Building Industry Fairness (Security of Payment) Act 2017

Support in remembering the BIF Act 2017. These Flashcards do not cover the following sections: 20 - 30,

What are the 9 Chapters of the Act and how many pages for each?

1. Preliminary - 2 Pages - 0.9%

2. Statutory Trusts - 72 Pages - 31.0%

3. Progress Payments - 49 Pages - 21.1%

4. Subcontractors’ Charges - 28 Pages - 12.1%

5. Administration - 24 Pages - 10.3%

6. Legal Proceedings - 7 Pages - 3.0%

7. Miscellaneous - 4 Pages - 1.7%

8. Transition and Repeal - 20 Pages - 8.6%

9. Amendment of this and other Acts - 2 Pages - 0.9%

What is the Main Purpose of this Act?

s3 outlines:

1. The main purpose of this Act is to help people working in the building and construction industry in being paid for the work they do.

2. The main purpose of this Act is to be achieved primarily by-

   • requiring the use of statutory trusts for particular contracts related to the building and construction industry; and

   • granting entitlement to progress payments, whether or not the relevant contract makes provision for progress payments; and

   • establishing a procedure for-

     • making payment claims

     • responding to payment claims

     • the adjudication of disputed payments claims; and

     • the recover of amounts claimed; and

   • enabling the use of a statutory charge in favour of subcontractors for payment of the work they do

When is a contract a subcontract?

1. A contract is a subcontract for another contract if-

   1. Performance of the contract contributes to the performance of the other contract because the work, required to be carried out under the contract, will form all or part of the work required to be carried out under the other contract; and

   2. the contribution mention in paragraph (1) is no merely coincidence (e.g. the purchase of tools from the store)

2. To remove any doubt, it is declared that -

   1. the contribution mention in section (1)(1) (above) may be indirect because the contract contributes to the performance of 1 or more other subcontracts in order to contribute to the other contract; and

   2. a contract may be a subcontract for another contract regardless of whether any party to the contract is also a party to the other contract.

3. If the party to a contract, who is required to carry out work under the contract, subcontracts all or part of the work -

   1. the resulting subcontract is a subcontract for the contract; and

   2. the person required to carry out the work under the subcontract is a subcontractor for the contract; and

   3. the work required to be carried out under the subcontract is the subcontracted work for the contract

4. The categories of subcontracts are first tier subcontracts, second tier subcontracts, third tier subcontracts and so on.

5. A subcontract is a first tier subcontract for a contract if-

   1. performance of the subcontract contributes directly to the performance of the contract; and

   2. 1 person is both a pary to the subxontract and a party to the contract.

6. A subcontract is a second tier subcontract for a contract if-

   1. performance of the subcontract contributes to the performance of the contract only by also contributing to the performance of another subcontract for the contract; and

   2. no party to the subcontract is also a party to the contract; and

   3. 1 person is both a party to the subcontract and a party to the other subcontract

What is the purpose of Chapter 2 - Statutory Trusts?

To ensure that funds paid to the contracted party for particular contracts are held in a trust to protect the interests of subcontractors.

What is the definition of Contract Administration under the act in Chapter 2? [Hint: 7 Instructions]

1. Preparing tender documentation and calling and selecting tenders

2. preparing, or helping the person’s clients with the preparation of, contracts

3. preparing additional documentation for the person’s clients or building contractors

4. arranging and conduction on-site meetings and inspections

5. arranging progress payments

6. arranging for certificates, including certificates from a local government, to be issued

7. providing advice and help to the person’s clients including during the maintenance period allowed under a contract

What is the definition of a variation to Chapter 2 of the Act?

addition to, or an omission from, the contracted work.

What is the meaning of Project Trust Work per s8A?

Project Trust work means any of the following work:

1. erection or construction of a building

2. renovation, alteration, extension, improvement or repair of a building

3. the provision of lighting, heating, ventilation, air conditioning, water supply, sewerage or drainage in connection with a building

4. any site work (incl. the construction of retaining structures) related to work of a kind mentioned in paragraph (1), (2) or (3)

5. the preparation of plans or specifications for the performance of any other work mentioned in this subsection

6. contract administration if carried out by a person for the construction of a building wholly or partly designed by the person

7. fire protection work withing the meaning of the Queensland Building and Construction Commission Act 1991, schedule 2

8. site testing within the meaning of the Queensland Building and Construction Commission Act 1991

9. the carrying out of a building inspection

10. the inspection or investigation of a building, and the provision of advice or a report for the following

    1. termite management systems for the building

    2. termite infestation in the building

11. work performed by an architect under the Architects Act 2002 in the architect’s professional proactive if the work is associated with a building

12. work performed by a register professional engineer under the Professional Engineers Act 2002 in the engineer’s professional practice if the work is associated with a building

13. work performed by a surveyor under the Surveyors Act 2003 in the surveyor’s professional practice if the work is associated with a building

14. electrical work under the Electrical Safety Act 2002 if the work is associated with a building

15. the erection of scaffolding that is associated with a building

16. earthmoving and excavating that is associated with a building

17. certification work performed by a building certifier under the Building Act 1975 in the certifier’s professional practice if the work is associated with a building

18. the assessment of energy efficiency of a building

19. work performed by a fire safety adviser under the Building Fire Safety Regulation 2008 if the work is associated with a building

20. the laying of wet pour rubber, including the laying of a blended mix of graded rubber particles and binder to provide a continuous surface if the works is associated with a building

21. the installation of prefabricated components of a building

22. mechanical services work that is associated with a building

Project trust work also includes work prescribed by regulation to be project trust work

However, project trust work does not include work prescribed by regulation not to be project trust work…duh

Is GST included in the Contract Price?

Per Clause 9(2) of the BIF (SOP) Act 2017, in working out the amount of the contract price, an amount for GST is not to be included

Briefly delve into what a project trust subcontract is

A project trust subcontract is when the subcontract is entered into;

1. the subcontract is a first tier subcontract

2. the subcontract work is 1 or more of the following

   1. arichectural

   2. contractor/trade work

   3. engineering

   4. service or work prescribed by regulation

A subcontract does not cease to be a project trust subcontract because of…

1. an amendment of the subcontract or

2. an amendment of subsection (1) or regulation made for subsection (1) [Subsection 1 notes when a project trust contract occurs]

If the contract becomes a project trust contract after it has been entered into, does the subcontract become a project trust subcontract?

Yeah dawg

When can the subcontract that entered into a contract as a subcontract, convert to a project trust subcontract?

1. the subcontract is amended

2. the subcontract would have been a project trust subcontract had it been entered into in its amended form, incl. any earlier amendments, at the time it was amended.

What are the first 90 pages of the Act discussing [Chapter 2]?

Statutory Trusts

What is a subcontractor beneficiary for a project trust?

A subcontractor who is a beneficiary of the trust under Section 11A

Section 11A: Trustee and beneficiaries of a project trust

1. The contracted party for a project trust contract is both the trustee and a beneficiary of the project trust for the project contract

2. The contracted party -

   1. becomes the trustee and a beneficiary of the project trust whern the trust is established; and

   2. ceases to be the trustee and a beneficiary of the project tryst when the trust is lawfully dissolved

3. A subcontractor for a project trust subcontract for a project trust contract is a beneficiary of the project trust for the contract

4. The subcontractor -

   1. becomes a beneficiary of the project trust when -

      1. a project trust subcontract is entered into with the subcontractor; or

      2. a subcontract for which the subcontractor is the contracted party becomes a project trust subcontract; and

   2. ceased to be a beneficiary of the project trust when -

      1. the cubcontractor is paid all amounts the subcontractor is entitled to be paid in connection with all project trust subcontracts for which the subcontractor is the contracted party; and

      2. the trust is lawfully dissolved.

Briefly explain what a related entity is in accordance with Section 10A.

1. A person who is a related entity for another person if -

   1. for individuals - they are members of the same family; or

   2. for an individual and a corporation - the individual or a member of the individual’s family -

      1. is a majority shareholder, director or secretary of the corporation or a related body corporate of the corporation; or

      2. has an interest of 50% or more in the corporation; or

   3. for an individual and a trustee of a trust - the individual or related entity under another provision of this section is a beneficiary of the trust; or

   4. for corporations - they are related bodies corporate; or

   5. for a corporation and a trustee of a trust - the corporation or a related entity under another provision of this section is a beneficiary of the trust; or

   6. for trustees of 2 or more trusts -

      1. a person is a beneficiary of both trusts; or

      2. a person is a beneficiary of 1 trust and a related entity under another provision of this section is a beneficiary or the other trust.

   7. Also, a person is a related entity for another person if the persons acquire interests in land holding trust and the acquistiations form, evidence, give effect to or arise from what is substantially 1 arrangement.

What Act outlines a ‘Land Holding Trust’ as referred to in s10A?

Duties Act 2001

What Act and Section discusses ‘related bodies corporate’ which is mentioned in s10A?

Corporations Act, s50

When is a party to a subcontract liable to pay the subcontractor in accordance with s10B? [Hint: 7 instances]

1. The amount is due to be paid by the person to the subcontractor in accordance with the terms of the subcontract;

2. under the subcontract, the amount is certified, or otherwise assessed, as payable by the person to the subcontractor;

3. the person gives the subcontractor a payment schedule for the amount

4. the person is liable to pay the amount to the subcontractor under s77;

5. the person must pay the amount to the subcontractor under Chapter 3, Part 4 because of an adjuctiaction of a disputed progress payment for the subcontract;

6. the person must pay the amount to the subcontractor because of a final and binding dispure resolution process;

7. a court or tribunal orders the person to pay the amount to the subcontractor

What is a Project Trust [Division 2, s11]?

It is a trust

1. over amounts -

   1. payable in connection with a project trust contract of project trust subcontract; and

   2. required to be deposited in the project trust account under this chapter; and

2. primarily for the benefit of the subcontractors for the project trust contract

What are the beneficial interests in a project trust? [s11B]

The beneficiaries of a project trust for a contract have a beneficial interest in -

1. for a subcontractor for the contract (as beneficiary) - all amount the subcontractor is entitled to be paid in connection with project trust subcontracts; or

2. for the contracted party for the contract (as beneficiary) - the remainder of the trust

What is ‘remainder’ for a Project Trust outlined in s11B?

remainder, for a project trust, means the amount still held in trust after subtracting all amounts subcontractor beneficiaries are entitled to be paid in connection with project trust subcontracts.

When is a project trust required for a contract? [Div 3, Subdivision 1]

The project trust is required for a contract if -

1. the contract is eligible for a project Trust under Subdivison 2

   1. 14

      1. The contracting is eligible for a project trust if:

         1. the contracting party is the state, a state authority, a local government, an individual, a private entity or a hospital and health service; and

         2. more than 50% of the contract price is for project trust work; and

         3. the contract price is;

            1. if the contracting party is the State of a hospital and health service - $1 million or more; or

            2. otherwise $10 million or more

      2. 14A - Eligibility of contract for project trust when contract amended

         1. Discusses what happens when a contract raises and a project trust is needed.

      3. 14B - Multiple contract at same site or adjacent sites.

         1. This is used if

            1. the same parties enter into 2 or more separate contracts and;

            2. the separation contracts are for carrying out project trust work at the same site or adjacent sites.

         2. The separate contracts are taken to be a single contract (the larger contract) for the purpose of applying this division.

         3. To remove any doubt, it is declared that the exemptions under subdivision 3 apply only to the larger contracts and not to the separation contracts.

         4. This section does not apply to separate contracts entered into as a result of separate tender processes.

      4. 14C - Subcontracts with related entities require project trusts.

         1. A Subcontract is eligible for a project trust if -

            1. the subcontract is a first tier subcontract for a head contract and;

            2. a project trust is required for the head contract and;

            3. the subcontractor is a beneficiary of the project trust for the head contract; and

            4. the subcontractor is a related entity for the contracted party for the head contract

1. the contract is not exempted undeer Subdivision 3; and

2. the contracted party enters into a subcontract for all or part of the contracted work.

What is a private entity?

1. a company or other entity that is owned by any entity other than the State; but

2. does not include a State authority

What contracts are exempt from a project trust? [Section 15, Subdivision 3]

15. Subcontracts generally

    1. A project trust is not required for a subcontract unless it is a type of subcontract to which section 14C or 14E apply

15A - For a contract if the contracting party or contracted party is an entity prescribed by regulation

15B - If the only parties to the contract are the State and a state authority

15C - if the work to be carried out under the contract is residential construction work for less than 3 living units this includes:

• a single detached dwelling is taken to be 1 living unit and;

• a residential unit is taken to be 1 living unit and

• a duplex is taken to be 2 living units.

15D - If the work is maintenance work. This includes:

• Testing

• taking samples & restoring the sample site

• prevent deterioration or failure of a thing

• restore a thing to its correct operating specifications

• replace a component at the end of its working life

• It does not include:

• improving a building to increase its capabilities or functions

• improving a building to meet new statutory requirements applying to the building

• a refurbishment or replacement of a building that extends the life of the building

15E - Contracts for professional design, advisory or contract administration work

• A project trust is not required for a contract if the only work to be carried out under the contract is advisory work or design work carried out by an:

  • architect under Architects Act 2002

  • a registered professional engineer under the Professional Engineers Act 2002

  • a building designer

  • a person who carries on a business as a landscape architect.

  • contract administration

15F - Contracts with less than 90 days until practical completion

• These do not need a trust if there are less than 90 days between -

  • the 1st day a project trust would be required for the contract (trigger date) and;

  • the day practical completion is expected to occur

• if the PC date gets pushed out, this will need to be reviewed.

What is advisory work?

• the inspection or investigation of a building

• the provision of advice or a report about a building

List the 3 ways to establish a trust [s17]?

1. payment of an amount from the contracting party to the contracted party under the contract'

2. payment of an amount from the contracted party to a subcontractor beneficiary for subcontracted work under the contract

3. a deposit in the project trust account as required under this chapter

Who is to open a Project Trust Account [s18]?

1. The contracted party must open an account at a finacncial instituion for the trust as required by this section - Maximum penalty - 500 penalty unit

How soon must a Project Trust account be opened [s18]?

The Project Trust Account (PTA) must be opened within 20 business days after the contracted party enters into the subcontract for the contract.

However, if a PTA added after a contract amendment, the PTA must be opened within 20 BD after being amended.

The project trust account must not be a virtual account or subordinate to any other account at a financial institution.

You cannot shorten the 20 day window for opening a PTA.

What is the penalty if a Trustee does not ensure the Project Trust Account is held at an approved financial institution [s18A]?

Maximum of 200 penalty units

What is the penalty if a Trustee does not ensure the Project Trust Account is held under a name that includes the trustee’s name and the word ‘trust’ [s18A]?

Maximum of 200 penalty units

What is the penalty if a Trustee does not ensure that deposits of amounts to, and withdrawals of amounts from, the Project Trust Account are made using only methods that create an electronic record of transfer [s18A]?

Maximum 500 Penalty Units

What 4 actions need 5 days of notification from the trustee to the contracting party, and the commissioner a notice stating the action taken and include the information prescribed by regulation?

What is the Maximum Penalty rate for not doing this [s18B]?

1. Opens the Account

2. Changes the name of the Account

3. Closes the Account

4. Transfers the Account

Max 200 Penalty Units

What 3 instances can a trustee transfer the project trust account to an alternative financial institution [s18C]?

What is the max penalty for not obliging?

1. The alternative financial institution is an approved financial institution; and

2. all amounts held in the account are transferred with the account to the alternative financial institution; and

3. the trustee informs the contracting party, the commissioner and the subcontractor beneficiaries about the transfer prescribed by regulation

Maximum 200 Penalty Units

Do all payments from the contracting party need to be deposited in project trust account [s19]?

Yes as the contracting party is liable under s77 to pay the amount to the contracted party

There may also need to be payments to Chapter 3, Part 4 - Adjudication of disputed progress payments.

There also may be payments required by a final and binding dispute resolution process relating to the contract and/or court orders.

What 5 instances does the contracting party not need to deposit money into the Project Trust Account [s19(2)]?

1. The money was due to be paid before the trust was established; or

2. The amount is paid into court; or

3. The amount is to be withheld because of a payment withholding request given to the contracting party under s97B; or

4. the money is paid directly to a person under Chapter 4 in connection with a subcontractor’s charge; or

5. The contracting party has a reasonable excuse for failing to deposit the amount into the account. This holds a maximum penalty of 200 penalty units.

What is the maximum penalty if an amount is paid to the contracted party or its agent in contravention of the deposit obligation, the contracted party must deposit the amount into the project trust account as soon as practicable after receiving the amount.

Maximum penalty of 200 penalty units or 2 years imprisonment

Is the Trustee of a Project Trust Account entitled to the interest accrued by the project trust?

Yes! In accordance with s21(4)(a) and s51D

What is a retention trust [s31]?

Its a trust over the following amounts:

• retention amounts withheld in the form of cash under particular contracts, inclusive of GST

• deposits in the retention trust account as required under this chapter; and