Building and Construction and Dispute Resolution Special Counsel, Daniel Morris, and Director, Murray Thornhill discuss how a security of payment reform Bill has been reintroduced, and what likely measures will be implemented if the Bill is passed.
This week has seen the Unions weigh into the debate about civil and construction insolvency in the aftermath of the Pindan Construction collapse.
This is hardly surprising given the 68 unfinished projects and over 500 civil and construction contractors employed on Pindan sites across Western Australia as we reported last week.
However, civil and construction insolvencies are nothing new, having a history of parliamentary reports and calls to action from both sides of politics, spanning almost three decades. The most recent of these, a report by Western Australian Barrister, John Fiocco, has resulted in a security of payment reform Bill being tabled in Western Australia's legislature.
The Bill was introduced to the WA legislature on 23 September 2020 but intervening events, including a recent State election, has delayed its progress. We are pleased to have seen it announced yesterday that the Bill has finally been reintroduced and are hopeful of its quick passage through Parliament, having gone through a third reading in the Upper House on 11 November 2020.
If passed, the Bill will implement some of the anti-insolvency measures recommended by Mr Fiocco: notably, the use of trust accounts to protect subcontractors' retention monies and measures for their earlier release. Other proposed measures appear in the Bill, including some of the Personal Property Securities Act protections recommended in an International Construction Law Review (ICLR) publication by our Daniel Morris.
Such measures aside, it is clear that the Bill's main emphasis is on accelerating cashflows and reducing barriers to payment recovery such as unfair time bars and adjudication technicalities. The Bill may thus be seen as more concerned with improving the payment practices of solvent principals and contractors than with protecting civil and construction contractors against insolvency.
Anecdotally, many in civil and construction contracting have brushed off concerns about the effects of insolvency, saying they have ways and means to absorb these occasional shocks provided they get paid on time, every time by their solvent principals. However, in the wake of Pindan and other recent construction contractor-insolvencies, it may be time to re-evaluate the importance of insolvency protections for civil and construction contractors.
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