30 January 2018

Major Changes to the Building and Construction Industry: BIF

The Building Industry Fairness (Security of Payment) Act 2017 (“BIF Act”) was passed on 26 October 2017, just prior to the pre-election dissolution of the government.  The BIF Act, introduces major changes for the building industry in 2018.

What are the reforms?

Reforms are to three areas:

  1. security of payment legislation: amendment and consolidation of the Subcontractors Charges Act 1974 and the Building and Construction Industry Payments Act 2002 (“BCIPA”);
  2. amendments to the Queensland Building and Construction Commission Act 1991 (“QBCCA”): enhancing the prevention of corporate phoenixing and increasing QBCC oversight of financial affairs; and
  3. progressive introduction of “project bank accounts”: a type of trust account for the payment of progress payments from the principal, retention funds and disputed monies for the benefit of first‑tier subcontractors.

When do reforms start?

  1. security of payment legislation: changes are not yet in force and will commence on a date to be proclaimed. While this is tipped to be in the first half of the year, the date is unknown.  At the latest, the legislation will commence on the 12‑month anniversary of the legislation (26 October 2018);
  2. QBCCA: similarly, these provisions will commence on a date to be proclaimed. New minimum financial requirements will be prescribed by regulation, and the detail of these minimum requirements has not been released; and
  3. project bank accounts (“PBAs”) began on 1 January 2018 for government projects between $1 and $10 million dollars. A review of PBAs will be undertaken in September 2018, with the expectation that the second phase of the PBA implementation will commence on 1 January 2019 for both public and private sector projects over $1 million dollars.

BCIPA amendments

In this update, we focus on the changes to the BCIPA regime, which has been in place since 2004.  The amendments to BCIPA are subcontractor‑friendly and the industry is likely to see an increase in the volume of adjudication claims when the changes commence.

The most significant change is the removal of the requirement to include the endorsement “This is a payment claim under the Building and Construction Industry Payments Act 2004’ on a payment claim.  This means an invoice which:

  1. identifies construction work to which it relates; and
  2. states the amount of the progress payment sought,

will satisfy the requirements for a payment claim and trigger the commencement of time limits for payment or challenge by the recipient.

The new ‘response period’ is the earlier of the period set out in the construction contract for responses or payment, or 25 business days.

A respondent to a payment claim must either pay the claim, or respond with a payment schedule on time.

The consequences of not responding with a payment schedule are more severe than ever:

  1. a respondent no longer has a ‘second chance’ to serve a payment schedule – if a payment schedule is not served in the response period, a claimant can proceed straight to adjudication without further notice to the respondent;
  2. failure to provide a payment schedule before the end of the response period will render the respondent liable to a penalty of 100 penalty units, and is grounds for disciplinary action to be taken against the respondent under the QBCCA; and
  3. the respondent is precluded from submitting an adjudication response (if the claimant proceeds to adjudication).

It is imperative that the payment schedule contain all reasons for withholding payment.  The ability for a respondent to a ‘complex claim’ (a claim over $750,000.00) to include new reasons for withholding payment in their adjudication response has been removed.

The timeframes for claimants to apply for adjudication have been extended as follows:

Claim type Current BCIPA New
Failure to give payment schedule or pay the full amount of the payment claim 10 business days after payment schedule due date 30 business days after the later of:

1.       payment due date; or

2.       payment schedule due date.

Failure to pay the full amount stated in the payment schedule 20 business days after due date No change (20 business days after payment due date)
Payment schedule less than payment claim 10 business days after receipt of payment schedule 30 business days after receipt of payment schedule

The Federal Government review of security of payment legislation across all states was due on 31 December 2017.  It remains to be seen whether any additional changes to the BCIPA and Subcontractors Charges Act 1974 will be recommended.

Stay tuned for further updates concerning the commencement date of the BIF Act, and for further information about the QBCCA amendments and implementation of PBAs.

For more information about this issue and all building and construction matters please contact our Senior Associate, Rowan Wilson on 07 4036 9700.

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