Queensland: Building Industry Fairness (Security of Payment) Act 2017 — partly uncommenced (Qld)

Building Industry Fairness (Security of Payment) Act 2017 An Act to provide for the security of payment in the building and construction industry by providing for effective, efficient, and fair processes for securing payment Chapter 1 Preliminary Part 1 Introduction 1 Short title This Act may be cited as the Building Industry Fairness (Security of Payment) Act 2017. 2 Commencement (1) Chapter 9, part 1, divisions 1 to 4 commence on a day to be fixed by proclamation. (2) The Acts Interpretation Act 1954, section 15DA does not apply to chapter 9, part 1, divisions 1 to 4. Note— The Acts Interpretation Act 1954, section 15DA, provides for the automatic commencement of certain Acts 1 year after they are assented to. 3 The main purpose of Act (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— (a) requiring the use of statutory trusts for particular contracts related to the building and construction industry; and (b) granting an entitlement to progress payments, whether or not the relevant contract makes provision for progress payments; and (c) establishing a procedure for— (i) making payment claims; and (ii) responding to payment claims; and (iii) the adjudication of disputed payment claims; and (iv) the recovery of amounts claimed; and (d) enabling the use of a statutory charge in favour of subcontractors for payment of the work they do. Part 2 Application and operation of Act 4 Act binds all persons This Act binds all persons, including the State, and, as far as the legislative power of the Parliament permits, the Commonwealth and the other States. Part 3 Interpretation 5 Definitions The dictionary in schedule 2 defines particular words used in this Act. 6 Subcontracts, subcontractors and subcontracted work (1) A contract is a subcontract for another contract if— (a) 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 (b) the contribution mentioned in paragraph (a) is not merely coincidence. Example for paragraph (b)— the purchase of tools from a retail store (2) To remove any doubt, it is declared that— (a) the contribution mentioned in subsection (1)(a) 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 Note— A subcontract that contributes directly to a contract would have 1 entity that is both a party to the subcontract and a party to the contract. (b) 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— (a) the resulting subcontract is a subcontract for the contract; and (b) the person required to carry out the work under the subcontract is a subcontractor for the contract; and (c) 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— (a) performance of the subcontract contributes directly to the performance of the contract; and (b) 1 person is both a party to the subcontract and a party to the contract. (6) A subcontract is a second tier subcontract for a contract if— (a) 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 (b) no party to the subcontract is also a party to the contract; and (c) 1 person is both a party to the subcontract and a party to the other subcontract. (7) A subcontract is a higher subcontract for another subcontract if— (a) performance of the other subcontract contributes to the performance of the subcontract because the work, required to be carried out under the other subcontract, will form all or part of the work required to be carried out under the subcontract; and (b) both subcontracts are subcontracts for the same contract. Example— A first tier subcontract would be a higher subcontract for a third tier subcontract if the work required to be carried out under the third tier subcontract will form all or part of the work required to be carried out under the first tier subcontract. Chapter 2 Statutory trusts Part 1 Preliminary 7 Purpose of chapter The main purpose of this chapter is to ensure that funds paid to the contracted party for particular contracts are held in a trust to protect the interests of subcontractors. 8 Definitions for chapter In this chapter— amendment, of a contract, includes a variation of the contract or a change in the contract price. approved financial institution means a financial institution approved by the commissioner under section 55. building means a fixed structure that is wholly or partly enclosed by walls or is roofed. contract administration, in relation to project trust work wholly or partly designed by a person, includes the following— (a) preparing tender documentation and calling and selecting tenders; (b) preparing, or helping the person's clients with the preparation of, contracts; (c) preparing additional documentation for the person's clients or building contractors; (d) arranging and conducting on-site meetings and inspections; (e) arranging progress payments; (f) arranging for certificates, including certificates from a local government, to be issued; (g) providing advice and help to the person's clients including during the maintenance period allowed under a contract. contracted party, for a contract, means the party to the contract who is required to perform work under the contract, whether by— (a) carrying out the work personally; or (b) directly or indirectly causing the work to be carried out. contracted work, for a contract, means the work required to be carried out under the contract. contracting party, for a contract, means the party to the contract for whom the contracted work is to be carried out. contract price see section 9. hospital and health service means a Hospital and Health Service established under the Hospital and Health Boards Act 2011, section 17. mechanical services work see the Queensland Building and Construction Commission Act 1991, schedule 2. project trust contract means a contract for which a project trust is required under section 12. project trust subcontract see section 9A. project trust work see section 8A. State authority— (a) means— (i) an agency, authority, commission, corporation, instrumentality, office, or other entity, established under an Act or by authority of the State for a public or State purpose; or (ii) a corporation that is— (A) owned or controlled by the State, a local government or an entity mentioned in subparagraph (i); and (B) prescribed by regulation to be a State authority; or (iii) a subsidiary of a corporation mentioned in subparagraph (ii); or (iv) a part of an entity mentioned in subparagraphs (i) to (iii); or (v) a hospital and health service; but (b) does not include an entity prescribed by regulation not to be a State authority. trust records means records required to be kept and retained under section 52. variation, of a contract, means an addition to, or an omission from, the contracted work. 8A Meaning of project trust work (1) Project trust work means any of the following work— (a) the erection or construction of a building; (b) the renovation, alteration, extension, improvement or repair of a building; (c) the provision of lighting, heating, ventilation, air conditioning, water supply, sewerage or drainage in connection with a building; (d) any site work (including the construction of retaining structures) related to work of a kind mentioned in paragraph (a), (b) or (c); (e) the preparation of plans or specifications for the performance of any other work mentioned in this subsection; (f) contract administration if carried out by a person for the construction of a building wholly or partly designed by the person; (g) fire protection work within the meaning of the Queensland Building and Construction Commission Act 1991, schedule 2; (h) site testing within the meaning of the Queensland Building and Construction Commission Act 1991, schedule 2 and classification carried out in preparation for the erection or construction of a building on the site; (i) the carrying out of a building inspection; (j) the inspection or investigation of a building, and the provision of advice or a report, for the following— (i) termite management systems for the building; (ii) termite infestation in the building; (k) work performed by an architect under the Architects Act 2002 in the architect's professional practice if the work is associated with a building; (l) work performed by a registered professional engineer under the Professional Engineers Act 2002 in the engineer's professional practice if the work is associated with a building; (m) work performed by a surveyor under the Surveyors Act 2003 in the surveyor's professional practice if the work is associated with a building; (n) electrical work under the Electrical Safety Act 2002 if the work is associated with a building; (o) the erection of scaffolding that is associated with a building; (p) earthmoving and excavating that is associated with a building; (q) 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; (r) the assessment of energy efficiency of a building; (s) work performed by a fire safety adviser under the Building Fire Safety Regulation 2008 if the work is associated with a building; (t) 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 work is associated with a building; (u) the installation of prefabricated components of a building; (v) mechanical services work that is associated with a building. (2) Project trust work also includes work prescribed by regulation to be project trust work. (3) However, project trust work does not include work prescribed by regulation not to be project trust work. 8B [Repealed] 9 Meaning of contract price (1) The contract price, for a contract, means the amount the contracted party is entitled to be paid under the contract or, if the amount can not be accurately calculated, the reasonable estimate of the amount the contracted party is entitled to be paid under the contract. (2) In working out the amount under subsection (1), an amount for GST is not to be included. 9A Meaning of project trust subcontract (1) A subcontract for a project trust contract is a project trust subcontract if, when the subcontract is entered into— (a) the subcontract is a first tier subcontract for the contract; and (b) the subcontracted work under the subcontract is or includes 1 or more of the following— (i) architectural services; (ii) contractor or trade work; (iii) a professional engineering service; (iv) services or work prescribed by regulation for this paragraph; and (c) the subcontract is not excluded by regulation from being a project trust subcontract. (2) A subcontract does not cease to be a project trust subcontract because of— (a) an amendment of the subcontract; or (b) an amendment of subsection (1) or a regulation made for subsection (1). (3) If a contract becomes a project trust contract after it is entered into, a subcontract of the contract then in existence becomes a project trust subcontract if it would have been a project trust subcontract had it been entered into when the contract became a project trust contract. (4) A subcontract that was not, at the time it was entered into, a project trust subcontract becomes a project trust subcontract if— (a) the subcontract is amended; and (b) the subcontract would have been a project trust subcontract had it been entered into in its amended form, including any earlier amendments, at the time it was amended. (5) In this section— architectural services see the Architects Act 2002, schedule 2. contractor or trade work means— (a) work for which the subcontractor holds, or is required to hold, a licence under any of the following— (i) the Building Act 1975; (ii) the Electrical Safety Act 2002; (iii) the Plumbing and Drainage Act 2018; (iv) the Queensland Building and Construction Commission Act 1991; (v) a regulation made under the Work Health and Safety Act 2011; (vi) an Act or regulation prescribed by regulation for this paragraph; or (b) work prescribed by regulation to be contractor or trade work. professional engineering service see the Professional Engineers Act 2002, schedule 2. Part 2 Project trusts Division 1 Preliminary 10 Definitions for part In this part— head contract means a contract for project trust work that is not also a subcontract of another contract. project trust account means the account for a project trust at a financial institution. subcontractor beneficiary, for a project trust, means a subcontractor who is a beneficiary of the trust under section 11A. 10A Who is a related entity (1) A person is a related entity for another person if— (a) for individuals—they are members of the same family; or (b) for an individual and a corporation—the individual or a member of the individual's family— (i) is a majority shareholder, director or secretary of the corporation or a related body corporate of the corporation; or (ii) has an interest of 50% or more in the corporation; or (c) for an individual and a trustee of a trust—the individual or a related entity under another provision of this section is a beneficiary of the trust; or (d) for corporations—they are related bodies corporate; or (e) 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 (f) for trustees of 2 or more trusts— (i) a person is a beneficiary of both trusts; or (ii) a person is a beneficiary of 1 trust and a related entity under another provision of this section is a beneficiary of the other trust. (2) Also, a person is a related entity for another person if the persons acquire interests in a land holding trust and the acquisitions form, evidence, give effect to or arise from what is substantially 1 arrangement. (3) In this section— family, for a person, means— (a) the person's spouse; or (b) a parent of the person or the person's spouse; or (c) a grandparent of the person or the person's spouse; or (d) a brother, sister, aunt, uncle, nephew or niece of the person or the person's spouse; or (e) a child of the person or the person's spouse; or (f) a grandchild of the person or the person's spouse; or (g) the spouse of any person mentioned in paragraphs (b) to (f). land holding trust see the Duties Act 2001, schedule 6. related bodies corporate means bodies corporate that are related under the Corporations Act, section 50. 10B When amount liable to be paid to subcontractor For this chapter, a person who is a party to a subcontract is liable to pay an amount to the subcontractor if any of the following circumstances apply— (a) the amount is due to be paid by the person to the subcontractor in accordance with the terms of the subcontract; (b) under the subcontract, the amount is certified, or otherwise assessed, as payable by the person to the subcontractor; (c) the person gives the subcontractor a payment schedule for the amount; (d) the person is liable to pay the amount to the subcontractor under section 77; (e) the person must pay the amount to the subcontractor under chapter 3, part 4 because of an adjudication of a disputed progress payment for the subcontract; (f) the person must pay the amount to the subcontractor because of a final and binding dispute resolution process; (g) a court or tribunal orders the person to pay the amount to the subcontractor. 10C References to particular terms in this part In this part— (a) a reference to a contract in association with a reference to a project trust is a reference to the contract for which the trust is required; and (b) a reference to a contracting party in association with a reference to a project trust is a reference to the contracting party for the contract for which the trust is required; and (c) a reference to a contracted party in association with a reference to a project trust is a reference to the contracted party for the contract for which the trust is required; and (d) a reference to a trustee in association with a reference to a project trust, or a project trust contract, is a reference to the trustee for the project trust; and (e) a reference to a subcontract in association with a reference to a project trust is a reference to a subcontract of the contract for which the trust is required; and (f) a reference to a subcontractor beneficiary in association with a reference to a project trust is a reference to a subcontractor beneficiary for the trust; and (g) a reference to a trustee in association with a reference to a project trust account is a reference to the trustee for the trust to which the account relates. Division 2 Project trusts 11 What is a project trust A project trust is a trust— (a) over amounts— (i) payable in connection with a project trust contract or project trust subcontract; and (ii) required to be deposited in the project trust account under this chapter; and (b) primarily for the benefit of subcontractors for the project trust contract. 11A Trustee and beneficiaries of project trust (1) The contracted party for a project trust contract is both the trustee and a beneficiary of the project trust for the contract. (2) The contracted party— (a) becomes the trustee and a beneficiary of the project trust when the trust is established; and (b) ceases to be the trustee and a beneficiary of the project trust 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— (a) becomes a beneficiary of the project trust when— (i) a project trust subcontract is entered into with the subcontractor; or (ii) a subcontract for which the subcontractor is the contracted party becomes a project trust subcontract; and (b) ceases to be a beneficiary of the project trust when— (i) the subcontractor 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 (ii) the trust is lawfully dissolved. 11B What are the beneficial interests in a project trust (1) The beneficiaries of a project trust for a contract have a beneficial interest in— (a) for a subcontractor for the contract (as beneficiary)—all amounts the subcontractor is entitled to be paid in connection with project trust subcontracts; or (b) for the contracted party for the contract (as beneficiary)—the remainder for the trust. (2) In this section— 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. Division 3 Contracts requiring project trusts Subdivision 1 When project trust required 12 When project trust required for a contract (1) This section applies to a contract entered into on or after the commencement of this section. (2) A project trust is required for a contract if— (a) the contract is eligible for a project trust under subdivision 2; and (b) the contract is not exempted under subdivision 3; and (c) the contracted party enters into a subcontract for all or part of the contracted work. (3) The requirement starts on the first day a project trust is required under subsection (2). (4) The requirement continues until the project trust is dissolved under section 21, regardless of any of the following changes— (a) a variation, or any other amendment, of the contract; (b) a change in the contract price; (c) a change in the contracted work. (5) If a project trust is required for a contract and a project trust is also required for a subcontract of the contract, separate project trusts are required for the contract and the subcontract. 13 [Repealed] Subdivision 2 Eligible contracts 14 Eligibility of contract for project trust when contract entered into (1) A contract is eligible for a project trust if— (a) the contracting party is the State, a state authority, a local government, an individual, a private entity or a hospital and health service; and (b) more than 50% of the contract price is for project trust work; and (c) the contract price is— (i) if the contracting party is the State or a hospital and health service—$1 million or more; or (ii) otherwise—$10 million or more. (2) Also, a contract is eligible for a project trust if— (a) the contracting party is a State authority that has decided a project trust is to be established for the contract; and (b) more than 50% of the contract price is for project trust work; and (c) the contract price is $1 million or more. (3) This section applies to a contract at the time the contract is entered into. (4) In this section— private entity— (a) means a company or other entity that is owned by any entity other than the State; but (b) does not include a State authority. State does not include a State authority. 14A Eligibility of contract for project trust when contract amended (1) A contract does not cease to be eligible for a project trust because of an amendment of the contract. (2) A contract that was not, at the time it was entered into, eligible for a project trust becomes eligible for a project trust on the amendment of the contract if— (a) the contract is amended; and (b) the contract would have been eligible for a project trust had it been in its amended form, including any earlier amendments, when it was entered into; and (c) the amended contract— (i) increases the original percentage of the contract price that is for project trust work by 30% or more; or (ii) increases the original contract price by 30% or more. 14B Multiple contracts at same site or adjacent sites (1) This section applies if— (a) the same parties enter into 2 or more separate contracts; and (b) the separate 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. Example— The larger contract would be eligible for a project trust if the contract would be eligible for a project trust under section 14. (3) To remove any doubt, it is declared that the exemptions under subdivision 3 apply only to the larger contract and not to the separate contracts. Note— If the separate contracts are for small scale residential construction work under section 15C, the exemption under section 15C does not apply to exclude the separate contracts from being taken to be a single contract under subsection (2). (4) This section does not apply to separate contracts entered into as a result of separate tender processes. 14C Subcontracts with related entities require project trusts (1) A subcontract is eligible for a project trust if— (a) the subcontract is a first tier subcontract for a head contract; and (b) a project trust is required for the head contract; and (c) the subcontractor is a beneficiary of the project trust for the head contract; and (d) the subcontractor is a related entity for the contracted party for the head contract. Note— The contracted party for the head contract would also be the contracting party for the subcontract. (2) To remove any doubt, it is declared that the subcontractor continues to be a beneficiary of the project trust for the head contract. 14D Prescribed contracts require project trusts A contract is eligible for a project trust if it is of a type of contract prescribed by regulation. 14E Prescribed subcontracts require project trusts (1) A subcontract is eligible for a project trust if— (a) the subcontract is a first tier subcontract for a head contract; and (b) a project trust is required for the head contract; and (c) the subcontractor is a beneficiary of the project trust for the head contract; and (d) the subcontract is a type of subcontract prescribed by regulation. (2) To remove any doubt, it is declared that the subcontractor continues to be a beneficiary of the project trust for the head contract. Subdivision 3 Exempt contracts 15 Subcontracts generally A project trust is not required for a subcontract unless it is a type of subcontract to which section 14C or 14E apply. 15A Contracts with particular entities A project trust is not required for a contract if the contracting party or contracted party is an entity prescribed by regulation. 15B Contracts between the State and a state authority A project trust is not required for a contract if the only parties to the contract are the State and a state authority. 15C Contracts for small scale residential construction work (1) A project trust is not required for a contract if the only project trust work to be carried out under the contract is residential construction work for less than 3 living units. (2) For subsection (1)— (a) a single detached dwelling is taken to be 1 living unit; and (b) a residential unit is taken to be 1 living unit; and (c) a duplex is taken to be 2 living units. (3) In this section— residential construction work means the type of work prescribed by regulation. residential unit means a part of a building designed for separate occupation as a residence. 15D Contracts for maintenance work (1) A project trust is not required for a contract if the only project trust work to be carried out under the contract is maintenance work. (2) In this section— maintenance work— (a) means— (i) testing; and (ii) taking samples and restoring the sample site; and (iii) work required on an ongoing basis to— (A) prevent deterioration or failure of a thing; or (B) restore a thing to its correct operating specifications; or (C) replace a component at the end of its working life; but (b) does not include— (i) improving a building to increase its capabilities or functions; or (ii) improving a building to meet new statutory requirements applying to the building; or (iii) a refurbishment or replacement of a building that extends the life of the building. 15E Contracts for professional design, advisory or contract administration work (1) 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, either directly or indirectly, by— (a) an architect under the Architects Act 2002; or (b) a registered professional engineer under the Professional Engineers Act 2002; or (c) a building designer; or (d) a person who carries on a business as a landscape architect. (2) Also, a project trust is not required for a contract if the only work to be carried out under the contract is contract administration carried out, either directly or indirectly, by a person mentioned in subsection (1) for the construction of a building wholly or partly designed by the person. (3) In this section— advisory work means— (a) the inspection or investigation of a building; or (b) the provision of advice or a report about a building. building designer means a person who holds a licence of a class mentioned in the Queensland Building and Construction Commission Regulation 2018, schedule 2, part 11, 12 or 13. design work means the preparation of plans or specifications for project trust work. 15F Contracts with less than 90 days until practical completion (1) A project trust is not required for a contract if there is less than 90 days between— (a) the first day a project trust would, apart from this section, be required for the contract (the trigger date); and Note— If the effect of an amendment of a contract is that the contract becomes eligible for a project trust for the first time, the trigger date is the day the amendment takes effect. See section 14A. (b) the day practical completion for the contracted work is expected to occur. (2) If a project trust is not required for a contract because of subsection (1), the contracted party must review the application of this section to the contract each time an amendment of the contract is made that is likely to affect the day practical completion for the contracted work is expected to occur. (3) In this section— practical completion, for contracted work for a contract, means— (a) practical completion as provided for under the contract; or (b) if the contract does not provide for practical completion—when the contracted work would reasonably be estimated to be completed— (i) in compliance with the contract, including all plans and specifications for the work and all statutory requirements applying to the work; and (ii) without any defects or omissions, other than minor defects or minor omissions that will not unreasonably affect the intended use of the work. 16 [Repealed] Division 4 Project trust administration Subdivision 1 Establishing project trusts 17 Establishment of project trust Once a project trust is required for a contract under section 12, the trust is established by the first of the following being made after the trust is required— (a) payment of an amount from the contracting party to the contracted party under the contract; (b) payment of an amount from the contracted party to a subcontractor beneficiary for subcontracted work under the contract; (c) a deposit in the project trust account as required under this chapter. Subdivision 2 Project trust accounts 18 Contracted party must open project trust account (1) If a project trust is required for a contract under section 12, the contracted party must open an account at a financial institution for the trust as required by this section. Maximum penalty—500 penalty units. (2) The project trust account must be opened within 20 business days after the contracted party enters into the first subcontract for the contract. (3) However— (a) if a project trust is not required for the contract until after an amendment of the contract; and Note— See section 14A about amendments of contracts affecting the requirement to establish a project trust. (b) the contracted party entered into a subcontract for the contract before the amendment of the contract; the project trust account must be opened within 20 business days after the day the contract is amended. (4) The project trust account must not be a virtual account or subordinate to any other account at a financial institution. (5) There must not be more than 1 project trust account for the project trust. (6) A provision of a contract that provides that the project trust account must be opened less than 20 business days after the contract is entered into is of no effect. 18A Restrictions for project trust account (1) A trustee must ensure the project trust account is held at an approved financial institution. Maximum penalty—200 penalty units. (2) A trustee must ensure the project trust account is held under a name that includes the trustee's name and the word 'trust'. Maximum penalty—200 penalty units. (3) A trustee must 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 the transfer. Maximum penalty—500 penalty units. 18B Notice of project trust account's opening, closing or name change (1) This section applies if a trustee, or another person on behalf of a trustee, takes any of the following actions in relation to the project trust account— (a) opens the account; (b) changes the name of the account; (c) closes the account; (d) transfers the account. (2) Within 5 business days after taking the action, the trustee must give to the contracting party, and must give to the commissioner using an approved way, a notice— (a) stating the action taken; and (b) including the information prescribed by regulation. Maximum penalty—200 penalty units. 18C Change of financial institution (1) A trustee must not transfer the project trust account to an alternative financial institution unless— (a) the alternative financial institution is an approved financial institution; and (b) all amounts held in the account are transferred with the account to the alternative financial institution; and (c) the trustee informs the contracting party, the commissioner and the subcontractor beneficiaries about the transfer as prescribed by regulation. Maximum penalty—200 penalty units. Note— See, also, section 18B for the trustee's obligation to inform the contracting party and the commissioner of closing and opening a project trust account. (2) When transferring the project trust account to an alternative financial institution, the trustee may withdraw the amounts of interest credited to the account by a financial institution, if the withdrawal is authorised under section 51D. (3) Nothing in this section enables the trustee to have more than 1 project trust account for a project trust at the same time beyond the period necessary to transfer the project trust account. (4) In this section— alternative financial institution, for a project trust account, means a financial institution that is not the financial institution at which the account is currently kept. Subdivision 3 Payments to project trust account 19 All payments from contracting party to be deposited in project trust account (1) This section applies to any of the following amounts paid by the contracting party to the contracted party in connection with a project trust contract— (a) an amount paid in accordance with the terms of the contract; (b) an amount paid because the contracting party is liable under section 77 to pay the amount to the contracted party in connection with the contract; (c) an amount paid under chapter 3, part 4 because of an adjudication of a disputed progress payment relating to the contract; (d) an amount paid because of a final and binding dispute resolution process relating to the contract; (e) an amount paid because of a court order relating to the contract; (f) an amount, paid for any other reason, that reduces the unpaid amount of the contract price for the contract. (2) The contracting party must deposit the amount into the project trust account for the contract (the deposit obligation) unless— (a) the amount was due to be paid before the trust was established; or (b) the amount is paid into court; or (c) the amount is to be withheld because of a payment withholding request given to the contracting party under section 97B; or (d) the amount is paid directly to a person under chapter 4 in connection with a subcontractor's charge; or (e) the contracting party has a reasonable excuse for failing to deposit the amount into the account. Maximum penalty—200 penalty units. (3) Once the amount is deposited into the project trust account, the deposit is taken to be a payment made by the contracting party to the contracted party and discharges the contracting party's liability to pay that amount to the contracted party. (4) 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 for subsection (4)—200 penalty units or 2 years imprisonment. 19A Limited purposes for which money may be deposited in project trust account (1) A trustee must not cause an amount to be deposited into the project trust account for any purpose other than— (a) paying the trustee, as the contracted party, an amount the contracting party must deposit into the account under section 19; or (b) paying a subcontractor beneficiary an amount the subcontractor is entitled, or may become entitled, to be paid in connection with a project trust subcontract; or (c) repaying an amount withdrawn from the account in error; or (d) making another payment prescribed by regulation. Maximum penalty—200 penalty units or 1 year's imprisonment. (2) This section does not apply to an amount of interest credited to the project trust account by a financial institution. Subdivision 4 Payments from project trust account 20 All payments to subcontractor beneficiaries to be paid from project trust account (1) The contracted party for a project trust contract may only pay an amount to a subcontractor beneficiary of the project trust— (a) from the project trust account; and (b) by depositing the amount into the account of a financial institution nominated by the beneficiary. Maximum penalty—200 penalty units or 1 year's imprisonment. (2) To remove any doubt, it is declared that the obligation to pay an amount from the project trust account applies whether or not the amount is held in the account when it is to be paid. Note— See section 51 about covering shortfalls. (3) The account nominated by the subcontractor beneficiary under subsection (1)(b) must be— (a) controlled by the beneficiary; and (b) if the beneficiary is also required to establish a project trust for its subcontract—the account for the project trust for the subcontract. (4) This section does not apply to— (a) a retention amount withheld from payment to a subcontractor beneficiary if the amount is deposited into a retention trust account of which the subcontractor is, or will be, a beneficiary; and (b) a retention amount to be released to a subcontractor beneficiary from a retention trust account. 20A Limited purposes for which money may be withdrawn from project trust account (1) A trustee must not withdraw an amount from the project trust account for any purpose other than— (a) paying a subcontractor beneficiary an amount the contracted party is liable to pay the beneficiary in connection with its subcontract; or (b) paying the trustee, as the contracted party, an amount the contracting party is liable to pay the contracted party for contracted work but only to the extent a subcontractor beneficiary is not entitled to be paid for the same work; or (c) returning an amount paid in error by the contracting party; or (d) depositing a retention amount into a retention trust account; or (e) making payment relating to the contract in accordance with an adjudication under chapter 3, part 4; or (f) making payment relating to the contract as ordered by a court; or (g) making another payment prescribed by regulation. Maximum penalty—300 penalty units or 2 years imprisonment. (2) A trustee must repay all amounts it withdraws in contravention of subsection (1) as soon as practicable after the trustee becomes aware the withdrawal is in contravention of that subsection. Maximum penalty—300 penalty units or 2 years imprisonment. (3) A trustee is taken to have withdrawn an amount from the project trust account if— (a) the trustee authorises any person to make the withdrawal; or (b) the trustee knowingly contributes to the withdrawal being made. (4) This section does not apply to the withdrawal of an amount for the project trust account for— (a) an amount of interest authorised to be withdrawn under section 51D; or (b) an amount for fees charged by the approved financial institution for the project trust account. 20B Order of priority A trustee must not withdraw an amount from the project trust account to pay itself, or make another payment prescribed by regulation, unless there would still be a sufficient amount available in the account after the withdrawal to pay all amounts the contracted party is liable to pay subcontractor beneficiaries at the time of the withdrawal. Maximum penalty—300 penalty units or 2 years imprisonment. 20C Insufficient amounts available for payments (1) This section applies if— (a) a project trust is established for a contract; and (b) the contracted party is liable to pay 2 or more subcontractor beneficiaries (each a claimant) an amount at the same time; and (c) the total amount held in the project trust account is insufficient to satisfy in full all of the amounts liable to be paid to the claimants; and (d) when an amount liable to be paid to a claimant is due to be paid, the contracted party has not complied with its obligation under section 51 to cover the insufficient amount. (2) The amount to be paid by the contracted party to each claimant is to be reduced in proportion to the amounts liable to be paid to each. Example— If one subcontractor beneficiary is to be paid $50,000 and another subcontractor beneficiary is to be paid $30,000 but only $40,000 is available, the beneficiaries are to be paid $25,000 and $15,000 respectively. (3) If the contracted party makes a payment complying with subsection (2), the party must, using an approved way, inform the commissioner of the payment as soon as practicable after making it. Maximum penalty—100 penalty units. (4) While there continues to be an insufficient amount held in the project trust account, the contracted party must not pay a subcontractor beneficiary unless the payment complies with subsection (2). Maximum penalty—100 penalty units or 1 year's imprisonment. (5) Nothing in this section relieves the contracted party of the party's liability to pay in full the amounts the subcontractor beneficiaries are entitled to be paid in connection with project trust subcontracts. Subdivision 5 Ending project trust 21 Ending project trust (1) Once a project trust is established for a contract, the trustee may dissolve the trust only if— (a) there are no longer any subcontractor beneficiaries for the trust; or (b) the only remaining work to be carried out under the contract is maintenance work. (2) A project trust is dissolved by the trustee— (a) closing the project trust account; and (b) giving written notice to the commissioner of the trust having been dissolved. (3) A trustee is taken not to dissolve the project trust by closing the project trust account if the account was only closed for the purpose of transferring the account to another financial institution under section 18C. (4) When dissolving the project trust, the trustee may pay itself the following amounts— (a) any amount for interest that the trustee is entitled to under section 51D; (b) any remaining amount that is not owing to a subcontractor beneficiary. (5) In this section— maintenance work see section 15D(2). 21A Unauthorised dissolution of project trust (1) A person must not purport to dissolve a project trust before it may be dissolved under section 21(1). Maximum penalty—500 penalty units or 1 year's imprisonment. (2) Without limiting subsection (1), the person is taken to purport to dissolve a project trust if the person closes the account for the trust while it is still required. (3) Subsection (2) does not apply to a person transferring the project trust account to another financial institution under section 18C. 22 [Repealed] Division 5 Information sharing 23 Notice of project trust before entering subcontracts (1) The contracted party for a project trust contract must give each subcontractor a notice about the use of a project trust account (notice of project trust) as required by this section. Maximum penalty—200 penalty units or 1 year's imprisonment. (2) The notice of project trust must— (a) be in writing; and (b) include a statement that a project trust will be used for making payments to the subcontractor; and (c) include the information prescribed by regulation. (3) The notice of project trust must be given to the subcontractor— (a) if the project trust is not yet established when the contracted party and the subcontractor enter into a subcontract—within 10 business days after the trust is established; or (b) if the project trust is already established when the contracted party and the subcontractor enter into a subcontract—before the contracted party and the subcontractor enter into a subcontract. (4) However— (a) if a project trust is not required for a contract until after an amendment of the contract; and Note— See section 14A about amendments of a contract affecting the requirement to establish a project trust. (b) the contracted party entered into a subcontract for the contract before the amendment of the contract; the notice of project trust must be given within 10 business days after opening the project trust account. 23A Subcontractor beneficiary to be informed of particular withdrawals (1) This section applies if— (a) a withdrawal is made from a project trust account to make a payment to a subcontractor beneficiary; or (b) a withdrawal is made from a project trust account to deposit an amount, withheld from payment to a subcontractor beneficiary, in a retention trust account for the benefit of the subcontractor beneficiary. (2) Within 5 business days after making the withdrawal, the trustee for the project trust must give the subcontractor beneficiary a notice of the withdrawal that includes the information prescribed by regulation, unless the trustee has a reasonable excuse. Maximum penalty—100 penalty units. 23B Subcontractor beneficiary may request particular information (1) A person who is, or was, a subcontractor beneficiary of a project trust may, in writing, request the trustee give the person the following information to the extent it relates to the person— (a) a statement of balance for the project trust account; (b) a copy of the transactions for the project trust account; (c) a copy of the trust records; (d) a copy of supporting statements given to the contracting party with the payment claims made by the trustee as the contracted party. (2) The trustee must give the person the requested information within 10 business days after being given the request, unless— (a) the trustee has a reasonable excuse; or (b) the information is already available to the person; or (c) the information has not changed since it was previously given to the person. Maximum penalty—100 penalty units. (3) The requested information must be given to the person in writing and any words used in the information to explain a transaction must be in the English language. (4) It is not a reasonable excuse for the trustee to fail to comply with the request on the grounds that complying with the request might tend to incriminate the trustee or expose the trustee to a penalty. (5) In this section— supporting statement see section 75(9). Division 6 Obligations of contracting party 24 Contracting party to report related entities (1) This section applies if— (a) a project trust is established for a contract; and (b) the contracting party knows, or ought reasonably to know, that a subcontractor beneficiary is a related entity for the contracted party. (2) The contracting party must, using an approved way, inform the commissioner of the matter within 5 business days after the party first becomes aware, or ought reasonably to have become aware, of the matter. Maximum penalty—50 penalty units. 24A Contracting party to report failure to establish project trust (1) This section applies if the contracting party for a contract knows or ought reasonably to know— (a) a project trust is required for the contract; and (b) a project trust account has not been opened for the trust as required under section 18. (2) The contracting party must, using an approved way, report the matter to the commissioner. Maximum penalty—100 penalty units. Division 7 Other matters 25 Contracted party to report related entities (1) This section applies if— (a) a project trust is established for a contract; and (b) the contracted party enters into a subcontract with a related entity for the party. (2) The contracted party must, using an approved way, inform the commissioner about entering into the subcontract with the related entity within 5 business days after entering into the subcontract. Maximum penalty—200 penalty units. 25A Limited liability of contracting party Nothing in this part creates or supports a right of action against the contracting party for a contract by a subcontractor, or the contracted party, as a beneficiary of a project trust for the contract. 25B No assignment of entitlement by contracted party An assignment by the contracted party of an entitlement of the party to an amount held in trust for a project trust is of no effect. Part 3 Retention trusts Division 1 Preliminary 30 Definitions for part In this part— building contract see Queensland Building and Construction Commission Act 1991, section 67AAA. minimum contract price means the contract price amount prescribed by regulation. retention trust see section 31. retention trust account means the account for a retention trust at a financial institution. 30A References to particular terms in this part In this part— (a) a reference to a contract in association with a reference to a retention trust is a reference to the contract for which the trust is required; and (b) a reference to a contracting party in association with a reference to a retention trust is a reference to the contracting party for the contract for which the trust is required; and (c) a reference to a contracted party in association with a reference to a retention trust is a reference to the contracted party for the contract for which the trust is required; and (d) a reference to a trustee in association with a reference to a retention trust or a contract for which a retention trust is required is a reference to the trustee for the retention trust. Division 2 Retention trusts 31 What is a retention trust A retention trust is a trust— (a) over the following amounts— (i) retention amounts withheld in the form of cash under particular contracts; (ii) deposits in the retention trust account as required under this chapter; and (b) primarily for the benefit of the party who will be entitled to the retention amount. 31A Who are the trustee and beneficiaries of a retention trust (1) This section applies to a retention trust established for retention amounts withheld from payment under a contract (the retention trust contract). (2) The contracting party is both the trustee and a beneficiary of the retention trust. (3) The contracting party— (a) becomes the trustee and a beneficiary of the retention trust when the trust is established; and (b) ceases to be the trustee and a beneficiary of the retention trust when the trust is dissolved. (4) The contracted party is a beneficiary of the retention trust. (5) The contracted party— (a) becomes a beneficiary of the retention trust when a retention amount is withheld from payment to the party under the retention trust contract; and (b) ceases to be a beneficiary of the retention trust when paid all retention amounts it has a beneficial interest in and the trust is lawfully dissolved. Note— A retention amount need only be released to a contracted party when required under the relevant contract. 31B What are the beneficial interests in a retention trust (1) The beneficiaries of a retention trust have a beneficial interest in— (a) for the contracted party as beneficiary—all retention amounts held in the trust that were withheld from payment to the contracted party; or (b) for the contracting party as beneficiary—all amounts held in the trust after subtracting the beneficial interests mentioned in paragraph (a). Note— The contracting party's beneficial interest will generally only exist once the contracted party's beneficial interest has ended under subsection (2). (2) However, the contracted party's beneficial interest in a retention amount ends— (a) if and when the contracting party becomes entitled to be paid the amount under the relevant contract; and (b) to the extent the contracting party becomes entitled to be paid the amount under the relevant contract. Example of when the contracting party becomes entitled to be paid a retention amount— The contracting party becomes entitled under the contract to be paid a retention amount to pay for corrections to defects in the contracted work. Division 3 When retention trusts required 32 When retention trust required (1) A retention trust is required for a retention amount withheld from payment under a contract if— (a) the contract is a withholding contract at the time the retention amount is withheld; and (b) the retention amount is withheld by the contracting party in the form of cash. (2) Also, a retention trust is required for a retention amount withheld from payment under a contract if— (a) the contract was not a withholding contract at the time the retention amount was withheld but the contract has since become a withholding contract; and (b) the contract is a first tier subcontract; and (c) the retention amount was withheld by the contracting party in the form of cash; and (d) the retention amount had not been released to the parties entitled to it at the time the contract became a withholding contract. (3) The requirement starts, or is taken to have started, on the first day the contracting party withholds the retention amount from payment. (4) The requirement continues until all of the retention amount has been released to the parties entitled to it under the withholding contract, regardless of any of the following changes— (a) a variation, or any other amendment, of the contract; (b) a change in the contracted work. (5) This section does not apply to a retention amount withheld from payment under a contract if— (a) the contracting party is the State, the Commonwealth, a state authority, a local government or another entity prescribed by regulation; or (b) the contract price for the contract is at least the minimum contract price. (6) In this section— withholding contract means— (a) a project trust contract that is— (i) a head contract; or (ii) a subcontract that is eligible for a project trust under section 14C or 14D; or (b) a project trust subcontract for a project trust contract mentioned in paragraph (a). Division 4 Retention trust administration Subdivision 1 Establishing retention trusts 33 Establishment of retention trust (1) This section applies if, under section 32, a retention trust is required for a retention amount withheld from payment under a contract. (2) The retention trust is established by the contracting party withholding the retention amount from payment. 33A Charge over retention amounts held in retention trust (1) This section applies if, under section 32, a retention trust is required for a retention amount withheld from payment under a contract. (2) In addition to the retention trust, the retention amount is also subject to a charge in favour of the contracted party for securing the release of the amount when the party becomes entitled to the amount. (3) However, if and when the contracting party becomes entitled to be paid part of the retention amount under the contract, the charge is released over that part of the retention amount. (4) The contracted party may enforce the charge as if the charge had been given to it under a written agreement between it and the contracting party. (5) An act done to defeat, or purporting to operate so as to defeat, the charge is of no effect against the contracted party. (6) The charge is declared to be a statutory interest to which the Personal Property Securities Act 2009 (Cwlth), section 73(2) applies. Subdivision 2 Retention trust accounts 34 Contracting party withholding retention amount must open retention trust account (1) This section applies if, under section 32, a retention trust is required for a retention amount withheld from payment under a contract. (2) The contracting party must open an account for the retention trust at a financial institution— (a) if the retention trust is required under section 32(1)—before the retention amount is withheld; or (b) if the retention trust is required under section 32(2)—within 20 business days after the contract becomes a withholding contract. Maximum penalty—500 penalty units. (3) However, the contracting party need only establish 1 retention trust account for all retention amounts withheld by the party under any number of contracts for which it is the contracting party. 34A Restrictions for retention trust account (1) A trustee must ensure the retention trust account is held at an approved financial institution. Maximum penalty—200 penalty units. (2) A trustee must ensure the retention trust account is held under a name that includes the trustee's name and the word 'trust'. Maximum penalty—200 penalty units. (3) A trustee must ensure that deposits of amounts to, and withdrawals of amounts from, the retention trust account are made using only methods that create an electronic record of the transfer. Maximum penalty—500 penalty units. (4) A trustee must not close the retention trust account unless— (a) all retention amounts held in the account have been released to the parties entitled to it under the relevant contracts; or (b) the account is transferred to an alternative financial institution under section 34C. Maximum penalty—200 penalty units. 34B Notice of retention trust account's opening, closing or name change (1) This section applies if a trustee, or another person on behalf of the trustee, takes any of the following actions in relation to the retention trust account— (a) opens the account; (b) changes the name of the account; (c) closes the account; (d) transfers the account. (2) Within 5 business days after taking the action, the trustee must, using an approved way, give the commissioner a notice— (a) stating the action taken; and (b) including the information prescribed by regulation. Maximum penalty—200 penalty units. 34C Change of financial institution (1) A trustee must not transfer the retention trust account to an alternative financial institution unless— (a) the alternative financial institution is an approved financial institution; and (b) all amounts held in the account are transferred with the account to the alternative financial institution; and (c) the trustee informs all contracted parties, from whom retention amounts held in the account have been withheld from payment, about the transfer as prescribed by regulation. Maximum penalty—200 penalty units. Note— See, also, section 34B for the trustee's obligation to inform the commissioner of closing and opening a retention trust account. (2) When transferring the retention trust account to an alternative financial institution, the tr