Australia: Construction Agenda: Queensland proposals for project bank accounts

Last Updated: 14 February 2017
Article by Rocco Russo

The Queensland Government is holding community and industry consultation and inviting feedback on a series of proposed reforms for the Queensland building and construction industry. The wide-ranging proposals are set out in the Queensland Building Plan Discussion Paper released in November last year, as well as in a number of supporting fact sheets.

A key area of reform is Queensland's security of payment system, following on from issues raised and proposals made in the Security of Payment Discussion Paper released by the Government in late 2015.

On the security of payment front, the 'centrepiece' of the proposed suite of measures is project bank accounts (PBAs), with the Government announcing at the end of last year that it was in the process of preparing legislation to phase in PBAs across the State. Our comments below are based on some of the of the initial consultation documents that have been released on this issue.

What is a PBA?

According to the Government's fact sheet, a PBA will be a trust account set up and managed by the head contractor in relation to a particular project. Rather than a head contractor receiving payments for subcontractors from the principal and passing them down the contractual chain, payments are made simultaneously from the trust account to the head contractor and to subcontractors.

The PBA model is proposed to operate as follows:

  • A trust bank account is set up and managed by the head contractor, under which the head contractor and subcontractors are beneficiaries.
  • Subcontractors submit their payment claims to the head contractor. The head contractor then submits a progress payment claim to the principal.
  • The principal's superintendent assesses the claim and notifies the head contractor of agreement or disagreement with the claim via a payment schedule.
  • Following the issue of the payment schedule, the head contractor submits a progress payment instruction to the bank, setting out the amount to be paid from the PBA to each beneficiary to the trust.
  • The principal deposits the payment (in accordance with the payment schedule) into the PBA's general account. This payment discharges the principal's obligation to pay the head contractor.
  • The bank simultaneously distributes the funds in the PBA to the head contractor and the subcontractors in accordance with the progress payment instruction.

Other general features of the proposed mechanism are as follows:

  • PBAs extend only to the 'first layer' of subcontractors, or those that contract directly with the head contractor and not beyond.
  • The principal has no control over the PBA, or any viewing rights of the PBA.
  • Two separate accounts will be required; one general account to process progress payments and the other for retention funds.
  • The head contractor is entitled to any interest on the PBA and may withdraw interest when the final certificate is issued under the contract or on termination of the contract.

The above proposed PBA structure is designed to be a payment mechanism only and is not intended to resolve disputes about payment. Should such disputes exist, subcontractors will need to rely on their contract with the head contractor or other legal mechanisms, such as the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) or the Subcontractors' Charges Act 1974 (Qld) (SCA).

Pros and cons

PBAs are designed to benefit subcontractors. The advantages of the proposed mechanism include as follows:

  • Subcontractors will be paid faster, as a PBA will prevent the head contractor from holding onto money received from the principal instead of passing them down the contractual chain.
  • Subcontractors are protected should the head contractor become insolvent. The PBA is a trust fund with the money paid into it held on trust for the head contractor and subcontractors as beneficiaries. This means that in the event of the head contractor's insolvency, the money in the PBA held on trust for the subcontractor is protected from entering the pool of assets available to creditors.

Some disadvantages to the proposed mechanism (primarily for head contractors) are as follows:

  • Head contractors cannot access or use money that is ultimately payable to subcontractors (including retention money) on one project to meet cash flow requirements for other projects. This could mean that head contractors who rely on the ability to shift limited cash resources to where they are needed most will need to increase their cash on hand, ultimately leading to higher project construction costs or solvency issues.
  • It may potentially increase red tape and administration costs in the industry. Depending on the agreement between the principal and the head contractor (and potentially the impending legislation), the head contractor may also have to bear the costs of establishing the PBA.

Timeframes

The Government proposes to roll out PBAs to both government and private sector projects over $1 million from January 2019, subject to successful outcomes from prior implementation on government projects between $1 million and $10 million.

Comment

It remains to be seen how any legislation in relation to PBAs will interact with existing security for payment provisions, particularly as another proposal outlined in the Queensland Building Plan is combining the various Acts that relate to security of payment into the one Act.

For those organisations involved in the building and construction industry, it will be important to monitor the ongoing progress of the proposed reforms, as they will require changes to contracts and contract administration processes.

© Cooper Grace Ward Lawyers

Cooper Grace Ward is a leading Australian law firm based in Brisbane.

This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.

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

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
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 Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions