Time for leadership on Security of Payment
The Western Australian Government’s failure to act on Security of Payment legislation has again left subbies exposed after another construction group’s collapse.
The government’s tinkering around the edges of SOP laws has been exposed as a complete failure and waste of time.
The WA Government held a review into SOP in 2018, with great promise, but delivered minor reform and avoided the hard work to reform SOP legislation. The result is businesses and workers livelihoods being thrown into chaos and uncertainty. The net result is that WA Government reforms have failed everyone except the liquidators, secured creditors and banks.
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The Federal Government commissioned the Murray Review and the recommendation of the review in 2017, was to implement deemed statutory trust for builders to ensure money for subbies was protected. The WA Government gave indication they were seriously considering this, however, when the reforms were implemented, they shied away from doing the hard work and again tinkered around the edges. Leaving the building sector exposed.
MEA has participated on numerous consultations regarding SOP across the country over the past five years and at this stage the only meaningful reform being attempted is in Queensland. The Queensland Government are implementing deemed trusts for all projects over $1 million by January 2023.
The current example of insolvency is foreseeable in many parts of the country whereby builders and subbies have:
- antiquated SOP legislation,
- Australian Standard form contracts that are hopelessly out of date, lagging behind in legal precedent and not fit for purpose (AS 2124-1992 / AS 4000-1997),
- a building industry mindset of making subbies carry the entire risk for a project through contract negotiating power imbalance.
We will continue to see subbies burnt every time there is mismanagement, or a major lender decides a business risk profile is not acceptable. Liquidators pick over the bones of any assets that are left, pay themselves, accuse subbies of receiving preferential payments and then inform subbies their work claim is at the end of the cue. At least in Queensland there is some hope that a subbie will receive payment for the work completed which builders have received and that liquidators cannot grab that is rightfully the subbies.
The Federal Government is implementing a system of Director Identification Numbers to try and reduce unscrupulous directors phoenixing corporations, however with seven different systems of SOP in this country it is time for all States and the Federal Government either harmonise this area, like Consumer Affairs legislation or, refer the powers to the Federal Government to implement one fair system based on the Murray Review.
It is time for leadership. Leaders who are willing to push through the noise vested interests and bureaucracy to achieve change.
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