Lotu-Iiga Sam: Construction Contracts Amendment Bill — Second ReadingText is incorporated into the Bound VolumeLotu-Iiga Sam: Construction Contracts Amendment Bill — Second Reading[Sitting date: 20 March 2014. Volume:697;Page:16944. Text is incorporated into the Bound Volume.]Hon Peseta SAM LOTU-IIGA (Minister of Pacific Island Affairs)on behalf of theMinister for Building and Construction: I move That the Construction Contracts Amendment Bill be now read a second time. The bill has now been considered by the Commerce Committee chaired by Jonathan Young and I thank the committee for its thoughtful and meticulous consideration. The committee received 31 written submissions and heard 22 oral submissions. Overall there was much support for the fundamental policies in this bill and this demonstrates the need for the proposed changes and reflects efforts that the Government made to consult with sector experts. As a result of the submissions the select committee recommended a number of improvements and clarifications to the drafting to better achieve the Government’s policy intent and address concerns raised. I support the recommendations made.The building and constructing sector is vital to our economy. It employs about 8 percent of our workforce and contributes about 4 percent of our gross domestic product. The Construction Contracts Amendment Bill is one of the regulatory changes supporting the amendments to the Building Act 2004 that this House has passed in the last 2 years. The package of regulatory changes is intended to contribute to this Government’s goal of an efficient and productive construction sector.The Construction Contracts Act 2002 provides for the timely and cost-effective resolution of disputes in the construction sector. The processes in that Act are a lower-cost alternative to going to court. The review of the Construction Contracts Act found the system was working well but could be improved by reducing some costs and clarifying some processes. The key amendments in this bill will firstly remove the distinction between how the Act applies to residential and commercial construction contracts. The bill consolidates the processes in the Act so that one process applies regardless of the type of work the construction contract is for.Secondly the bill removes the distinction between the two different types of decisions that can be adjudicated under the Act. Currently decisions on payment disputes can be more readily and easily enforced than decisions on disputes about rights and obligations. The bill will streamline the enforcement process so it is the same regardless of the subject matter of the dispute.Thirdly it expands the scope of the Act to include construction-related services. Parties to contracts for the performance of these services will then be able to access the payment and dispute resolution processes in the Act. This will be of particular benefit to consumers helping them hold architects engineers and quantity surveyors to account for their work. It will also benefit designers and quantity surveyors enabling them to use the payment provisions of the Act to ensure they are paid for their services in a timely manner. Due to possible impacts on professional indemnity insurance policies the select committee has recommended that this amendment come into effect 1 year after commencement of the amended Act. The Minister agrees that this is indeed appropriate.The bill also contains some other amendments to the Construction Contracts Act 2002 to streamline processes and to reduce costs. These include reducing some of the time periods in the adjudication and enforcement processes; secondly clarifying some procedural steps such as how to seek an extension of time; thirdly a new power for the chief executive of the Ministry of Business Innovation and Employment to obtain information for research and monitoring purposes; fourthly consequential amendments to the definition of “residential occupier”; and finally clarifying how an adjudication order can be appealed contested or reheard.I would like to outline some of the key changes to the bill recommended by the select committee that the Minister for Building and Construction supports. The committee ably led by my friend and colleague Jonathan Young recommends deleting the requirement to hold pre-adjudication conferences for all adjudication claims made under the Act. The requirement did not accurately reflect the policy intent which was to address the risk of ambush claims. The Minister supports the new amendments the committee has recommended to address ambush claims. The bill will do this by inserting a pause into the adjudication process to limit the ability of a claimant to rush the adjudication for tactical reasons. It will also require adjudicators to allow a respondent more time if they believe that a claim has been served with undue haste for tactical reasons by the claimant. It also will clarify when and how other time extensions can be sought. Finally it will require the information in an adjudicator’s notice of acceptance to be prescribed by regulations to guarantee consistency in information and ensure parties are aware of the process.The select committee has also recommended changes that will clarify that contracts for the sale and purchase of second-hand assets and service contracts should be excluded from the scope of the Act. It will also override an incorrect interpretation of section 80(d) of the Act made by the court in two cases to ensure that the word “prescribed” is interpreted as “prescribed by regulations”. I understand that the quality of submissions received on this bill was high reflecting the importance of the bill to the sector. The effort and thought put into helping the Government fine-tune this bill has been well received.Another issue raised by some select committee members was the use of retentions in the construction market and the impact on subcontractors. This is not part of the bill but following the collapse of Mainzeal Property and Construction last year the Hon Maurice Williamson instructed his officials to look at how the system could be improved. This work is still continuing but he is optimistic that a viable solution can be found. It is his hope that a Supplementary Order Paper can be added to this bill to address the issues that have been raised if a legislative solution is determined to be the best way forward. Just to set the record straight Labour members of the committee stated that Maurice Williamson had changed his position on the retentions issue. This is wrong. As he said in this House the Government is still not ruling anything in or ruling anything out. It is considering any changes being proposed but they must be based on good evidence.In summary this bill will speed up dispute resolution in the construction sector it will support the Building Act reform programme by making improvements to accountability in the construction sector and it will maintain the efficient functioning of the private disputes resolution market. I commend it to the House.Debate interrupted.