ARE YOU READY FOR THE BIF? - STAND AT EASE (BUT NOT FOR LONG)
The Queensland Minister for Works this week announced a deferment to the start of the next tranche of reforms in the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act). (Read them here >>)
Changes to payment claim and payment schedule processes ( here) were due to commence on 1 July 2018.
The minister announced that these changes will now commence on 17 December 2018.
Now you have an extra 24 weeks to understand the changes and make the necessary changes to you payment procedures (both payers and payees). Project Bank Accounts are likely to kick in soon after.
At the same time the Qld Government announced the Building Industry Fairness Reforms Implementation and Evaluation Panel to assess the implementation of the BIF Act, in particular an assessment of the success or otherwise of project bank accounts in the government sector. A discussion paper will also be released for industry consultation in the coming weeks.
These announcements, whilst they may have no connection, come at the same time as the release of the Federal Government’s “Murray Review” into Security of Payment laws in Australia with a view to recommending a best practice model for payment legislation across the nation.
Since the start of security of payment laws in NSW in 1999 a mixture of legislation was introduced around the country. Over time the State laws have diverged more as States have made different attempts to cover issues considered to address perceived faults or improve the legislation.
The the key findings are:-
Many of the State regimes are unduly complex.
The appointment of adjudicators should be regulated.
Unfair contract terms and intimidation / retribution are still a problem
Late payment is still a major issue.
Some of the recommendations are:
Residential contracts should be included;
Payment Claims should be “endorsed” (My 2 cents: I don’t agree with this recommendation. Qld is about to drop this requirement, in my opinion, quite correctly. “Endorsing” a payment claim can signal that a dispute may be about to happen. Some contractors (even the biggest) have been known to coerce subcontractors into not “endorsing” payment claims. In my opinion, the payment claim / payment schedule process merely formalises the long-standing payment practice of invoice / claim > negotiation > payment, together with a time frame that reflects reasonable commercial business terms, in Queensland about 30 days from invoice to payment. The industry must be encouraged to adopt this process as “business as usual”, not as a precursor to a possible dispute. Not endorsing payment claims should also lead to better quality subcontractors claims, a big bonus for builders who spend a lot of time deciphering poor invoices),
The adjudication process should be rapid, but respondent’s should be able to apply for extensions of time to respond if the issues are complex. (My 2 cents - I’m a bit wary of this idea. It opens another door for tactical delay and does not encourage clients and contractors to be on top of their contract management. If contractors are up to date with instructions, variations and programming / extensions of time, they should be able to respond to a claim quickly and accurately. In my experience a lot of claims occur because contract management is delayed, sloppy or not maintained at all. Clients and contractors must learn to manage contracts properly and suffer the consequences if they don’t. If late payment is an issue this recommendation should not proceed).
The parties should be able to “agree” on an adjudicator. (My 2 cents - Another opening for agitating more dispute and delay. It will almost certainly lead to adjudicators ‘touting” for business on both sides of the ledger and parties ranking adjudicators for the best potential outcome. There does not seem to be any good reason for this idea, only bad outcomes. The system of nomination works perfectly well. If late payment is an issue this recommendation should not proceed).
Parties may be able to seek a review in some circumstances. (My 2 cents - This is another door for more delay and more expense resolving a payment dispute. The Courts are available to review aspects adjudication decisions relating to procedural fairness and other matters, and respondents can resolve contractual disputes through their contract or through the Courts. That is sufficient. We all need to keep in mind that adjudication of payment disputes is an interim measure to keep cash flowing. If parties rely on it to help resolve contractual disputes that is a good thing, since many adjudicators are experienced contract managers, but that is not a formal part of the process. If late payment is an issue this recommendation should not proceed).
Claimant’s moneys should be secured in cascading statutory trusts (similar to the Queensland “Project Bank Accounts” legislation. (My 2 cents - I was originally very reserved about this since I felt the extra administration would be a burden. However every subcontractor and supplier loves the idea. My feeling is, that with the technology available today the admin. burden should not be a big issue. Contractors, of course, will not be able to cross-fund projects from cash flow. We will almost certainly see some innovative funding solutions coming from the banks. It may also raise the question of "opening deposits" from clients, similar to residential contracts. Builders and subcontractors, however, will have to be diligent about maintaining contractual entitlement to payment, since it will become critical, not just a matter for negotiation. I also foresee more killer contracts clauses, as payers (clients, contractors and subcontractors) attempt to tighten up on entitlement provisions).
Supporting statements (stat declarations that all payments have been made) should be an essential precondition to payment. (My 2 cents - This will put more pressure on subcontractors to ensure they pay their employees and contractors; a very good thing).