How to deal with a dispute for funds in a Project Bank Account

From 1 March 2018, Project Bank Accounts have become part of the construction industry in Queensland. That means as a head contractor you’ll need to know how to deal with disputes when they occur. 

Project Bank Accounts are trust accounts which are held by you as the head contractor, for the benefit of the subcontractors on a project. 

Each subcontractor becomes a beneficiary to the trust account when they enter into a subcontract on the project. The subcontractors remain as beneficiaries until they are paid all amounts (including retention monies) they are entitled to be paid. 

If you’re not sure whether a Project Bank account is required for your project, see our previous article here.

What is a payment dispute with PBAs?

The Building Industry Fairness Act (Security of Payment) 2017 (‘the BIF Act’) defines that a payment dispute occurs when:

  • A subcontractor gives a payment claim; and
  • The head contractor gives a payment schedule but pays an amount less than stated in the Payment Schedule

OR

  • A subcontractor gives a payment claim; and
  • The head contractor fails to give a payment schedule and therefore becomes liable for the amount claimed. 

Dealing with a PBA dispute

Once there is a payment dispute, the head contractor must transfer the disputed funds to the Payment Disputes Trust Account.

These funds can then only be released:

  • To the subcontractor beneficiary; or
  • In accordance with the outcome of the dispute resolution process; or
  • Another person in circumstances prescribed by regulation.

The regulations restrict dispute resolution processes only to:

  • A proceeding in a court or tribunal;
  • An adjudication of a payment claim (which is now currently under the Building and Construction Industry Payment Act 2004); or
  • Arbitration conducted in accordance with a subcontract.

Therefore, once an amount has been transferred into the disputed claims trust account, these funds cannot be released without a final determination – one way or another.

Head contractors must therefore exercise caution to ensure the Payment Schedules issued are correct, or face lengthy delays until a final determination is made.

What penalties apply to PBA disputes?

Significant penalties can be applied to head contractors who do not adhere to the strict requirements of the BIF Act.

Get help with a dispute for funds in a PBA

If you’re not sure how to comply with Project Bank Accounts, MDL can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here. 

 

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