Security of payment reform not enough for CFMEU

The state’s construction union has voiced its disappointment over the government’s failure to include cascading statutory trusts in its Building and Construction Industry Bill, labelling the move a missed opportunity.

The Building and Construction Industry Bill 2021 (Security of Payment) passed state parliament yesterday afternoon, after being reintroduced late last month.

The state government has assigned almost $10 million to implement the legislation over a four-year period, which includes a mandatory retention trust scheme, provisions for monthly progress payments, and a rapid dispute resolution process.

The reforms, which are designed to complement project bank accounts on government projects, also give the Building Services Board the power to remove registered building contractors with a history of engaging in ‘phoenixing’ activity from the industry.

The government introduced the new Bill a week after three Pindan Group entities were placed in administration and a further nine were placed in liquidation, leaving hundreds of subcontractors and trade suppliers involved in its 80 active projects out of pocket.

Commerce Minister Amber-Jade Sanderson promised the reforms would deliver greater protections for subcontractors in the event of an upstream insolvency and increase the likelihood that subcontractors would be paid before that insolvency occurs.

While praising the state government for the inclusion of reforms, which restrict phoenixing practices and prohibit ‘pay when paid’, CFMEU (Construction Forestry Maritime Mining and Energy Union) state secretary Mick Buchan said the Bill did not go far enough.

Following news the Bill had passed, Mr Buchan said the state government’s failure to incorporate cascading statutory trusts, which effectively safeguard money owed to subcontractors in the case of an insolvency, was a missed opportunity and one that would be costly for industry.

Cascading statutory trusts were a key recommendation of an independent review of the security of payments for subcontractors in WA’s building and construction industry.

“Cascading statutory trusts across the contracting chain is the only real measure that will safeguard subcontractors against the fallout of insolvency, the misuse and misappropriation of project funds, and the deliberate reallocation of risk down onto the smallest local subcontractor in the building and construction industry,” Mr Buchan said.

“Cascading trusts are the simplest and clearest way to make sure the industry does the right thing.

“The fact that local West Australian businesses are still having to operate without that basic assurance – that they will actually be paid – is radically undermining the health and profitability of the entire Western Australian construction industry.”

The state's opposition has also been critical of the move, with opposition commerce spokesperson Vince Catania arguing that subcontractors had become banks for construction companies.

The state government has previously defended the move, insisting that the companies needed to have cash flow.