Queensland
On 17 December 2018, the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) introduced a number of changes to the Queensland construction industry and, in particular, the security of payment regime. For a summary of the key security of payment changes please see our previous update.
In addition, the BIF Act amended the Queensland Building and Construction Commission Act 1991 (Qld) by introducing:
- a statutory defects liability period (DLP) on all contracts so that retention must be released 12 months after practical completion if:
- the contract allows a retention amount to be withheld or security to be held after practical completion in relation to the need to correct defects; and
- the contract does not provide for the release of the retention amount or security at the end of an ‘identifiable period’;
- a penalty of up to 200 penalty units or 1 years’ imprisonment for failing to release retention amounts in accordance with the relevant contract without a ‘reasonable excuse’ and where there is no dispute about the release;
- a requirement that contractors give subcontractors 10 business days’ notice before the end of the DLP stating the date the DLP ends, the amount of retention to be paid at the end of the DLP if no amount is required to correct defects and the date the retention amount is proposed to be paid to the other party; and
- if the DLP in a subcontract is linked to the DLP under the head contract, then it is an offence if you do not give the notice in (c) within 5 business days of being given the notice under the head contact.
It would seem that the penalty for failing to release a retention amount is easily avoided by issuing a notice of dispute.
Project bank accounts (PBAs) are expected to be rolled out to the private sector in 2019. PBAs will be required for all private-sector projects over $1 million, at some time after 1 March 2019 (the exact date is yet to be confirmed).
New South Wales
On 21 November 2018, the NSW Government passed the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amendment Act), which adopted a number of key recommendations made by John Murray AM in the national review of security of payment laws (Murray Review).
We will keep you up to date regarding the Amendment Act commencement date as soon as this is confirmed by the NSW Government. The key changes that will be introduced under the Amendment Act are set out in our previous update, including:
- reintroducing the requirement for payment claims to be endorsed;
- reducing the time for head contractors to pay subcontractors after receiving a payment claim from 30 business days to 20 business days; and
- creating a statutory reference date on the termination.
The NSW Government has also foreshadowed the introduction of a statutory deemed trust scheme, whereby monies are automatically taken to be held on trust, the moment they are received, for parties further down the contracting chain (however this is yet to be confirmed).
Western Australia
The Western Australian Government has released the ‘Security of Payment Reform in WA Building and Construction Industry’ report (Fiocco Report), which advocates for nationally consistent security of payment laws and makes 44 recommendations which aim to increase security of payment for subcontractors in WA’s construction industry.
The Fiocco Report supports the majority of the recommendations that were made in the Murray Review and also makes some recommendations which align with the changes that came into force under the BIF Act on 17 December 2018.
The Fiocco Report makes a number of unique recommendations including:
- inserting a statutory express term into construction contracts, which requires a principal to give a contractor 10 business days’ notice before having recourse to any security under a construction contract; and
- introducing a demerit point system for builders who demonstrate poor payment practices and contractual deficiencies, where the accumulation of a specified number of points could result in a fine and/or the suspension or cancellation of registration.
The WA Government has also announced that it will significantly expand PBAs to apply to Government projects where the total value of works exceeds $1.5 million. The WA Government said that it would provide a definite guide to which projects will be covered early this year.
Takeaway
For construction industry operators in NSW, QLD and WA, significant legislative changes for the construction industry are in the pipeline.
We encourage you to familiarise yourself with these changes now and ensure that your contracts are amended in order to be adequately protected and prepared in 2019.
CDI Lawyers will keep you up to date of these changes as a when they are announced and introduced throughout 2019.
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