By Greg Richards, Partner
The Building and Construction Legislation (Non-conforming Building Products – Chain of Responsibility and Other Matters) Amendment Act 2017 (NCBP Amendment Act) commenced on 1 November 2017.
The Building Industry Fairness (Security of Payment) Bill 2017 (BIFSOPA), which replaces the Building and Construction Industry Payments Act 2004 (BCIPA) and the Subcontractors’ Charges Act 1974 (SCA), was passed with amendment by the Queensland Parliament on 26 October 2017 but has not yet received royal assent and is yet to come into effect.
The above legislation effects significant reforms to the existing legislation and includes numerous penalties for non-compliance.
You need to be aware of your rights and obligations and ensure that proper processes are in place to effectively deal with the changes and avoid penalties for non-compliance.
Non-conforming Building Products
The NCBP Amendment Act amends four current Acts, in particular the Queensland Building and Construction Commission Act 1991 (QBCC Act). Importantly, it introduces a new Part 6AA, dealing with building products, into the QBCC Act. The Code of Practice is available on the Department of Housing and Public Works’ website.
Parties involved in the supply chain (e.g. designers, manufacturers, importers, suppliers and installers) will face increased accountability for non-conforming building products on building projects.
The legislation introduces a primary duty on all participants in the ‘chain of responsibility’ to ensure, insofar as reasonably practicable, that building products are not non-conforming building products for an intended use.
A building product is ‘a non-conforming building product’ for an intended use if the association of the product with a building:
- is not, or will not be, safe;
- does not, or will not, comply with relevant regulatory provisions; or
- does not perform, or is not capable of performing, to the standard represented.
A person in the chain of responsibility has a duty to notify the QBCC as soon as practicable but within 2 days after becoming aware or reasonably suspecting, that the building product is a non-conforming building product for an intended use, unless the person has a reasonable excuse.
A person in the chain of responsibility is also required to report a ‘notifiable incident’ to the QBCC within 2 days after becoming aware or reasonably suspecting the notifiable incident.
The NCBP Amendment Act imposes duties to give required information about the building product to each subsequent person in the chain of responsibility.
Executive officers of companies in the chain of responsibility must exercise due diligence to ensure the company complies with their duties under the legislation.
The QBCC has power to direct remedial action in respect of a breach.
The NCBP Amendment Act introduces ‘building product undertakings’ which the QBCC may accept in connection with a matter relating to a contravention or alleged contravention.
The relevant Minister is given a power to make recall orders and publish warning statements in relation to non-conforming building products.
The legislation introduces a number of penalties including for:
- breaches of the duties contained in the legislation (maximum penalty 1000 penalty units);
- representations about the performance of a building product that does not comply with the relevant regulatory provisions in circumstances where the person knows, or ought reasonably to know, that the building product does not comply (maximum penalty 1000 penalty units); and
- failure to notify the QBCC about a non-conforming building product where the person becomes aware, or reasonably suspects, that the building product is a non-conforming building product for an intended use (maximum penalty 50 penalty units).
Reforms to BCIPA and Other Legislation
- repeal BCIPA and the SCA and will consolidate those provisions with amendments into one new Act;
- introduce project bank accounts (PBA’s) for certain projects;
- amend the ‘excluded individuals’ provision in the QBCC Act; and
- increase penalties for unlicensed building work under the QBCC Act.
The reforms to the security of payment legislation (formerly BCIPA) include:
- payment claims will no longer require endorsement as payment claims under the new legislation;
- there will be no requirement to serve a notice of intention to apply prior to making an adjudication application. However, there will be a requirement to serve a ‘warning notice’ prior to commencing proceedings for failure to pay by the due date for payment;
- creating a reference date at the date of termination of a construction contract;
- removing the respondent’s ability to raise new reasons for withholding payment in an adjudication response if they have not been raised in the relevant payment schedule (regardless of the amount in dispute);
- limiting the size of the adjudication applications and responses (to be provided by regulation); and
- extending the time to make an adjudication application (e.g. to 30 business days where a payment schedule is served and withholds money).
Project Bank Accounts
BIFSOPA will introduce PBA’s for Queensland State Government projects of $1m – $10m value where more than 50% of the contract price is for building work.
PBA’s will not be required for:
- residential construction work for private (non-government) persons;
- maintenance work;
- Queensland Government projects tendered prior to commencement of BIFSOPA; and
- projects less than 90 days duration.
PBA’s will only apply to first tier subcontractors and are only required for building work.
Head contractors will be required to set up a PBA for the project within times provided by the BIFSOPA and will be required to establish the following trust accounts:
- general trust account;
- retention account; and
- disputed funds account.
The principal will make payment of amounts under the head contract into the PBA rather than make payments to the head contractor.
If a subcontractor is entitled to be paid an amount under its subcontract, the head contractor may only pay the amount to the subcontractor from the relevant trust account.
If an amount is due to be paid to a subcontractor and there is an insufficient amount available in a trust account to pay the subcontractor, the head contractor must as soon as the head contractor becomes aware of this, deposit into the trust account an amount equal to the shortfall.
A head contractor must not withdraw an amount from the PBA to pay itself unless there would still be a sufficient amount available in the trust account after the withdrawal to pay all amounts due to be paid to the subcontractors at the time of the withdrawal.
BIFSOPA will expand the ‘excluded individuals’ provisions in the QBCC Act to include a person involved in a company failure in another State, or who was a director, secretary or influential person of a company up to 2 years prior to the failure.
BIFSOPA introduces penalties for failure to comply with parts of the legislation including for:
- failure to serve a payment schedule (maximum penalty 100 penalty units);
- failure to comply with an adjudication decision (maximum penalty 200 penalty units);
- not establishing a PBA (maximum penalty 500 penalty units);
- ending a PBA early (500 penalty units or 1 year’s imprisonment);
- paying a subcontractor from a source other than the PBA (maximum penalty 200 penalty units or 1 year’s imprisonment);
- paying money out of the PBA for a purpose not authorised by the BIFSOPA (maximum penalty 300 penalty units or 2 years imprisonment);
- failure to pay money into the disputed funds account (maximum penalty 200 penalty units or 1 year’s imprisonment);
- increased penalties for unlicensed building work (graduated penalties including a maximum penalty of 350 penalty units or 1 year’s imprisonment for a third or later offence or if the building work carried out is tier 1 defective work);
- failure to give notice regarding the end of the defects liability period, the amount of retention to be paid and the date the retention is proposed to be paid (maximum penalty 100 penalty units); and
- deliberate breach of building contract causing loss (maximum penalty 350 penalty units).
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