New questions raised over building industry payment security

AUSTRALIA'S states and territories have been urged to adopt nationally consistent security of payment legislation for the construction industry.

John Murray AM, whose Turnbull Government review of building industry security of payment produced more than 80 recommendations, said he applauded the courage and conviction of Queensland Housing and Public Works Minister Mick de Brenni in addressing unconscionable conduct towards subcontractor payment.

But he has made clear his own conviction that the statutory trusts he recommended rather than the project bank accounts the Queensland Government has trialled on public works projects during the past 12 months with the intent of rolling out into the private sector, were the best way forward.

Mr Murray's comments come as the West Australian Government has announced it would begin the staggered introduction of statutory trusts 18 months after the adoption of the necessary legislation in September.

Subcontractors Alliance head Les William said while he was happy the Queensland Government had acted, he would prefer the legislation be amended to reflect the Murray recommendations and to ensure harmonised laws nationally.

"Having said that we are certainly not unappreciative of what the Queensland Government has done," Mr Williams said.

His organisation was formed in the wake of the 2013 Walton Construction collapse and has since lobbied for reform and the establishment of the Queensland Joint Taskforce into construction sector fraud established by the State Government after News Ltd's Back Our Subbies campaign.

A Queensland Government spokesperson said a review into its 12-month trial of project bank accounts on government projects between $1m and $10m was expected soon with private sector roll out at some point after that.

The spokesperson said the government in its Building Industry Fairness reforms report had considered "all jurisdictions who had any existing frameworks".

Mr Murray was dismissive of criticism of the WA approach by Master Builders state executive director John Gelavis who was reported in the Financial Review as saying it would force builders to be more capitalised.

"Builders without a capital base should dust off the nail bag," Mr Murray said.

"You can't operate as a business without capital. That problem is the builder's not the subbies."

He said securing subcontractor payments would stop builders using a floating charge over their cash flow to secure bank finance.

Mr Murray has described statutory trusts and project bank accounts as two "entirely different concepts" but underpinned by a shared principle to protect payments to the most vulnerable in the contractual chain.

He said the data had never been shared of reviews into trials of project bank accounts on public projects in New South Wales, Queensland, Victoria and Western Australia.

"The only inference can be that there would be some costs involved and contractors would bear the burden," Mr Murray said.

"Various builders have said they wanted to do the right thing but didn't want to be saddled with additional cost."

Under the proposed Queensland regime trust accounts for progress payments, disputed funds and retention money would have to be established for every project .

Deemed statutory trusts would be invisible and function like trust accounts maintained by real estate and solicitor businesses.

Builders would not be able to access the account without first certifying subcontractors had been paid.

Mr Murray said the other issue with the Queensland approach was that it would only apply to first tier subcontractors.

The most vulnerable, the sub, subcontractors at the the bottom of the chain and whose small businesses relied on cash flow would not be protected, a situation he described as perverse.

His major concern remained that expressed in his review, that the most efficient, effective security of payment reform was uniform legislation nationally.

"Queensland were first movers in this space (Security of Payment reform)," Mr Murray said.

"It incurred political capital having run the gauntlet of organisations that opposed it and have proceeded to implement what they said they would. It has been a significant step forward but not necessarily the best."


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