manage the BIF Bill, contact Michael Morrissey.
Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.