25 May 2018

Queensland Leads Australian in Guaranteed Payment to Subbies From Failed Projects

Andrew Lambros
Andrew Lambros

The NSW State Government, under fire over unpaid subcontractors for a State-commissioned highway upgrade, should consider adopting a Queensland measure that would protect subbies.

That’s the view of Andrew Lambros, who heads Bennett & Philp Lawyers’ Insolvency and Bankruptcy Team. He says Queensland is possibly unique in Australia for having special legal protections in place to try to ensure sub-contractors are paid if major projects suffer financial collapse.

Media reports state small business owners subcontracted to upgrade sections of the Pacific Highway in northern NSW have been left “emotionally devastated” after they weren’t paid for work commissioned by the Government.

Ostwald Brothers, the company contracted by the Roads and Maritime Service to upgrade the Ballina to Woolgoolga section of the highway, went broke in late 2017. Now NSW Labor claims 23 small businesses subcontracted by Ostwald Brothers to carry out the work are owed $7.3 million.

Andrew Lambros says such a situation is far less likely to happen in Queensland now, with the Queensland State Government launch this year of Project Bank Accounts (PBAs) as part of the Building Industry Fairness Act.

“Sadly there’s a perennial issue in the building industry of projects collapsing and sub-contractors left out in the cold, which is why Queensland introduced subcontractor charges  some 40 years ago which gave the subcontractor additional legal rights against the owner of the site and the head contractor when these collapses occur”.

In a further significant improvement now under the Project Bank Accounts scheme launched in March,  a set of bank accounts are set up for a project, acting as a trust and head contractors deposit funds to cover sub contractors’ payments.

Since March this covers projects tendered by the Queensland Government on building and construction projects (excluding engineering projects) valued between $1 million and $10 million (including GST). The scheme will cover situations like the Pacific Highway upgrade if the work is done in Queensland . This model is also set to apply to private sector projects valued from $1 million. However, this will not occur before 1 March 2019.

Mr Lambros says now Queensland arguably has the strongest sub-contractor protections in Australia but he feels any business embarking on a significant outlay should ensure they have proper legal advice beforehand as there are still significant risks for subcontractors in the building industry.

The protections for sub-contractor payments only cover work in Queensland.

Link to Building Industry Reforms website:

http://www.hpw.qld.gov.au/BuildingPlan/Pages/default.aspx

Link to Project Bank Accounts information:

http://www.hpw.qld.gov.au/construction/BuildingPlumbing/Building/SecurityOfPayment/Pages/ProjectBankAccounts.aspx

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