A number of subcontractor representatives and peak bodies have issued a joint call to the Prime Minister and state Premiers to implement cascading statutory trusts.
"We don't want debt;" says a letter to Prime Minister Scott Morrison, "we want effective security of payment to receive the money we are owed."
That's the message a united group including Adjudicate Today, the Australian Subcontractors Association, Master Plumbers Association, the National Electrical and Communications Association and fintech payment protection platform ProjectPay have issued, calling for Morrison to introduce payment reform to protect small and medium subcontractors and ensure they are well placed to survive the COVID-19 pandemic and ply their role in the rebuilding once the emergency has passed.
The ongoing issue of delayed and non-payments in the building and construction industry, in light of the COVID-19 emergency, now puts the sector in danger of collapse.
The body calls for the implementation of cascading statutory trusts (CST). A CST is a trust imposed by law that 'cascades' down through a string of 'deemed' trusts. Money that is payable to a business down the line is held for the benefit of that business by the business above. "Put simply", says a media release circulating the letter, "CSTs protect payments for all levels in the contractual supply chain – from principals to subcontractors."
"This is a national emergency," says fair pay advocate Louise Stewart in the letter. "Our first priority must be to fix the payment problems in the industry so that the government's economic stimulus flows through to the tradies that do the work. We urgently need the support of all governments to keep as many tradies afloat as possible. As part of relaxing the insolvency laws, we believe the federal government has an obligation to put in place protections for the public and subcontractors to ensure they get paid."
Paul Williams, chair of the Australian Subcontractors Association, says "we need to introduce CSTs now as a way to protect payments that are due to subcontractors, even where a contractor above them becomes insolvent. This is an industry already plagued by illegal phoenixing and changes to insolvency regulations make the ground even more fertile for this type of reprehensible behaviour. That's why it's more important than ever to expedite the introduction of statutory trusts. It's a proven solution: the real estate industry has been using such trusts for years."
Stewart says more debt is not the answer: "many of these small and medium businesses work on lean margins and do not have the capacity to take on more debt, given the payment problems in this industry."
The combined group has called for the Federal Government to:
- release the report of the senior officers requested by the Building Minister's Forum to prepare model legislation for the introduction of CSTs across the industry
- convene an emergency meeting of the BMF to consider and commit to model legislation across Australia
- make all government payments owing to subcontractors directly to the subcontractors and not to tier one contractors, etc, and
- instruct all public sector construction clients to pay their subcontractors directly pending urgent legislation introducing CSTs.
Photo by Aditya Joshi on Unsplash