It is widely held that subcontractors are vulnerable to not
being paid for the work they do. So much so, that legislatures
around Australia have made special laws in to try and secure
subcontractors' payment rights.
WA's security of payment laws, which provide for rapid
adjudication of construction pay disputes, appear in the
Construction Contracts Act 2004.
However, the recent Forge Group collapse reminds us that
adjudicators' determinations cannot be enforced against
insolvent principals or head contractors: Hammersley Iron Pty
Ltd v James  WASC 10.
A principal's/head contractor's insolvency may give the
contractor a right to claim for the "fair value" or
quantum meruit of work done up to the date of insolvency.
However, these sorts of claims are fraught with difficulty,
the complexity and cost of proving "fair value";
the fact that fair value assessments often work out to less
than the contractor has already received in progress payments;
the likelihood that the insolvent principal's lenders,
suppliers, professional service providers and the ATO will all take
priority as creditors over contractors who will often be left with
ittle or nothing once those priority claims have been paid
For now, the best way for contractors to protect their payment
rights against their principals' insolvency may be to register
security interests on the Personal Property Securities Register
("PPSR"). However, the security that PPSR offers is far
from complete, particularly where payment is owed for services as
opposed to the sale or lease of goods. Also, even contractors with
security interests registered on the PPSR are likely to rank in
insolvency behind the banks, suppliers of materials and plant hire
Project Bank Accounts ("PBAs") have been touted as a
better way to secure contractors' right to be paid for their
work. Currently, though, PBAs are only required on:
administered by Building Management and Works;
with a construction value over $1.5 million;
tendered from 30 September 2016; and
where AS2124 contracts are used.
There are calls to expand the operation of PBAs and even to make
them universal for projects, be they private or public, over a
But are PBAs really the panacea they purport to be?
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A lessee will need to demonstrate that the genuine interests of the lessor will be protected if relief is granted.
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