In response to the Building Fairness: An Evaluation of Queensland’s Building Industry Fairness Reforms report, which made 20 recommendations aimed at improving Queensland’s security of payment framework, the Queensland Government has now released the Government response to the Building Industry Fairness Reforms Implementation and Evaluation Panel report (Government’s Response). In the Government’s Response, all of the recommendations have been either “accepted” or “accepted in principle”.
Project Bank Accounts (PBAs)
The Government has announced that PBAs will now be rolled out in the following phases:
- Government building projects above $1 million, including Health and Hospital Services from 1 July 2020;
- Building projects above $10 million from 1 July 2021;
- Building projects above $3 million from 1 January 2022; and
- Building projects above $1 million from 1 July 2022.
As set out in the Government’s Response, the following key changes will be made to PBAs before they are rolled out:
- removing the requirement for a disputed funds trust account to be established as part of the PBA framework;
- removing the requirement for head contractors to establish a retention trust account as part of the PBA and instead requiring all parties in the contracting chain to establish a retention trust account;
- requiring head contractors to, within 5 business days of issuing a payment instruction to the bank, provide the relevant subcontractor with a statement which identifies the amount to be paid, the amount to be transferred to the retention trust account and the total amount held in the retention trust account;
- removing the obligation on head contractors to give the principal certain information (including information about the head contractors’ subcontracts and copies of ‘payment instruction information’);
- requiring head contractors to keep the following trust accounting records (which must be made available to the Queensland Building and Construction Commission (QBCC), upon request):
- information relating to all transactions to and from the PBA;
- details of the beneficiaries;
- all payment claims and supporting statements, if any;
- all payment schedules any documentation relating to payment;
- claims, schedules and payments; and
- any information prescribed by regulations;
- requiring head contractors to lodge with the QBCC certain information in relation to a project that requires a PBA, within a specified number of days after entering the contract (such as the site address, contract value, name of the principal, description of the building work, bank in which the PBA will be established, commencement date and date for practical completion);
- removing the ability for a principal to replace the head contractor as trustee of the PBA on insolvency of the head contractor or termination of the contract; and
- enhancing the powers of the QBCC to enable it to monitor and enforce compliance with the retention trust account requirements.
Security of Payment
The Government’s Response also indicates that the following key changes will be made to improve Queensland’s security of payment regime:
- introducing a statutory mechanism whereby subcontractors may serve a payment withholding request on the principal, in respect of amounts in dispute with the head contractor at adjudication, which attaches to any amount that is or will become payable by the principal to the head contractor, including retention amounts;
- introducing a requirement for head contractors to include a supporting statement with each payment claim (based on the NSW model), which declares that all subcontractors have been paid and identifies any subcontractors which have not been paid and any amounts outstanding (where a failure to comply with this requirement is an offence); and
- making it an offence to pay a lesser amount than the amount stated in a payment schedule.
Takeaway
Industry participants should begin to familiarise themselves with new administrative procedures to comply with the forthcoming changes.
CDI Lawyers will keep you up to date with any further developments as and when they unfold.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.