The Queensland Government’s ‘milestone moment’ for security of payment in the building and construction industry

This week, the Queensland Government passed the Building Industry Fairness (Security of Payment) and Other Legislation Amendments Act 2020 (BIF Bill) as part of its plan of what it refers to as ‘making sure Queensland tradies get paid’ (notwithstanding the legislation also applies to payment of builders).

The provisions contained in Part 4 and 6 of the BIF Bill commenced on 1 July 2020, which sees amendments to the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) and the Queensland Building and Construction Commission Act 1991 (QBCC Act). The remaining Parts, amending the Architects Act 2002, Building Act 1975 and the Professional Engineers Act 2002 will commence by proclamation in due course.

Please see our previous update here which provides a summary on the key amendments to the BIF Act when the BIF Bill was first introduced.

Key Amendments

Under the amendments, project bank accounts are officially out, with contracting parties (developers and builders alike) now required to establish a ‘project trust account’ for amounts payable to contracting parties (builders and subcontractors) for each project.

Further, a “retention trust account” is now compulsory for all developers and builders for retention held under a head contract and first-tier subcontracts. Notably, a single retention trust account may be established for all projects.

The proposed “disputed funds trust account” is also done away with.

There remain substantial penalties under the BIF Bill for, amongst other things:

1. not establishing a project trust account where required;
2. withdrawing money from a project trust account for any other purpose than as stated in the BIF Act;
3. not maintaining sufficient funds in a project trust account; and
4. failing to open a retention trust account before withholding retention from payment to a contracted party.

The amendments to the BIF Act also introduce additional avenues for contracted parties to recover monies owing. These avenues include the ability for:

1. a head contractor to register a charge over property of the developer for unpaid adjudication amounts. No doubt this will put many developers in breach of their finance agreements and builders in breach of the tripartite agreement signed with the financier;
2. a head contractor can now serve a payment withholding request (PWR) on a financier to withhold monies from payment to the developer;
3. a subcontractor can now serve a PWR on a developer to withhold monies from payment to the head contractor; and
4. if a PWR is given to a financier or a developer, in addition to the obligation to withhold an amount in compliance with the PWR, the amount is also subject to a charge (being a statutory interest under the Personal Property Securities Act 2009 (Cwlth)) in favour of the person giving the PWR.

The BIF Bill also sees amendments and further expansion to the regulatory powers of the Queensland Building and Construction Commission (QBCC) which include:

1. the ability to place conditions on a licence granted under the QBCC Act, restricting the scope of work that a licensee may perform to be commensurate with the licensee’s skills and experience, with the view these conditions will better support a licensee’s transition into a new licence class;
2. boosting transparency between New Zealand and other Australian States and Territories in licensing suspensions and cancellations; and
3. publication of relevant details of excluded individuals and permanently excluded individuals who are not licensees.

Takeaway

From 1 July 2020:

1. a head contractor may register a charge over property for an unpaid adjudication amount, despite having no charging clause in their construction contracts;
2. head contractors may secure payment directly with financiers of a project; and
3. subcontractors may now secure payment directly with the developer of a project.

From 1 March 2021, it is intended that the trust account framework will apply to Government construction contracts over $1 million, with the next transition to occur in 1 July 2021 to expand to Government, hospital and health services’ construction contracts valued at $1 million or more.

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. 

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