In breaking news, the Queensland State Parliament has debated and passed the Building Industry Fairness (Security of Payment) Bill 2017 (BIF Bill). For further information on the BIF Bill, please see our previous Construction Alerts dated 24 August 2017 and 13 October 2017.
The BIF Bill has been passed with 144 amendments. We briefly discuss the most significant amendments below.
Project bank accounts
The operation and effectiveness of the BIF Bill is to be reviewed by a panel of not more than four appropriately qualified persons, starting not later than 1 September 2018. This means that PBAs will come under scrutiny and, depending on the outcome of the review, it may be the case that PBAs will not be introduced for private sector projects in 2019.
A payment dispute will also now occur when a head contractor fails to provide a payment schedule to a subcontractor and becomes liable to pay the subcontractor the amount claimed in the payment claim.
In essence, if a head contractor does not provide a payment schedule and fails to pay the full amount of the payment claim, the head contractor must deposit the full amount of the payment claim into the disputed funds trust account pending an application for summary judgment or adjudication. This is a significant change to the original BIF Bill.
Despite this significant amendment, we consider that the effect of the disputed funds trust account will remain largely nugatory as a consequence of the definition of payment dispute not being the difference between an amount claimed in a payment claim and the amount proposed to be paid in a payment schedule. A payment dispute only arises where there is a difference between the scheduled amount and the payment instruction. Accordingly, the circumstances in which a payment dispute can arise remain limited.
A head contractor may now withdraw an amount from a trust account to pay itself first as long as there would still be sufficient amounts available in the trust account after the withdrawal to pay all amounts due to be paid to subcontractors at the time of the withdrawal.
A head contractor must now ensure that a principal can view information relevant to a payment instructions, in contrast to the previously proposed requirement for head contractors to ensure that a principal can view payment instructions themselves. It remains to be seen whether principals will have full optics on head contractor margins.
Security of payment
The time for providing a payment schedule in response to a payment claim will now be the shorter of:
- the period provided for under the construction contract for responding to a payment claim; or
- the period provided for under the construction contract to pay the amount claimed in the payment claim to the claimant; or
- 25 business days after the day that the payment claim is given the respondent.
This is a significant departure from the current requirements under the Building and Construction Industry Payments Act 2004 (Qld) and the original BIF Bill.
The proposed requirement for respondents to provide payment schedules in response to a payment claim, has been amended such that no payment schedule is required if the respondent pays the amount of the payment claim prior to the date on which the payment schedule would have been required to be given.
The proposed entitlement to progress payments for a reference date reverts back to the current entitlement to progress payments which is from a reference date.
Adjudicators are provided with discretion to disregard an adjudication application or an adjudication response to the extent that it contravenes any limitations prescribed by regulation, in contrast to the original proposed position where an adjudicator was required to disregard an adjudication response longer than the prescribed length, without a similar requirement for an adjudication application.
The amended BIF Bill will now receive Royal Assent, which is essentially a rubber stamp function in the law making process. The date of commencement will then be published in the Government Gazette. Industry participants should now review their administrative and contractual processes and prepare for the introduction of the BIF Bill. We consider that the main issue to impact the building and construction industry remains the introduction of PBAs.
If you are concerned about any aspects of the BIF Bill or your preparedness for the commencement of the BIF Bill, please contact Andrew Kelly, Tom McKillop or Chris Woodhouse.
Tom McKillop | Senior Associate | +61 7 3338 7530 | firstname.lastname@example.org
Chris Woodhouse | Lawyer | +61 7 3338 7908 | email@example.com