Active Law’s Newsletter on the Law affecting the Construction Industry in Queensland
Building Industry Fairness (Security of Payment) Bill 2017 Series
QBCC Bringing back the Biff
On 22 August 2017, the Minister for Housing and Public Works, the Hon. Mick de Brenni introduced the Building Industry Fairness (Security of Payment) Bill 2017 (“BIFB”) into the Queensland State Parliament.
This article is one of a series of short articles by Active Law’s construction lawyer Paul Hick which discuss the BIFB and the effect it will have on builders and subcontractors if passed into law in its current form.
Of the numerous substantial reforms the BIFB proposes, the increased powers of the QBCC and the penalties they can impose make for essential reading for anyone involved in the construction industry.
The QBCC has been referred to as the building industry watchdog and with the changes proposed to a raft of legislation affecting the building industry in Queensland, it looks like the watchdog is about to be let well and truly off the leash.
Whether or not you are happy about the proposed changes, with the shadow of more than 30 insolvencies in building companies so far this year looming behind what may be the most extensive reforms of construction industry legislation at any one time, change is inevitable. It only remains to be seen what the extent of those changes will be.
With the time for submissions on the BIFB closing on 7 September 2017 (only 16 days after it was tabled), it’s pretty clear the agenda is to push these reforms through very quickly. If the Government secures the support to get the legislation through it is not hard to surmise they will be implemented very soon. Everyone involved in the construction industry in Queensland will need to quickly get a working understanding of the changes to the law and the activities of the QBCC.
The proposed changes ramp up the penalties for non-compliance and the power of the QBCC to impose them.
Chapter 2 of the BIFB deals with project bank accounts. It contains 34 penalty provisions within 22 sections (sections 21, 23 to 34, 36, 38, 40, 45, 49, 50 to 52 and 55). They include substantial penalties for offences like:
- a head contractor failing to notify the QBCC Commissioner within 5 business days that they have entered into a subcontract with a related entity;
- a head contractor failing to open 3 separate trust accounts for each project (over $1,000,000) within 20 business days of entering into the first subcontract for the project;
- depositing, withdrawing or transferring from trust accounts without the proper payment instruction;
- not ensuring the name of a trust account includes the words ‘trust account’;
- a head contractor not topping up the trust account if there is a shortfall;
- retention or disputed moneys not transferred to the correct trust account in the time required;
- not keeping adequate records of all transactions for 7 years;
- not giving information to a principal or subcontractor within the required time frame; and
- not providing payment instructions or information about payment instructions in a timely manner.
That is only a random sampling of the penalties for noncompliance with what will be substantial administrative obligations.
Chapter 3 of the BIFB contains the revamped parts of the Building and Construction Industry Payments Act 2004 (BCIPA) which is set to be repealed. It contains 2 penalty provisions affecting respondents to payment claims (sections 76 and 90) including a penalty for failing to serve a payment schedule. This latter is particularly concerning because the BIFB removes the current requirements for payment claims to specifically state they are made under the BCIPA. With that requirement to specifically identify a payment claim removed, principal’s head contractors and subcontractors down the chain who also engage subservient subcontractors will need to issue a payment schedule in response to every invoice they receive, even if they pay the invoice.
Chapter 4 of the BIFB contains the revamped parts of the Subcontractors’ Charges Act 1974 which is set to be repealed. It contains 3 penalty provisions (sections 119 and 128).
Chapter 9, Part 4 amends the Queensland Building and Construction Commission Act 1991 (QBCC Act) and leaving aside the numerous penalty provisions that already sit within the QBCC Act, amendments are proposed to increase and add new penalties in existing and new sections 42, 42B, 42C, 42D, 42E, 67GA, 67GB, 67NB and 67NC.
If one considers:
- the QBCC’s renewed vigour for compliance in their well-publicised focus on reducing insolvencies and rogue operators in the industry;
- the penalties referred to above;
- the increases to demerit points for directions to rectify and the change in policy on the issuing of directions to rectify;
- the return to annual financial reporting and closer monitoring of minimum financial requirements for licencing;
- mandatory and prohibited conditions for building contracts;
- statutory defects liability periods;
- statutory obligations to refund retentions; and
- new provisions dealing with influential persons for a company (part of the QBCC’s anti phoenixing arsenal),
it is clear the QBCC are bent on knocking the building industry back into the shape they think it requires and the reforms sought by the BIFB will give then a great deal of power to do that.
What this will mean to builders, subcontractors and principals is a need for increased vigilance of their compliance with their statutory obligations (both those they are used to and myriad new obligations slated) and the administrative burden that comes with that.
The consequences of non-compliance can be far more serious than a fine with the very fact that an offence has occurred and a fine been levied, being a criterion in determining the suitability of a person or corporation to continue to hold a licence – that is, it might affect your ability to hold a licence in the future….
In the flurry of overview that is sure to follow the implementation of the new laws when they come to pass, one can expect there will be many licensees, builders and subcontractors alike, who are aggrieved or confused or find their livelihood at risk by the QBCC’s focus upon them. Whether you are a principal, head contractor or subcontractor, it is imperative to the efficient running and survival of your business that you understand the rights and obligations that the law imposes, as it is and as it will be if the BIFB passes into law.
Active Law’s construction team are very experienced in all aspects of construction law including in reviewing of QBCC decisions, advising on statutory and contractual obligations, the drafting, negotiation and administration of contracts, dispute resolution including litigation, arbitration and of course the procedures under security of payment legislation. Active Law’s Paul Hick is a construction lawyer and has been involved in the construction industry for over 35 years. He is also a senior adjudicator under the BCIPA and has undertaken hundreds of adjudications under security of payment legislation in QLD, NSW, ACT and SA.
TAKE NOTE – IF YOU ARE SEEKING TO RECOVER PAYMENT UNDER SECURITY OF PAYMENT LEGISLATION, YOU MAY BE ELIGIBLE FOR AN INITIAL CONSULT AND APPRAISAL OF YOUR MATTER WITHOUT COST.
Contact Active Law for more information.