Builders with a history of “phoenixing” face being barred from the industry under new laws designed to protect subcontractors that will be introduced to State Parliament today.
But Commerce Minister John Quigley has backed off plans to protect progress payments to subbies, instead legislating only to “ring-fence” retention money — usually around 5 per cent of a contract’s total value.
The Bill delivers on a McGowan Government election commitment to introduce a retention trust scheme.
However, Mr Quigley had raised the prospect of forcing head contractors to also place progress payments to subcontractors in trusts so they were not left to bear the brunt of crippling losses if a project goes bust prior to completion.
That proposal faced fierce opposition from the building and construction industry, which argued it would create too big an administrative burden, and has been left out of the final legislation.
The retention trust scheme is an Australian-first and will help protect at least some of the cash owed to subbies in the event of an insolvency — which occurs more frequently in the building industry than others.
In some cases, the directors of building companies that declare bankruptcy owing millions of dollars simply set up a new business that has no liability for their previous debts, a practice known as “phoenixing”.
The Bill will hand regulators new powers to ban head contractors with a history of insolvency or not paying court-ordered debts from the industry altogether.
It will also legislate timeframes for payments between principals, head contractors and subcontractors.
“The building and construction industry is a vital part of our economy, providing the jobs, housing and critical infrastructure to meet the needs of all West Australians,” Mr Quigley, pictured, said.
“The current reality is businesses need to always contend with the fear of not getting paid on time or at all, and without access to effective rights and protections under the law.
“Our election commitment was made in recognition of the fact that the State’s construction industry has a long history of businesses and their families suffering significant financial losses due to non-payment and mistreatment.”