Hudson Brett: Construction Contracts Amendment Bill — In CommitteeText is incorporated into the Bound VolumeHudson Brett: Construction Contracts Amendment Bill — In Committee[Sitting date: 24 September 2015. Volume:709;Page:7100. Text is incorporated into the Bound Volume.]BRETT HUDSON (National):It was no great surprise that the area of retention payments was going to be traversed quite strongly I think in this debate. So we have our Supplementary Order Paper 106 from the Minister for Building and Housing which is what I will touch upon here. There were some Supplementary Order Papers from other members including the Hon Clayton Cosgrove. Our position on this will be that the measures that the Government is proposing in our Supplementary Order Paper are adequate and in fact are comprehensive in helping to protect the moneys that are owed for those contractors who are doing work—those people in charge of construction work.So if we look into the actual provisions in terms of what will be done section 18A through to section 18H in proposed clause 8BC is really dealing with this notion that moneys that are owed to that contractor or those contractors—and we express them in terms of party A with party A being the construction company or the company owning the construction development—and party B being the contractor providing services and therefore being a creditor to party A. So party A is required to hold moneys that would be owed or retention moneys in a trust for work done that will eventually be due to party B so that they cannot be used as normal cash flow or normal cash resources for party A. They do not have to be held in a separate trust but they must be held for specific purposes.Proposed clause 18E is very very clear that “Party A must not appropriate any retention money to a use other than to remedy defects in the performance of party B’s obligations under the contract.” So they cannot use the moneys they are holding in trust to take away from party B in any other fashion other than where there is an agreement that party B has failed to meet the standard of work—the quality of work or the outcomes—that they were contracted to do. But there is a note that although they cannot use the money for other purposes other than to address the defects and performance of party B the money does not have to be held in a separate trust account and it can in fact be commingled with other moneys in the trust including retentions for other contractors.It is important and it is provided for in proposed clause 18D that not only must party A keep proper accounting records of the retention moneys that are held in that trust they must make those available to party B at all reasonable times and without charge so that party B can have confidence that the moneys that are being held and that will become due to party B in time are still there and available to them when that time comes.Another proposed clause that is extremely important to this whole approach to dealing with retentions relates to the protection of that money. Proposed clause 18H states very clearly that “Retention money—(a) is not available for the payment of debts of any creditor of party A (other than party B):”. So although moneys might be commingled in the trust that which is held for a specific contractor cannot be used to make any other payments to any other creditor including another contractor. It also says: “Retention money— … (b) is not liable to be attached or taken in execution under the order or process of any court at the instance of any creditor of party A (other than party B).” So another creditor of party A cannot have an order to take funds that are held in trust for party B—in this case this particular contractor.So what have we achieved? Well without requiring the extensive compliance and compliance cost that would be accrued under Supplementary Order Paper 439 from the Hon Clayton Cosgrove with separate trusts for all of these contracts we still have the provisions that ensure that the moneys held in a trust can be used or withheld only for performance issues of the work of the specific contractor. It cannot be used to pay the debts to any other creditor and another creditor cannot go to court and get an order to take from that pool of retention moneys money for another contractor. So their money is secured and it is secured against the contractor that is obviously doing the work that they have been contracted to perform and to the standard that is required. So we have achieved that which I think all parties want to achieve with retentions and we have done it in a way that meets the test of ensuring that both parties have the right protections and without the unnecessary enlarged compliance cost that would come if we required every contract to be held in separate trusts. So I will leave it there. Thank you.