Wide Ranging Reforms to Queensland's Building and Construction Industry

Recent legislation has triggered wide-ranging reforms for Queensland’s building and construction industry.

Non-Conforming Building Products

From 1 November 2017, designers, manufacturers, importers, suppliers and installers of building products:

• Must (each) ensure that building products conform with their intended use¹ ; and
• Face prosecution if they do not notify the Queensland Building and Construction Commission (QBCC) when they become aware or reasonably suspect that a building product is non conforming², or that a building product is non conforming and/or caused death or serious injury or illness³.

Some guidance is given on how to comply with the legislation, through a Code of Practice, and further information is available on the QBCC’s website.

In the meantime, the Queensland Government has established an Audit Taskforce to identify Queensland buildings that are exposed to fire risk (from external wall cladding). The Taskforce is auditing hospitals, aged care facilities, schools, accommodation buildings, high occupancy public and private buildings, and high-rise office buildings.

Given safety of building products is a national issue, national legislation on these issues is also anticipated⁴.

Project Bank Accounts

Use of Project Bank Accounts⁵ will be trialled (most likely) from 1 January 2018 on Queensland government building contracts between $1M and $10M. Following a mandatory review of these reforms by 1 September 2018, use of Project Bank Accounts may be rolled out to private sector projects.

A Project Bank Account (of itself) is not a bank account. It is a trust for :

• Amounts paid under a building contract;
• Amounts a subcontractor is entitled to be paid under a subcontract;
• Subcontractor retentions; and
• Amounts in dispute as between the contracted party and subcontractors.

Rather than paying building contractors (directly), principals must make payments for building work to a general trust account, and the building contractor will not be entitled to receive any payment until after:

• Subcontractors are paid amounts due to them;
• Any subcontractors’ retentions are paid to a retentions trust account; and
• Any amounts claimed by subcontractors but disputed are paid to a disputed funds account.

Building contractors must top up the general trust account (from their own cash reserves or bank overdrafts) if amounts paid into the general trust account by the principal are not sufficient to pay the required amounts to subcontractors, the retention trust account and the disputed funds account.

The Building Industry Fairness (Security of Payment) Act imposes a range of offences relating to the establishment, use and administration of Project Bank Accounts, many with harsh penalties.

Building and Construction Payment Disputes

The Building Industry Fairness (Security of Payment) Act also absorbs and amends the Building and Construction Industry Payments Act (which provided for fast track adjudication of building and construction industry payment disputes) and the Subcontractors Charges Act (which provided a mechanism by which subcontractors could place a secured charge upon funds payable to superior contractors).

The changes include:

• Payment claims no longer need to be endorsed as a payment claim made under the legislation in order to trigger the consequences imposed by the legislation (which include obligations to pay claimed amounts, reference of disputed payment claims to a fast track adjudication that can be enforced as a court judgments, and penalties for non compliance);
• Claimants will be guaranteed a reference date after contracts are terminated;
• Harsh consequences for respondents who fail to respond to payment claims through a payment schedule explaining any reasons for non payment. Irrespective of the value of the payment claim, new reasons can not be given in a subsequent adjudication response, and failing to deliver a payment schedule within 10 business days (or failing to pay adjudicated amounts) will be offences, attracting penalties;
• Regulations are also anticipated limiting the length of adjudication applications and adjudication responses, and capping fees payable to adjudicators.

This article was written by Karyn Reardon, Partner. 

¹Building and Construction Legislation (Non-Conforming Building Products ‒ Chain of Responsibility and Other Matters) Amendment Act 2017 (Qld), amending the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).
²See s74AL of the QBCC Act.
³See s74AM of the QBCC Act
⁴See: https://industry.gov.au/industry/IndustrySectors/buildingandconstruction/Pages/Senate-Inquiry-into-Non-Conforming-Building-Products.aspx. 
⁵The Building Industry Fairness (Security of Payment) Act establishes the concept of a Project Bank Account.