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Building Industry Fairness Act – What can we do? Australian Legal Update

02 March 2018
Article by Lex Orange from DWF Australia. What can be done to be 'BIF ready'.

What can we do? The Top 3 

1. PBAs – Directors’ personal liability

2. Pricing with PBAs

3. Processes for Chapter 3

1. PBAs – Directors’ personal liability?

  • Corporate trustee is exposed to claim from beneficiaries for conduct which is a breach of trust.
  • Directors’ duty is to act in the best interests of the company as a whole (properly manage trust).
  • If directors permit a breach of trust, the company may seek compensation from the directors, through a derivative action initiated by shareholders or (more likely) by a liquidator. 

1. PBAs – Directors’ personal liability – what can we do? 

  • Corporate trustee indemnifies directors against liability to the corporate trustee (which can be set off against any claim by corporate trustee).
  • Subcontract: exclude personal liability / limit liability to discharge claim out of trust assets (including for breach of trust). But s. 99?
  • Limit the duties of the directors. But Corporations Act?

2. Pricing with PBAs

  • Retention money (5% of value of subcontractors’ contract) removed from cash flow. 
  • Potential for negative cash flow in early part of project.

2. Pricing with PBAs

DWF

2. Pricing with PBAs

DWF

Consider: Impact of subcontractor’s charge. 

2. Pricing with PBAs – what will this drive? 

  • Provide security in the form of bank guarantees (but impact on NTA / AAT)
  • Increase debt facility (but impact on NTA / AAT)
  • Improve net asset position (easy to say!)
  • Front load contracts?

3. Processes for Chapter 3  

e.g. subcontracts

  • 25 business days for payment schedule and for payment.
  • Pre- and post-proclamation contract conditions.
  • Process for payment schedules (consequences of no payment schedule/streamline responses).

 For further information see Queensland Construction Update - Minister provides timetable for implementation of new BIF legislation

 

Further Reading