Test Case for the QLD Trust Account Framework
HAVE SUBCONTRACTORS’ FUNDS BEEN PROTECTED?
Summary
PBS Building (QLD) Pty Ltd is the first construction company to enter administration with trust accounts in place, involving:
- 2 project trust accounts (PTAs)
- 1 overarching retention trust account (RTA)
for these projects:
- $41 million Latitude project
- $16 million Bokarina project
Administrators were appointed in March 2023, and by September 2023, the company was liquidated with $37,000 left in the PTAs and $350,000 in the RTA.
Key Developments
- Supreme Court Application: Administrators sought directions on the use of trust funds. The QBCC ordered all trust accounts to be frozen.
- Court’s Decision: The Court upheld that trust funds are protected and belong to beneficiaries, who have priority for payment.
Legislative Implications
Clarification is needed on how and when beneficiary funds should be distributed in insolvency cases, especially when there are insufficient funds to cover administrators’ fees or a project hasn’t reached practical completion.
Conclusion
This case demonstrates that trust accounts increase the likelihood of parties receiving the money they’re owed, providing better financial security for beneficiaries.
MORE information?
Read the full judgment here: https://www.queenslandjudgments.com.au/caselaw/qsc/2024/108.
Please reach out if you have any questions or feedback – we’re happy to help where we can!
Thanks kindly,
Laura and the Building Trusts team
Call 0481 194 000 or email [email protected].