Queensland Government proposes greater restrictions on head contractors and PBAs with further amendments to the security of payment laws

The Queensland Government has recently passed further amendments to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) in an attempt to clarify how project bank accounts (PBAs) will operate and also reduce the time for providing a payment schedule in response to a payment claim.

Amendments to the BIF Act

Most significantly, the amendments aim to further restrict a head contractor’s ability to access amounts in PBAs, in that head contractors will not be able to withdraw amounts from:

1. the general trust account: if the head contractor is “liable to pay” any subcontractor those amounts, which includes not only amounts “due to be paid” (which was the previous wording) but also amounts certified, stated in a payment schedule or assessed as payable (e.g. by the superintendent); and
2. the disputed funds account: until after the conclusion of either the period in which an appeal may be commenced or the end of the appeals process. What this means is that (once commenced) it may result in a head contractor being required to hold an amount in the disputed funds account for an extensive period of time (conceivably, for years – e.g. after the adjudication process, application to set aside the adjudication decision, appeal, etc.).

Further, the amendments provide that:

1. head contractors will be prohibited from withdrawing an amount from the retention trust account before the end of the defects liability period, unless the withdrawal is:
   • to make payment to the relevant subcontractor;
   • ordered by a court; or
   • to make payment to a different subcontractor engaged on behalf of the head contractor to correct the defects in relation to the first subcontractor’s defective work, provided that the head contractor would have an entitlement to pay itself the amount under the original subcontract to which the retention amount relates.
2. The time respondents have to issue a payment schedule will be reduced to the earlier of:
   • the period stated under the contract; or
   • 15 business days after the payment claim is given to the respondent (previously 25 business days in the last amendments).

Commencement

There is still no official commencement date for the BIF Act, however it is presumed that chapters 2 and 3 will commence on 17 December 2018 as previously announced by the Queensland Government, with PBAs to be rolled out to the private sector in 2019.

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