On 30 November 2016 the Queensland Government published a discussion paper outlining planned changes to security of payment legislation. These changes were said to be in response to the negative impact on the economy that results from the slow payment to subcontractors.
The Minister for Housing and Works, Michael de Brenni, said the goal of the changes is to make sure ‘payments for subcontractors working in the building and construction industry are on time, every time and in full.’
These changes mirror in many respects what has happened in New South Wales and Western Australia.
Proposed Changes to BCIPA
Payment claims (like in NSW) will no longer be required to state that they are being made under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA). Current timeframes to lodge adjudication responses will be extended. The new timeframes are:
1. 30 business days if the adjudication application is for a standard claim (under $750,000); and
2. 40 business days for complex claims (over $750,000).
The Government also indicated they intend to address a loophole regarding termination for convenience. Under the changes, if a contract is terminated for convenience, and is silent on reference dates post termination, the reference date will be taken to be the date that the contract was terminated. This effectively acts as a reference date post- termination.
Adjudicators will be given discretion regarding fees and interest. An adjudicator will have discretion to order that:
1. the claimant be reimbursed by the respondent for the cost of the application fee; and
2. the respondent pay interest on the amount, backdated from the date of the payment claim.
It is said this will ensure the claimant can be compensated for the cost of pursuing payment through the adjudication process.
Implementation of Project Bank Accounts (PBAs)
PBAs, as in NSW (and WA), are trust accounts, to be set up by the head contractor. The aim of PBAs is to safeguard progress payments from the head contractor to the subcontractor in the event of head contractor insolvency.
PBAs are proposed to apply to all government funding projects (excluding engineering projects) valued at between $1,000,000 and $10,000,000 from 1 January 2018.
Subject to successful outcomes at Government level, the model will then be implemented to the private sector in January 2019.
It is not proposed to extend PBAs beyond subcontractors that contract directly with the head contractor, only covering ‘first layer’ subcontractors.
Other Potential Changes
The Government has proposed amalgamating the QBCC Act 1991, the BCIPA and the Subcontractors’ Charges Act 1974 as well as legislative provisions relating to PBAs so there is one clear document regarding security of payment provisions.
Implications of these changes, if they proceed, will be far- reaching and significant.
Commencement
The discussion paper is scheduled to be reported on in mid-2017. The minister said the report will then be presented to the government for endorsement in the second half of 2017.
The proposed changes are not likely to be in place until early 2018.
Conclusion
The changes proposed by the Government are significant. Principals, head contractors, and other members of the building and construction industry will all have to adapt their current practices and contractual documentation to transition into the new legislation.