Twyford Phil: Construction Contracts Amendment Bill — In CommitteeText is incorporated into the Bound VolumeTwyford Phil: Construction Contracts Amendment Bill — In Committee[Sitting date: 24 September 2015. Volume:709;Page:7099. Text is incorporated into the Bound Volume.]PHIL TWYFORD (Labour—Te Atatū): That seems a very sensible way to move forward. I just want to talk about the work that Clayton Cosgrove did on this after the Mainzeal Property and Construction collapse. He looked at two options for dealing with this issue of retentions: one was contractors’ liens where contractors would be legally required to retain a portion of the money that they owed to the subcontractors and the second option that he worked on was statutory construction trusts. So these would be trusts that are required by law to be set up where money would flow through that trust to ensure that the subcontractor gets paid first in the event of something like a company collapse. That solution that Mr Cosgrove proposed would apply to significant commercial construction projects—projects of a really significant size not your garden-variety standard home construction.The other issue that Mr Cosgrove identified was the need to protect contractors’ tools because there are so many operators in the construction industry who are essentially sole operators. Their tools their vehicle and their goodwill are all they have got and if they lose their tools as happened to many contractors with the Mainzeal Property and Construction collapse then they are between a rock and a hard place. So that was the other really important thing.I know that the Minister has been studying up on the Supplementary Order Paper. Really for the purposes of this debate this afternoon what we have got is a huge rewrite of this bill. It is a massive rewrite and I am not complaining about that. It is good that the Minister has come around because actually I think there is not much space between the Minister’s Supplementary Order Paper 106 and the Supplementary Order Papers that Clayton Cosgrove and Julie Anne Genter brought to the House. But it is that space that I think would be really interesting to explore so I welcome the Minister’s comments on that.So Clayton Cosgrove’s Supplementary Order Paper 439—basically what it does is it requires “retention money for commercial and industrial developments to be held in trust” for the benefit of the contractor entitled to the money. Basically it provides the opportunity for the Governor-General by Order in Council to require retention money for these developments to be held in trust and to require that the head contractor holds the retention money in an independent trust account. So it is quite specific. The money has to be held in an independent trust account. Also it provides for procedures to be followed in connection with the authorisation of payments the keeping of records in relation to that trust account and the resolution of disputes. So that is Clayton Cosgrove’s Supplementary Order Paper.Also Julie Anne Genter has brought to the House Supplementary Order Paper 446. What this does is it amends the bill to deal with the withholding of retention payments and it does so by making it clear that “where a construction contract provides for the provision of retentions these are clearly identified in any payment schedule.” It also proposes a new section that “qualifies the status of retention monies and the basis on which they may be held.” Again it basically provides the power for regulations to be made for this. The problem currently with the current Act is that there is no provision for any reference to the status of retention funds even though they are held against work that is performed by the subcontractor. Often the problem is that they are held far longer than is necessary.It needs to be said as well that the underlying reason for this is that the practice has been rife in the industry that companies’ head contractors have used retentions for their own cash flow. They have used the retentions. Often the money that has been held for subcontractors has been used to leverage other investments and basically to provide the cash flow. So when things are difficult when the market takes a dive—and we all know that the construction industry in this country has a wild roller-coaster boom-and-bust cycle. That I suppose is the other really important part of this.So we have got those two Supplementary Order Papers by Clayton Cosgrove and Julie Anne Genter. What we see in Supplementary Order Paper 106 which the Minister has brought to the Table is I think quite a wholesale incorporation of the material in those two Supplementary Order Papers. It defines the “retention money”. It requires the party to hold that money on trust. It provides that the trust only ends—