Another parliamentarian said in support of the government’s proposed bill: “It acknowledges that some people are dishonest and will deliberately commit fraud by ripping off contractors to increase their profits on building projects.” The minister responsible for the measures concluded the debate by saying the government was committed to introducing legislation to “clean up bad practices in the [building] industry”.
Just last week, these proposals became law in Australia when the government introduced what we in the UK call the Construction Act. In a few months’ time New Zealand will do the same.
Its Law Commission has proposed laws to “protect construction contractors”, saying: “The intention is that instead of the cash flow being held up for weeks, months, years, pending a final solution, a decision, described as ‘quick and dirty’, will be given to resolve the cash flow situation, leaving a final determination of financial rights and obligations to be arrived at later.”
Our Australian friends have not copied our Construction Act. Or rather, they have adopted what I can only sense is an Australian hard-nosed approach to the problem: “Mess me about, mate, and I will chop your bloody legs off at the knees.” I like it.
The new law works like this.
Step 1: all those who provide contracting services or professional services will be entitled to progress payments.
Step 2: all progress payment applications will be paid as applied for and will be enforced by the court – unless within 10 days of receipt of the fee note or invoice or interim application, the payer says “Oi, mate, your payment claim is a load of hooey”, and sends back something called the “scheduled amount”, which has to give chapter and verse of what the payer says is due.
Australia is fed up with “phoenix companies” that fold and reopen the next day as a different entity
Step 3: the quarrel. If the parties disagree, and they will, the payee has five days to call for an adjudicator, who gallops in from the outback and has 10 days to decide who is right. The djudicator’s decision is binding until finally decided in litigation or arbitration.
Now, what could be more simple? What could be quicker and dirtier? Australia and New Zealand, just like the UK, have had enough of the rip-off merchants and introduced an even more robust remedy for the Ned Kellys and other bushranging bandits of the building business.
And there is more. Australia, or rather New South Wales (which has 50% of all building work), is going to steal a march on the UK with its Industry Registration Scheme. This is linked to its new act for adjudication (called, by the way, the Building and Construction Industry Security of Payment Act 1999). It will tear the heart out of all those rogues who love going bust and springing up again the next day.
It will work like this: there will be a compulsory registration scheme. It will simply require contractors and developers to register. No one is barred from registering. But listen to this. If a developer or contractor does not comply with the statutory duty to pay on time, or fails to obey an adjudicator’s decision, or goes bust, then, once reported, the company’s name is moved to the “deregistered or defaulters” list.
And with the name of the company are also listed the names of the directors. All this information will be online at the touch of your computer button.
There is more. Not only will directors and their building companies appear on the defaulters page, but they will be disqualified from operating a contracting business. A company can be fined up to $1m, plus extra fines for each additional day. And if a director starts another company while on the defaulters’ list, he risks prison. Australia is fed up with what is known as “phoenix companies”, which fold and reopen the next day under a different entity.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or e-mail him on email@example.com.