Cosgrove Clayton: Construction Contracts Amendment Bill — In CommitteeText is incorporated into the Bound VolumeCosgrove Clayton: Construction Contracts Amendment Bill — In Committee[Sitting date: 12 March 2015. Volume:703;Page:2244. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): Firstly I want to say that the Labour Party will support the Construction Contracts Amendment Bill. We have our own Supplementary Order Paper 439 in my name which is an alternative measure to deal with many of the issues that the Minister for Building and Housing has raised. But I want firstly before I get down to the grit to express some goodwill and some bipartisan support. We support these measures. We note the collapse of Mainzeal Property and Construction and many others and this issue has been around for a long time. It is a difficult issue the retention issue. It places certain burdens and certain responsibilities some of which are hard to deal with so I do commend the Minister for coming to the party—late but coming to the party anyway.I note the Minister’s comments about having concern for subcontractors. The history of this is that when the previous Minister was in the chair just after the time of the collapse of Mainzeal Property and Construction and the controversy it was Maurice Williamson the then Minister for Building and Construction who wiped his hands of the whole thing. In fact he told this Parliament under questioning from this side that there was no issue—that he had consulted the industry there was no issue and everybody was happy with the status quo. There was no need to make any changes—that was communicated through the select committee process—because the industry was happy. This is even though a company collapsed under the stewardship in part of one former Prime Minister Jenny Shipley who—when coming before a number of select committees I say as an aside—was loath to make any explanation or take any accountability for the fact that a massive construction company collapsed with millions and millions of dollars lost and subcontractors were hung out to dry. I have to say to the Minister in the chair the Hon Nick Smith that to be fair to him he was not the Minister. I think he may have been sacked from Cabinet at that point. He was not the Minister at the time. It was Maurice Williamson. But the Government collectively wiped its hands of the whole issue. We were told in the Commerce Committee and it was only very very late in the piece when officials came to us and said: “Oh there’s been a bit of a rethink.” The jitters around the industry were that the Government was coming up to an election and the industry thought the Government might want to do something. That coincided with David Shearer and the Labour Party announcing that we would consult the industry and we came up with the proposition that we have today.Supplementary Order Paper 52 has been dropped on us in 24 hours. I look forward in goodwill to going through the detail in good faith and having a look at it. But I do say to the Minister that it is good. He is world-renowned for road to Damascus experiences. He has come to the battle almost when the war is won—late to the battlefield. It would be good for him to express a little bit of humility. If he could just have a look at the dates on the relevant Supplementary Order Papers. One is dated 1 year ago even though it was argued that this bill was out of scope to deal with retentions. Now it is back in scope. Oh what a surprise.This Supplementary Order Paper appears almost a year after the Labour Party proposed—and the Minister is right—a similar model to the New South Wales model and given that the Minister has outlined his I will outline mine. That proposal—and one of the deficiencies I think in the Minister’s model but I will be grateful if he will allay my fears—is that to have moneys deemed trust moneys is all very well but if you have crooks in a company who spend the money however it is deemed and it is gone even though it is higher in the hierarchy and in insolvency you cannot get blood out of a stone Minister I say through you Mr Chair. If it is gone it is gone and that is the thing that worries members on this side of the Chamber.We proposed a simple model—and we costed it out with the industry; a few hundred bucks basically effectively—a similar model to the New South Wales model which was to have if you like a contract trust a construction trust that would not interfere. It would be like a drop-box. It would not interfere. It would sit between the developer and the lead contractor and the subbies. It would not interfere with timing. It would not engage in dispute resolution. That is up to the contractual arrangements between the parties. It would not be onerous and it would not require multiple trusts and all this sort of thing; you could default to the Public Trust if you wanted to. But what would happen is that instead of the moneys flowing directly from developer to lead contractor and then to the subbies and if the lead contractor the Mainzeal Property and Construction goes boom it is all over and there is nothing there those moneys would flow in whatever contractual time frame was deemed by the parties not the trust—and that may vary from project to project—through from developer to trust and then is paid out as per the contract to subbies first then the lead.The difference in our proposal—unless I am to be corrected and I will wait to see—is that if you had a Mainzeal Property and Construction collapse if you had crooks in a company then that company then collapses and the money is frozen—[Bell rung] Mr Chair—The CHAIRPERSON (Hon Trevor Mallard): The Hon Clayton Cosgrove on Part 1.Hon CLAYTON COSGROVE: Thank you. I am just following the Minister’s lead. You did not pull him up when he explained his Supplementary Order Paper with respect. I think it is very helpful—The CHAIRPERSON (Hon Trevor Mallard): Order! Mr Cosgrove the Minister’s Supplementary Order Paper is to Part 1 of the bill as well as to Part 2. Your Supplementary Order Paper is to Part 2 of the bill and I am sure you will want to talk to it then.Hon CLAYTON COSGROVE: Thank you but I think as I say referring to being helpful that the Minister’s explanation deserves some sort of counterpunch in respect of Part 1. I think in fairness the concern we have with the Minister’s proposal and where we differ is that once those moneys are gone they are gone. They flow through a trust. If Mainzeal Property and Construction goes bang at least the moneys are quarantined within a construction trust and can be paid out. One of the benefits of that I think—and perhaps the Minister’s Supplementary Order Paper may deal with that as well—is it actually provides for those people who are supplying subcontractors for instance more confidence to extend credit and other facilities right through the supply chain. We will look forward to a number of explanations because these are quite technical amendments but we support the adjudication provisions and the notion of trying to straighten out these particular problems within the industry because at the end of the day subcontractors lose and when they lose they lose big time. Larger organisations have the ability to manage their financial affairs in a way that the one-person subcontractor brickie scaffolding person or whoever does not and they are vulnerable. They are extremely vulnerable.I am pleased that the Minister—but I would like an explanation as to why it took him a couple of years to change his mind—has come to propose some solutions in terms of the retention issue. The original proposition was that there was no problem according to his predecessor Maurice Williamson; that nothing was required to be done according to the reports that officials were getting and passing on to the select committee; and that the Government did not need to do a thing.And I just say I would be interested in the Minister’s comments and his analysis of the Mainzeal Property and Construction collapse because in this Parliament we have heard nothing. In fact I think Mrs Shipley is still the chair of a major power State-owned enterprise. I believe she was director or deputy chair but she was definitely on the board yet the murk that surrounded that collapse and the commercial and social carnage that occurred as a direct result of it through hundreds of subcontractors losing millions of dollars with many going out of business no one has provided an answer for. In fact it was well reported in the media that the Prime Minister stood shoulder to shoulder with Mrs Shipley and we have never had an explanation either from the Prime Minister in respect of that statement or from Mrs Shipley who now heads up and has been appointed—in fact I think she is on the flag committee. Is she or not? No? I am not sure but she has been appointed to many a Government entity and no one has provided an explanation as to whether she is fit and proper to be on those entities given the Mainzeal Property and Construction collapse.So I welcome the legislation. We will have questions—detailed questions—for the Minister but our main concern and why we did put up an alternative proposal over a year ago was that nothing was proposed by the Government. I would like an explanation to tell us whether if moneys are deemed to be in trust but thieves and vagabonds and rogues exist within the company and that money goes and is spent or misappropriated and is lost it will matter at any point whether it is higher on the hierarchy when the receiver comes over the fence to try to save it because there may well be nothing there. That is I think in goodwill where our proposals differ. The Labour Party remains open-minded and will listen to the explanations of the Minister and we remain open-minded as to whether we will accept and support those particular proposals or support our own.I think at least on both sides of the House we want to deal with this issue. We want to ensure that small businesses are protected. They do live up to their responsibilities and they do their work. All they ask is that they are paid for that work and all their suppliers ask is that they are paid for that work. But you have a Mainzeal Property and Construction collapse and everybody in the commercial chain like a set of dominoes falls over from retailers right through. So we all want to see that actually resolved. What we on this side of the Chamberseek is reassurance that this is the best possible option. It is very easy to say that the setting up of a construction trust is going to cost a whole lot of money. Well the information we had is that that would be very minimal. We too were mindful that we did not want to simply impose compliance cost on the industry. I look forward to the Minister’s reply.