Building Industry Fairness Reforms: Report to Government and Government Response

The long anticipated report of the Evaluation Panel appointed pursuant to the Building Industry Fairness (Security of Payment) Act 2017 was released on 28 November. Along with it the Government released its response to the recommendations of the Evaluation Panel.

That Evaluation Panel reviewed the operation of the PBA provisions of the Act and have made recommendations for change which will eventually be relevant to all parties involved in commercial and large scale residential projects in Queensland. Some provisions will affect all contracts where an adjudication is available regardless of whether a PBA is involved.

The more important recommendations, which by the most part, have been accepted by Government are summarised as follows:

1. The Project Bank Account (PBA) requirements be streamlined under the Act so that there need only be one PBA per project. While a retentions trust account will need to be opened there need not be a separate trust account for each project. No disputed funds trust account will be required.
2. It will be an offence for a person (including a principal) given a payment claim to pay less than the amount stated in the payment schedule.
3. A claimant in an adjudication proceedings can issue a “payment withholding request” to a party above the respondent in the contractual chain to require sufficient money to be retained to cover any claimed amount. Should the claimant in any adjudication be a head contractor any withholding request can be directed to a financier or funder of the project. In certain circumstances the claimant can issue a charge over the property on which the building, the subject to the adjudication application, is being carried out.
4. While the Government will further consider the length of the period for any warning notice required prior to court action in default of  a payment  schedule under section 99(3), it is recommended that the warning notice must be given within 60 business days after the due date for payment as opposed to the current 20 business days.
5. Any trust accounts be subject to external auditing.
6. Definitions are to be more closely aligned to those in the QBCC Act to avoid confusion on pivotal definitions of “building work”.
7. Clarification that subcontractors carrying out construction work, including civil works, where the head contract is a PBA will be included as a beneficiary.
8. Design consultants undertaking design work will not be required to establish a PBA.
9. The QBCC is to have expanded oversight and powers over PBA’s and retention trust accounts.
10. Supporting statements are to be made by the head contractor with every payment claim to the principal setting out what work has been paid for and if any payment for work remains outstanding. Should these supporting statements be false it will be an offence prosecuted by the QBCC.

Timing

The reforms will be initiated in stages and the stages now nominated by the Government are more delayed than what was suggested by the Panel. Currently the application of PBA’s only applies to State Government contracts with a value of $1 million – $10 million inclusive of GST.

The new phase 2 will commence from July 2020 adding in all Government projects valued at $10 million or more. This should give sufficient time to prepare and pass legislation. Upskilling on procedures and practices for this group are not likely to require an extended time given their likely previous experience with phase 1.

Phase 2A will commence July 2021 and add in private projects valued at $10 million or more.

Phase 3 will commence from January 2022 and add private projects in the range of $3 million – $10 million (excluding GST).

Phase 4 will commence from July 2022 and add in private projects in the range of $1 million – $3 million (excluding GST).

The delayed phase in period for phases 3 and 4 will ensure sufficient time for those previously uninvolved to bring systems and administration up to speed.

An election will be held by October 2020 and the real effect of PBA’s on any private projects won’t be known until well subsequent.

Upcoming seminars regarding new legislation

Bennett and Philp will be holding seminars for clients and interested parties once new legislation has been passed in the first half of 2020.

If you would like to be notified of these upcoming seminars, please enter your contact details via our Contact page or call us on +61 7 3001 2999.

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).