Queensland’s Building Industry Fairness (Security of Payment) Act 2017 – Is it Building Fairness?
By Albert Yeu
This article discusses the recent development of security of payment law in Australia and compares the legal framework of the proposed security of payment ordinance in Hong Kong.
Introduction Internationally, the construction industry has been seen to have imminent need to regulate timely payment. Consequences of non-payment will affect contractors, sub-contractors, their employees and family. In Canada, the Construction Lien Amendment Act 2017 received royal assent on 12 December 20171 and became law. The adjudication changes will come effective by proclamation, tentatively on 1 October 2019. In Australia, the Queensland’s Building Industry Fairness (Security of Payment) Act 2017 (“BIF Act”) received royal assent on 10 November 20172 and its provisions on progress payments, adjudication and subcontractors’ charges came into effect on 17 December 20183. On 21 May 2018, the Australian government released John Murray AM’s final report on the national review of security of payment laws, recommending to adopt nationally consistent security of payment laws mainly based on the New South Wales security of payment legislation. The interplay of the BIF Act and Murray's report remains to be seen in the future. Scope of Construction Contracts with Project Bank Account The first phase of the Project Bank Account (“PBA”) regime is provided under Chapter 2 of the BIF Act. It received proclamation on 22 February 2018 and became effective on 1 March 2018. A PBA is required for a government building contract tendered on or after 1 March 2018 if the principal for the building contract is the State or a State authority that has decided a PBA is to be established for the contract, more than 50% of the contract price is for building work and the contract price for the building contract is between $1 million and $10 million4. It also applies to an amended building contract with an aggregate increase of more than 30% of the original contract price that becomes a building contract described in s.14 BIF Act5. A “building contract” means a contract or other arrangement for carrying out building work in Queensland (whether or not the contract or arrangement is also for other matters), but does not include a subcontract6. The second phase of the PBA regime will be expanded to apply to the private sector as well subject to proclamation. Use of Project Bank Account In not later than 20 business days after the main contractor enters into the first subcontract7 , the main contractor shall establish a PBA comprising the following three trust accounts at the office or a branch of a financial institution within Queensland8: 1) A general trust account holds amounts paid under the main contract, paid under a subcontract with a subcontractor beneficiary or authorised to be deposited by regulation9. The main contractor then withdraws using electronic transfers10 from this trust account only for the purpose of: a) paying a subcontractor beneficiary an amount that the main contractor is liable to pay the subcontractor under a subcontract of the building contract11;