None the Wiser

The Committee report has been tabled in relation to the BIF Bill but how much wiser are we?

The awaited Public Works and Utilities Committee (Committee) report into the Building Industry Fairness (Security of Payment) Bill 2017 (BIF Bill) was tabled yesterday.

The committee makes seven recommendations, namely:

1.The committee recommends the Building Industry Fairness (Security of Payment) Bill 2017 be passed.

2. The committee recommends that the Minister consider ensuring the review of phase 1 of the Project Bank Account provisions:

• commence at least three months prior to the commencement of phase
• be undertaken in consultation with representatives of the building and construction industry, and
• the Minister report the review findings to the Legislative Assembly prior to the sections of the bill that commence phase 2 being proclaimed.

3. The committee recommends that the Minister review the appropriateness of the proposed imprisonment penalties for a number of new offences contained in the bill.

4. The committee recommends that the Minister consider amending the bill to require the QBCC to provide licensees with the opportunity to rectify building work, within a specified timeframe, before a direction to rectify is issued and a demerit point penalty is applied.

5. The committee recommends the Minister consult with the building and construction industry when developing the regulation that will mandate and prohibit certain conditions for building contracts and with regard to any subsequent amendments to the regulation.

6. The committee recommends that the Minister report to the House during the second reading speech on those issues raised by stakeholders about the bill where the department indicated it would undertake further consideration.

7. The committee recommends that the Minister in his second reading speech provide examples of any proposed regulations that he intends to make should the bill be passed.

However, on reading the report it is apparent that the committee is very divided along party lines in terms its assessment of the BIF Bill.

Mr Rob Molhoek, Member for Southport, Deputy Chair of the committee, in a statement of reservation on behalf of LNP members of the committee, stated:

“The Bill does not achieve security of payment for subcontractors, will increase costs in the industry, will reduce development and growth in Queensland, and will increase the risk of more insolvencies for contractors and subcontractors. Subcontractors are not protected under this Bill and it should not be passed in its current form. The reforms promised by the Minister in this Bill are best described as disingenuous, he needs to dig deeper and must come back in his second reading with meaningful amendments and absolute clarity in response to all those concerns raised by the committee and industry stakeholders. The proposed trial in respect of government contracts is a smoke screen, neither the department or QBCC were able to present any evidence of known building collapses in respect of government contracts. The proposed PBA’s which promise improved and more timely payment processes do not provide any real insurance against commercial collapses and deliver nothing for sub-contractors on projects or work on projects valued under a $1,000,000.”

The membership of the committee is made up of:

• Mr Shane King MP, Member for Kallangur, Chair
• Mr Rob Molhoek MP, Member for Southport, Deputy Chair
• Mr Jason Costigan MP, Member for Whitsunday
• Mr Matt McEachan MP, Member for Redlands
• Ms Joan Pease MP, Member for Lytton
• Mr Chris Whiting MP, Member for Murrumba

The Minister’s second reading speech, whenever that will be, will be very significant in terms of the progressing of the BIF Bill and disclosing the extent of any changes the government is prepared to make.

The next scheduled parliamentary sitting days are 24–26 October 2017 so these are the earliest dates the Minister can make a second reading speech.

The report contains numerous references where the Department undertook to give further consideration to issues raised by stakeholders.

The committee, in recommendation 6, has asked the Minister to report to the house in his second reading speech on issues raised in relation to clauses outlined below:

1. Clause 6 — Subcontractor, subcontractors and subcontracted work,
2. Clause 8 — Definitions for chapter 2,
3. Clause 9 — What is a PBA
4. Clause 16 — Building contracts for residential construction work
5. Clause 20 — Application of chapter if parties to a subcontract are related entities
6. Clause 21 — Notices of related entities
7. Clause 23 — Head contractor must establish PBA
8. Clause 27 — All payments from principal to be deposited in PBA
9. Clause 30 — Head contractor to cover shortfalls
10. Clause 31 — Limited purpose for which money may be withdrawn from PBA
11. Clause 32 — Order of priority
12. Clause 34 — Dealing with retention amounts
13. Clause 35 — When payment dispute occurs
14. Clause 36 — Dealing with amounts if payment dispute occurs
15. Clause 41 — Power to employ agents
16. Clause 50 — Principal to be given information about subcontracts
17. Clause 51 — Principal and subcontractor to be given copy of payment instruction
18. Clause 54 — Right of principal to step in as trustee
19. Clause 55 — Information to be given to principal as trustee
20. Clause 56 — Principal as trustee
21. Clause 59 — Application of Personal Properties Securities Act 2009 (Cwlth)
22. Clause 61 — Application of chapter 3
23. Clause 70 — Right to progress payment
24. Clause 71 — Amount of progress payment
25. Clause 72 — Valuation of construction work and related goods and services
26. Clause 73 — Due date for payment
27. Clause 75 — Making a payment claim
28. Clause 76 — Responding to a payment claim
29. Clause 86 — Extending time for deciding adjudication
30. Clause 87 — Valuation of work etc. in later adjudication application
31. Clause 102 — Services of notices
32. Clause 160 — Consideration of application
33. Clause 205 — Unfinished matters for existing payment claims
34. Clause 217 — Insertion of new ch 2, pt 2, div 4 (Multiple contracts at same or adjacent sites)
35. Clause 271 — Amendment of section 56AC — Excluded individuals and excluded companies
36. Clause 275 — Amendment of section 67A (Definitions for pt 4A)
37. Clause 276 — Insertion of new ss 67GA and 67BA (Building contracts conditions), and Schedule 2 — Dictionary.

Significantly, on page 59 of the report it is stated:

“The government members of the committee were satisfied with the advice from the department that it would consider the issues raised. The non-government members of the committee were concerned about the number of issues where the department indicated it would consider the issues raised.”

In respect of recommendation 7, the committee has asked that the Minister in his second reading speech provide examples of any proposed regulations that he intends to make should the bill be passed.

Outlined below are all the regulation-making powers under the BIF Bill:

1. clause 8 — the definition of ‘building work’ can include work prescribed by regulation. A ‘state authority’ also does not include an entity prescribed by regulation.
2. clause 14 — a building contract may, by regulation, be declared a PBA contract if the principal for the contract is the State or a State authority
3. clause 16 — that the definition of ‘residential construction work’ can include other building work prescribed by regulation
4. clause 28 — a head contractor may only deposit money into a PBA for particular purposes or as prescribed by regulation
5. clause 31 — a head contractor may only withdraw money from the PBA for particular purposes or as prescribed by regulation
6. clause 32 — where there are insufficient funds in the PBA, the head contractor is prohibited from paying itself or making another payment as prescribed by regulation
7. clause 36 — in dealing with amounts payable if a dispute occurs a head contractor must ensure that the amount transferred under subsection (2) is not paid to any person other than the subcontractor beneficiary or to another person in the circumstances prescribed by regulation
8. clause 50 — the head contractor must, within 5 business days after establishing the project bank account, give the principal the information prescribed by regulation. The maximum penalty for breaching this provision is 200 penalty units
9. clause 51 — applies if a head contractor gives a financial institution an instruction about a payment from a trust account for a project bank account.
10. Clause 50(3) provides that the copy of the instruction need only include the information prescribed by regulation
11. clause 54 — provides the circumstances in which the section applies if a PBA is established for a building contract. Pursuant to clause 54(d) the section also applies to another circumstance prescribed by regulation
12. clause 65 — the definition of ‘Construction work’ can include any other work of a kind prescribed by regulation
13. clause 66 — provides that the meaning of related goods and services can include ‘of a kind prescribed by regulation’
14. clause 68 — apart from the matters listed, a payment claim for a progress payment, is a written document that includes other information prescribed by regulation
15. clauses 79 and 82 — a regulation may limit the number and length of submissions that may accompany an adjudication application or an adjudication response
16. clause 122 — a notice of claim must be in the approved form and include other information as prescribed by regulation
17. clause 161 — an adjudicator must achieve an adjudication competency standard as prescribed by regulation from a body also prescribed by regulation
18. clause 165 — requires adjudicators to comply with the continuing professional development requirements prescribed by regulation as a condition of registration
19. clause 258 amends the QBCC Act to require licensees to comply with minimum financial requirements prescribed by regulation, and
20. clause 276 inserts new sections 67GA and 67GB into the QBCC Act — section 67GA provides that a building contractor must not enter into a building contract that does not include the conditions (mandatory conditions) prescribed by regulation for inclusion in that type of building contract and pursuant to section 67GB a building contractor must not enter into a building contract that includes a prohibited condition prescribed by regulation.

Suffice to say, the second reading speech looks set to take a while.

Significantly, on page 66 of the report it is stated:

“The committee noted the use of regulations throughout the bill for certain matters and also noted the concerns raised by stakeholders in relation to clause 276 and the justification provided in that the use of regulation is designed to provide flexibility in relation to ever changing standards for contracts. The committee is aware that all such regulations will come before it for consideration and be subject to disallowance.”

In summary, the vast majority of issues I have raised in my earlier articles have not been resolved with the tabling of this report, and may only be when the Minister delivers his second reading speech on the BIF Bill.

If you have any questions relating to the BIF Bill or any SOP issues, please contact Michael Chesterman at michael@helix.legal or Earl Tan at earl@helix.legal.

Not intended as legal advice. Read full disclaimer.