On 22 August the Queensland Government introduced the Building Industry Fairness (Security of Payment) Bill 2017 (Bill), which will repeal and replace the Building and Construction Industry Payments Act 2004 (BCIPA), the Subcontractors' Charges Act 1974 (SCA) and amend other related legislation.
When introducing the Bill, Minister for Housing and Public Works Mick de Brenni MP said it will establish a regime to help ensure subcontractors are paid in full, on time and every time. The Bill is State specific and in the Explanatory Notes is said to make Queensland the leader in legislative reform in the field of Project Bank Accounts.
Introduction of Project Bank Accounts
The Bill introduces Project Bank Accounts (PBAs) from 1 January 2018 for government contracts for construction of fixed structures that are wholly or partly enclosed by walls or roofed, and related work, if the contract sum is between $1 million and $10 million.
PBAs are trust accounts into which the government as principal will pay progress payments, retention monies and disputed funds to be held for the benefit of first tier subcontractors and the head contractor.
Replacement of Building and Construction Industry Payments Act 2004
The Bill repeals and replaces BCIPA, and provides improvements to the progress payment claims process by reducing opportunities for head contractors to delay payment and by streamlining the adjudication process.
A payment schedule will be mandatory, whether or not the contractor intends to pay the amount stated in the claim. The payment schedule must include all the reasons for non-payment as the right to include new reasons in an adjudication for complex claims has been removed.
Claimants will have more time to make an adjudication application (up to 40 business days from the due date for payment), but respondents will not have more time to respond.
The amount of material that an adjudicator will have to consider will be limited by regulation as both the number and length of submissions for adjudication applications and responses will be prescribed.
Replacement of Subcontractors' Charges Act 1974
The Bill also repeals and replaces the SCA. It is intended that the legal effect of the provisions that are currently in the SCA will remain unchanged.
Taking action against illegal 'phoenixing'
Amendments to the Queensland Building and Construction Commission Act 1991 (QBCC Act) will enhance the enforcement powers of the Queensland Building Construction Commission (QBCC). Licencing administered by the QBCC will be restricted to take action against corporate 'phoenixing', the practice of secretly running a construction company that goes bankrupt or has its building licence revoked.
'Excluded individuals', those involved in a company failure in other jurisdictions, or who were directors of a company up to two years prior to a failure, will be excluded from obtaining a building licence, as will an 'influential person' who is not an officer of the company but is in a position to substantially influence or control the company’s affairs.
Tougher penalties, including imprisonment
Penalties for unlicensed building work will be increased in a graduated penalty regime. A first offence carries a penalty of up to $31,537.50, a second offence up to $37,845, and third and subsequent offences, or where the work results in tier 1 defective building work, up to $44,152.50.
Penalties of up to $63,075 will be imposed on head contractors that fail to comply with the requirements of PBA, including failing to establish a PBA and unauthorised ending of the PBA.
A new penalty of $12,615 will be introduced for failure to provide a payment schedule, and $25,230 for failure to pay an adjudicated amount. A head contractor will also face a penalty of $12,615 for failure to give notice to a subcontractor about the end of the defects liability period.
Imprisonment of 1 year is an option for persons who fail to make payments to subcontractor beneficiaries of PBAs, or who deposit money into a PBA which is not related to the limited purposes of the account. A head contractor could also face 1 year imprisonment for failure to cover any shortfalls in the PBA.
Imprisonment of 2 years is an option for head contractors who fail to deposit into the PBA an amount paid by the principal, or who withdraw money from the PBA for other than the limited purposes. A head contractor could also face 2 years imprisonment for improperly dealing with retention amounts.