Australia: Potential introduction of project bank accounts (PBAs) for subcontractors in Queensland

In December 2015, the Queensland Government issued a Security of Payment discussion paper seeking industry feedback on ways to improve security of payment for subcontractors. One of the proposals flagged for consideration is the use of project bank accounts (PBAs).

This article considers the model of PBAs proposed in the Security of Payment discussion paper and particularly whether (if introduced) PBAs:

  • could give rise to an "arrangement" for payment under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) (if the PBA structure is one where the principal pays subcontractors directly); and
  • may raise practical questions in their operation vis-a-vis the Subcontractors' Charges Act 1974 (Qld) (SCA).


As noted in the discussion paper, the aim of PBAs is to ensure that subcontractors are paid amounts owed to them under a subcontract in a timely manner.

A PBA operates as a mechanism for contracting parties to make and receive payments. It is not a means for determining amounts payable by or to the parties.

The use of PBAs does not prevent payment delays for amounts which are in dispute. In such circumstances, the relevant parties could rely on their statutory rights under the BCIPA1 or the SCA2.


Essentially, the PBA uses a trust arrangement to protect money owed to subcontractors from creditors (of the head contractor) should the head contractor become insolvent.

The PBA model proposed in the discussion paper for use in Queensland operates as follows:

  • a ring fenced trust bank account is set up by the principal and head contractor. This bank account is for payment of both progress payments and retention monies;
  • a trust arrangement is created, with the bank as trustee and the head contractor and subcontractors as beneficiaries;
  • the payment process starts when a subcontractor submits a payment claim to the head contractor under the subcontract. After the head contractor certifies the amount payable to its subcontractors, the head contractor will sign and submit a progress payment claim to the principal for work done (which will include the amounts due to each subcontractor);
  • the principal (or the superintendant) will verify the work completed and the principal will then sign the progress payment claim. The principal will then pay the certified amount into the PBA and forward the signed progress payment claim to the bank; and
  • on receiving this authorisation, the bank will distribute the funds in accordance with the signed progress payment claim to the head contractor and the subcontractors (at the same time).

Key benefits

PBAs principally benefit subcontractors. A PBA will:

  • prevent head contractors holding onto funds received from the principal and not flowing them down to subcontractors within the prescribed time;
  • depending on the terms of the PBA, provide subcontractors with shorter payment terms than the head contractor would typically agree (assuming that there are no payment disputes); and
  • protect amounts owing to a subcontractor from entering the pool of assets available to creditors in circumstances where the head contractor becomes insolvent (thereby reducing the risk of subcontractors not being paid for work they have undertaken).

Adverse impacts

PBAs are less advantageous for head contractors. Under the proposed model, the head contractor is unable to access (or use) the total amount certified by the principal as owing to the head contractor, which reduces the control that the head contractor has over cash flow.

In addition, as payment is made simultaneously to the head contractor and subcontractors, the payment cycle (or time for downstream payments) is reduced. Importantly, this will limit the head contractor's ability to maximise the return on funds because the funds, without a PBA in place, would have 'belonged' to the head contractor in the period between receipt from the principal and payment to the subcontractors and therefore capable of yielding a return for the head contractor.

Where the principal certifies a lesser amount than the head contractor for works undertaken by subcontractors, the difference is deducted from the amount to be paid to the head contractor via the PBA. In circumstances where the balance in the PBA is insufficient to meet the amounts owing to subcontractors, the head contractor is required to contribute funds to meet the amount certified.

Depending on the agreement between the principal and head contractor, the head contractor may also be required to bear some of the costs of establishing the PBA.


While a PBA provides security for payment of certified amounts, it does not (and is not intended to) resolve underlying disputes about payment.

In such circumstances subcontractors will still need to rely on their contractual rights and/or statutory rights under BCIPA or the SCA.


A PBA could potentially create an "arrangement" for payment under BCIPA between the subcontractor and the principal.

The term "arrangement" is not defined in BCIPA. The courts have held that an arrangement may exist where:

  • a construction contract between a principal and head contractor contains a provision that states that the principal will pay subcontractors on behalf of the head contractor and notwithstanding that the principal was not a party to those subcontracts3; and
  • a third party has promised to pay a contractor for work. For example, the courts have held that there was an arrangement between the developer of a property and an architect because of an undertaking to pay for the work4 and similarly between a builder and its subcontractor for plastering work5.

In each case, the courts carefully examined the factual circumstances and promises or representations made by a principal or third party to the subcontractor to determine if an 'arrangement' for payment existed.

It is important to note that where the promise to pay is in the form of a guarantee to payment, the arrangement may be excluded from the operation of BCIPA by section 3(3)(c)(ii) of the BCIPA.

Essentially, whether a PBA will create an arrangement for the purposes of BCIPA will turn on the drafting of the construction contract and trust arrangements.

If these documents are not properly prepared, a principal may find itself inadvertently a respondent to an action brought by a subcontractor under the BCIPA.

Subcontractors Charges Act

The introduction of PBAs may give rise to a number of potential questions about the operation of certain provisions of the SCA which legislation allow subcontractors to issue a statutory charge over monies payable by a principal to a head contractor (for an amount owed by the head contractor to the subcontractor).

For example, where there is a disputed amount payable (or to become payable) by the head contractor to the subcontractor and a subcontractor issues a statutory charge over monies payable by the principal to the head contractor:

  • should the charge be placed over monies prior to them being paid into the PBA?
  • If so, and the charge causes a short fall in monies available in the PBA to pay other subcontractors, other subcontractors will find themselves in a position of relying on the head contractor to 'top up' the PBA – effectively denying them the benefit of the protection afforded by the PBA.

  • will (or can) a charge attach to monies once they are in the PBA?
  • will a principal still need to pay the claimed amount into court to discharge its obligations under the SCA pending final determination of the payment dispute or rather, after it has paid an amount into the PBA?

It is suggested that the operation of the SCA in conjunction with a PBA will require some clarification to ensure cohesion with both security of payment mechanisms.

Following close of submissions on the Security of Payment discussion paper (closes 31 March 2016), it will be interesting to see how the Queensland Government responds to industry feedback and whether:

  • PBAs are further explored as a method of securing payment for subcontractors; and
  • if so, what legislative steps are proposed to be taken to ensure consistency with existing security of payment regimes.


1 Principally, the right to submit the payment dispute to an adjudication process

2 Principally, the right to issue a statutory charge over monies payable by the principal to the head contractor for an amount owed by the head contractor to the subcontractor

3 Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd [2005] NSWSC 45 (followed in Queensland)

4 IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1439

5 Walton Construction (Qld) Pty Ltd v Salce [2008] QSC 235

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Most awarded firm and Australian deal of the year
Australasian Legal Business Awards
Employer of Choice for Women
Equal Opportunity for Women
in the Workplace (EOWA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.