In late August the government introduced the Building Industry Fairness (Security of Payment) Bill (the ‘BIF Bill’) for its first reading. The Bill is the government’s response to the outcry in the construction industry for more fair payment terms for subcontractors. If passed, the Bill will:
Replace the Building and Construction Industry Payments Act 2004 (‘BCIPA’);
Replace the Subcontractors Charges Act 1974; and
Amend the Queensland Building and Construction Commission Act 1991 in relation to phoenix companies.
The 215 page Bill makes significant changes, however here are five great new things for subbies under the proposed Bill.
1. Simplified Requirements for a Payment Claim
Previously under BCIPA, to be a valid payment claim you needed to specifically state on it that the progress claim was a payment claim under the Act. This requirement has been removed, meaning all progress claims an all invoices will be a valid Payment Claim provided it[1]:
identifies the construction work;
states the amount claimed; and
requests payment of the claimed amount.[2]
It is hoped the removal of the additional requirements, will remove any reluctance by subcontractors to use the security for payment legislation to protect their interests. During the consultation it was noted by a number of subcontractors that would not state their progress claim was a payment claim under the Act on their progress claim in fear that they would have negative consequences from the head contractor, such as not receiving future jobs.
2. S.20A Notices Abolished
Previously if a subbie issued a payment claim and was not paid by the due date (and had not received a payment schedule in response), the subbie could only keep its BCIPA claim alive and be allegeable for the protections of the Act, if the subbie issued a section 20A notices within 20 business days of the due date. This was also known as second chance payment schedules.
Unfortunately most subcontractors didn’t know about this requirements and often lost their right to use BCIPA well before they ever sought legal advice.
Under BIF, the requirement for section 20A notices has been removed and if a payer fails to send a payment schedule on time, the payer will be liable for the entire amount claimed under the payment claim.
Payers no longer get a second chance to send a payment schedule. The removal of burden of s.20A notices, gives subcontractors better access to justice and the protections of the security for payment legislation.
3. Adjudication Times Extended
The time frames to apply for an adjudication has been significantly extended to much more reasonable time frames.
Under BCIPA the time frame is 10 business days after receiving of a payment schedule. This was a very short time frame especially if the reasons raised in the payment schedule were numerous and/or complicated. A lot of businesses struggled to comply all of the information required to support their case within the time required.
The time frames are now extended to 30 or 40 business days from the due date, depending on the basis for your adjudication application[3]. This extended time frame will provide greater access to the adjudication process for subbies, which provides a speedier resolution of disputes.
4. Project Bank Accounts
If you have heard about this new Bill previously, it has probably been in relation to project bank accounts, which have been widely discussed in the media. BIF introduces this concept for the first time to Queensland.
Project Bank Accounts are a system where the project funds will be held in a bank account specifically for the purpose of ensuring funds are secured for the first tier of subcontractors and suppliers and not reallocated to the head contractor’s other projects or private bank accounts.
Initially, this system will be trialled on government projects from $1 million to $10 million from 1 January 2018. The proposal is to then extend Project Bank Accounts from 1 January 2019 to all projects over $1 million (both government and private). There is also an allowance in the Bill for the project bank accounts apply to subcontractors further down the contractual line at a later date.
The project bank account is to be set up and administered by the head contractor. There will be three accounts:
General account;
Retentions; and
Disputes.
The separate account allows for amounts in dispute and retentions to be set aside and held securely.
5. Penalties now apply for failure to release retention monies
BIF introduces the requirement that if a contractor fails to release a retention amount held under a building contract, they will be attract a maximum penalty of 200 penalty units ($25,230) or 1 year’s imprisonment.
Certain exceptions do apply[4], however this significant penalty is hoped to deter contractors who previously have simply delayed or failed to release of retention monies that were rightfully owed to the subbie.
For now BCIPA still applies and will stay in place until this new Bill becomes an Act. However, subcontractors have something to be cheerful about and the future of subcontracting in the State looks bright.
Submissions on the Bill close on 7 September 2017.
If you have any questions or concerns about the BIF Bill, please contact us on 07 3128 0120 or subcontractors@arbuildinglaw.com.au.
End Notes
[1] S.86 Building Industry Fairness (Security of Payment) Bill 2017
[2] There is also a requirement that the payment claim contains other information prescribed by regulation. These are yet to be revealed (if any).
[3] S.79 (2)(b) of the Building Industry Fairness (Security of Payment) Bill 2017 provides the following time frames for applying for an adjudication: for an application relating to failure to give a payment schedule and pay the full amount (30 business days from due date), for application relating to failure to pay the full amount stated in the payment schedule (40 business days from due date), for application relating to the amount stated in the payment schedule being less than the amount stated in the payment claim (30 business days from due date).
[4] Exceptions being: the money has been paid into court to satisfy a notice of claim under the Building Industry Fairness (Security of Payment) Act 2017; or the retention monies are subject of a dispute between the parties to the building contract unless, as an outcome of the dispute, the amount is to be paid to the contracted party. S.278 of the Building Industry Payment (Security of Payment) Bill 2017.
