On 20 March 2020, the Transport and Public Works Committee tabled its report into the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2020 and the Government has now accepted 11 out of the 12 recommendations for amendment which is reflected in the legislation passed on 15 July.
This communication is meant to bring your attention to the important amendments that will have some effect on the below webinar which was conducted earlier this year. The webinar is still a good resource subject to reading the changes which are outlined within this article.
Timetable for introduction Project Trust Accounts
Rather than the timetable of the introduction of phases outlined at slide 6 the new timetable (that will be effected by proclamation) has considerable flexibility bearing in mind the COVID – 19 uncertainties. The Minister intends to introduce changes incrementally over an extended period as detailed in his second reading speech as follows: –
- Phase 2 – State Government building contracts between $1 million and $10 million – 1 March 2021.
- Phase 3 – from 1 July 2021 State Government and Hospital and Health Services building contracts in excess of $1 million.
- Phase 4 – from 1 January 2022 all private-sector building contracts with Statutory Authority, Local Government and Government-owned Corporations worth $10 million or more.
- Phase 5 – from 1 July 2022 all building contracts with any Statutory Authority, Local Government and Government-owned Corporations worth $3 million or more.
- Phase 6 – from 1 January 2023 – all eligible building contracts be they Government or private of $1 million or more.
Definition of "Building"
The bill previously defined "building" as "includes a fixed structure" (refer to slide 7). This has been tightened considerably as a fixed structure could include a multitude of structures. The new definition provides that "building" means "a fixed structure that is wholly or partly enclosed by walls or is roofed". This narrows the definition as to what is "Project Trust Work" that requires a statutory trust to be set up.
The exemption for contracts dealing with Building Work Services has been tightened to only apply to advisory work or design work carried out by registered architects, registered professional engineers, building designers or landscape architects. Contract administration is also exempted so long as the engineer etc wholly or partly designed the building. There are also anti-avoidance provisions set out in amendments to clause 15F in respect to contracts less than 90 days until practical completion.
Omission of section 53BA and section 53BB
At slide 23 we commented concerning the controversial inclusion of these sections which made unlicensed Executive Officers of the company liable in respect of compliance with Minimum Financial Requirements. There were significant penalties which would have been able to target the "mum" of the "mum and dad" builder for non-compliance issues. Lobbying by sections of the industry has thankfully excluded this abhorrent portion of the proposed legislation.
Withholding payment provisions – resident owners
At slides 25 and 26 we referred to the withholding payment provisions in section 97A to H where the holder of an adjudication decision could deliver notices to parties higher up the chain to effectively withhold monies to secure payment to a claimant. The amendment makes these provisions not applicable to a resident owner who is higher up the chain. This is consistent with a history of security of payment legislation not involving "mum and dad" resident owners.
New section 123A – Developers
In accordance with the wish of the Committee, the Minister has committed to reviewing the role of Developers in the industry and will appoint a panel with the terms of reference to be supplied by the Minister.
New section omitting exemption – QBCC Act schedule 1A section 8
This QBCC provision exempted an unlicensed builder from liability under section 42 (penalties for unlicensed building) in circumstances where the construction was not residential, and they contracted with a licensed party to undertake the building works. These matters were not originally any matters that were reviewed by the review panel, which was the genesis of the original Project Trust Account amendments. They arose in the committee stage as a result of submissions apparently made complaining that unlicensed parties were undermining the intention of the Act and that such an exemption was unnecessary as most large infrastructure projects where builders may not have been licensed in Queensland are dealt with under other exemptions. Contractors who had used this exemption to avoid multiple licenses with a group will need to review their current practices and contracting entities so as to avoid any unintentional non-compliance.
Aside from the above provisions, the amendments are not considerable when compared to the original Bill.
The thrust of the original Bill concerning the introduction of Project Trust Accounts, Administration and Audit are largely unchanged. While the State election is due in October this year, the state opposition supported the Bill (although supported complaints of Industry concerning costs of implementation). We would assume if they were successful they would likely give the Act some chance to have an effect, before any further change. In the circumstances, a review of the linked webinar would be useful to increase understanding and compliance.
Construction Briefing Webinar – April 2020
The seminar discusses the essential and detailed consideration of:
- Overview and history of Building Industry Fairness (Security of Payment) Act
- Phases of introduction
- Who do Trusts apply to?
- Which contracts exempt?
- When is amount liable to be paid to a subcontractor?
- Statutory Trusts – Administration, Deposits, Payments, Dissolution, Shortfall, Notices
- Retention Trust Accounting, Admin, Charges
- Powers obligations and restrictions on Trustees
- QBCC Powers
- Security under PPSA
- Personnel liability of executives
- Amendments S75 – Supporting statements
- Withholding payment
- Charges over property
- Amendments to Security of Payment Provisions and QBCC Act, s42E, Excluded no site supervisors licence
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.