HANSARD
SITTING CALENDAR
SEARCH
LIVE BROADCAST
Hansard Dynamic Member Index
House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-10-29 Daily Xml
Contents
Pdf Xml

BUILDING AND CONSTRUCTION INDUSTRY SECURITY OF PAYMENT BILL

Committee Stage

In committee.

(Continued from 15 October 2009. Page 4324.)

Clause 2 passed.

Clause 3.

The Hon. I.F. EVANS: The objects of the act relate to those who undertake to supply related goods and services. My understanding is that, in similar bills around Australia, goods and services are not included. Can the government explain why it has included it?

The CHAIR: Member for Davenport, this is a private member's bill and I will ask the member for Newland to respond.

The Hon. I.F. EVANS: Sorry, Madam Chair, I understand the government has suspended standing orders to bring in the private member's bill, so obviously the government is supporting it, and so I assumed it was a government bill.

The CHAIR: However, the bill is being managed by the member for Newland as a private member's bill. The member for Newland.

Mr KENYON: This bill is pretty much a straight copy of the New South Wales act, and because I am not amending this particular clause in any way, it has just been lifted straight from the New South Wales act. So, in fact, they are included in New South Wales in this case. That is my understanding of it.

Clause passed.

Clause 4.

Mr KENYON: I move:

Page 4, line 22—After '31 December;' insert:

or

(c) any other day on which there is a statewide shut-down of the operations of the building and construction industry;

This amendment gives effect to including industry-wide shutdown days and days that are not included for the purposes of calculating the number of days to respond. This amendment arose out of consultation with industry, particularly the MBA in this particular case. It means that, particularly over Christmas when there is an industry-wide shutdown for quite a number of days or rostered days off for the whole of the industry (which I am told occur once a month), they are not included for the purposes of calculating response times, adjudication times and the like.

Amendment carried.

Mr KENYON: I move:

Page 5, lines 9 and 10—Delete the definition of recognised financial institution

This amendment deletes the definition of 'recognised financial institution' and part of the amendment is designed to include the banking agreements within the chain so that the whole chain from the lower subcontractors (if I can use that term) right up to the builders and financiers, or the developers of a project are included in the chain for claims.

The Hon. I.F. EVANS: I will make some comments in relation to this particular amendment. As the member for Newland has suggested in the amendments to his own bill, he is now deleting the words 'recognised financial institution' from the bill which has the impact of making the bill apply to financial institutions. Now the banking industry tells me that this is the only bill in Australia that will apply to financial institutions. When I rang the banking industry and asked them whether they had been consulted about the bill and the amendments, the answer was no. For the sake of the record—and I do not have the numbers in this chamber—and for the purposes of the committee, I will read the banking industry's view on the member for Newland's amendment to his bill.

The letter is dated 27 October and it is from Ian Gilbert. Ian Gilbert is the Director, Retail Policy, Australian Bankers' Association, Sydney. The letter states:

Dear Mr Evans

Thank you for bringing this matter to our attention and seeking our views. In the limited time available I provide some points for consideration.

The impact of the proposed amendments, if passed, on financial institutions is not entirely clear but we believe the following points ought to be taken into account to conclude that the Amendment to include financed construction contracts should not proceed.

1. Comparable legislation in New South Wales—

The Hon. M.J. Atkinson: Comparable.

The Hon. I.F. EVANS: Well, the Attorney keeps giving me grammar lessons.

The Hon. M.J. Atkinson: No; pronunciation in this case.

The Hon. I.F. EVANS: Yes; that as well. I will continue:

1. Comparable legislation in New South Wales excludes construction contracts that are financed by banks or other prescribed financiers. We assume from the fact of this exclusion that the Parliament of New South Wales was concerned about the possible harmful impact on the construction industry that might eventuate where a financier's exposure to increased credit risk would be increased by the legislation.

2. The second reading speech in the Assembly on 8 September 1999 included this passage: 'Particular types of contract are excluded from the operation of the legislation. The main exclusions are: contracts for residential building work with the person who resides in or proposes to reside in the premises on which the work is carried out; employment contracts; contracts of insurance or loans or guarantees with recognised financial institutions; contracts where the payment is not made in monetary terms, for example, a contract where in return for carrying out constructing work, the contractor is to receive the right to lease or operate the building or structure; and contracts for construction work carried out outside New South Wales' (my emphasis) but is silent on the reasons for these exclusions.

3. The exclusion of the bank financed construction contracts was a deliberate policy decision that enjoyed general bi-partisan support. We conclude that this reflects the recognition and understanding of the risk to the construction industry in New South Wales if bank financed construction contracts were included.

4. The meaning of 'construction contract' would include both the head contract with an owner and the subcontracts between the head contractor and the subcontractors. Despite the terms of the contract, a party to a 'construction contract' may claim progress payments according to the legislation which may have cash flow implications for head contractors and owners flowing through to financiers. A claim would be an unpredictable and therefore relevant event in a bank's assessment of its credit risk exposure.

5. Feedback from members of the [Australian Bankers Association], indicates that if bank financed construction contracts are to be covered in the South Australian Bill, a bank would need to undertake additional due diligence to ensure that its developer/owner customer would have the ability to meet the call of the subcontractor in the event that the bank determined not to make a progress payment because, for example, a concern over the loan to the value ratio if the payment were to be made at that stage of the construction.

6. Further, a claim for progress payments outside the normal terms of the construction contract could place additional stress on the cash flow of the bank's developer/owner customer, potentially increasing the risk to the bank. This may result in a broader approach by banks to credit risk in this industry in [South Australia]. How much this would impact is unclear but the effect would need to be taken into consideration deal by deal. A bank may have to review its standard form construction finance contracts and its credit risk assessment to account for untimed progress payment claims.

7. Another implication with the Amendment is that it will, in effect, disturb the contractual relationship between a bank and its customer where an assessed and prudent provision of finance according to the terms of the associated construction contract is displaced by an unpredictable and untimed alternative obligation reached by an adjudicator that may have the effect of an order of the court.

It is possible further feedback may become available before Thursday which I will provide to you in that event.

Sincerely

Ian Gilbert.

The reason I read that into Hansard is that, because the banking industry had not been consulted on the bill until this week, that information has not gone to the Housing Industry Association from the mover of the bill or, indeed, the Master Builders Association or the subcontracting associations.

Obviously I am distributing it to those organisations to seek their views because it was one of the building associations—the Master Builders Association or the Housing Industry Association—that lobbied hard to have the banks actually included in the system. It is obvious from the banking industry's advice that the South Australian legislation, it appears at least, would be the only legislation in Australia that would bring the banking system into this particular process. The banking industry says that would put South Australia's construction/developer industry into a different pool of law, which would add a risk component. Obviously, that would lead to a higher cost in South Australia.

I understand why the member would move the amendments, because they were requested by the various building associations. Unfortunately the banking industry was not consulted, or the government was unaware of that advice until this moment—indeed, the housing industry and master builders associations have not really had a chance to grasp it. However, on that basis the opposition will not support the amendment at this stage.

We will talk to various building associations between the houses but, based on the advice that it could put a higher cost and a higher risk on construction contracts in South Australia, and based on the advice that it does not exist in other states, I am not convinced at this stage that the opposition needs to support the amendment. I am not sure why the Housing Industry or Master Builders would argue that South Australia should adopt a different position to everywhere else in Australia on this point, and at this stage the opposition will not support the amendment, subject to further advice from the industry.

Mr KENYON: I understand the points raised by the member for Davenport, and would like to make the following comments. The amendment came as a result of consultation on this issue, with the Master Builders in particular, who were very keen for the entire chain to be included. As it is, I can see how the concerns of the banks may arise, and there may be an increase in due diligence. However, what is becoming payable is not more than what would ordinarily become payable. I am assuming that we are not seeing a cost blow-out or work over and above what should have been approved.

I suppose we again come down to the issue of variations within the building industry or with variations from contract. However, this bill aims to see payment through to subcontractors from contractors or builders, to people who have undertaken work or bought the material. The aim of the bill is to ensure that people receive due compensation, in a timely manner, for their labour and for the materials they have purchased. We all know that the smaller the business, or the lower the amount of cash flow for a subcontractor, the more difficult it is for them to bear that cost. The premise of this bill is that the people who bear the cost are the people who are most able to pay the cost, right up through the contractual stage.

So, having consulted with the building industry about it, particularly the MBA, and having come to this amendment through that consultation, I think I will continue forward with it. We would probably be keen to see what comes out of further consultation that may arise with the banking industry; in fact, I am happy to contact the banking industry and see how that goes. However, for the moment, it is not an unreasonable burden placed on banks because it is paying money that they have already contracted and agreed to pay, for the most part, through their contracting process.

The Hon. I.F. EVANS: I will not hold the house long; the member knows that the opposition supports the bill in principle and will not hold it up unduly. However, I think I am the only member in the house who comes, basically, from a building background. I may be wrong, but I think I am correct.

The bank is really saying that it contracts to the builder based on contracted progress payments. So, at certain stages of work certain amounts of money will be paid through. Under the bill, claimants can claim money outside of the progress payments. So the bank contracts for certain finance based on a certain cash flow provision—in lay terms, footings X amount, walls another amount, roof another amount, second fix another amount, etc.

Under the bill, the reality is that the claims do not have line up just with the progress claims as per the contract; so they can actually claim for work in between the progress claims, particularly goods and services. So, if you have supplied the equipment but that stage of the work is not finished and you are not getting paid, then you can claim. That is outside of the bank's contracted progress claim, so the bank is then saying that that is fine, that it is going to look at the building company and say, 'If we only pay you according to the progress payments we are contracted to, how are you going to finance any other claim in between time?'

The reality is that it will compromise and compress the builder's cash flow, and that, obviously, has implications for trading terms for builders. That is what the bank is actually saying and that is why, I think, the MBA and HIA may have to rethink their position.

Amendment carried.

The Hon. I.F. EVANS: I have a question relating to construction contract. Is it the intention of the bill to cover all types of contracts, including cost plus contracts, where there are no progress payments, necessarily, and is it also going to cover all domestic work, commercial work and industrial work, or is domestic work excluded?

Mr KENYON: No, all contracts, including the cost plus contracts that you mentioned, are envisioned to be covered. One of the specific objects of the act is to outlaw, for instance, 'pay when paid' provisions in contracts, and the like. It specifically gives subcontractors, or those involved, the opportunity to claim progress payments even where they are not envisaged in the contract between the contractor and the subcontractor. So, with the proviso that I have a fairly limited knowledge of the types of contracts, I am assuming that I am correct on that. Again, I will give an undertaking to the member that I will investigate that and get back to him so that he can have various amendments made in the upper house, should he choose to do that.

Clause as amended passed.

Clause 5.

Mr KENYON: I move:

Page 6, line 6 [clause 5(1)(e)(iii)]—After 'dismantling of' insert: fences or

Amendments Nos 3 and 4 increase the definition of services that are included.

The CHAIR: Thank you, but I can only consider amendment No. 3 at the moment.

Mr KENYON: That is my explanation for amendment No. 3, but the same applies for amendment No. 4.

Amendment carried; clause as amended passed.

Clause 6.

Mr KENYON: I move:

Page 6, line 36 [clause 6(1)(b)(iii)]—After 'advisory' insert: or technical

As previously stated, this expands the services that can be included.

Amendment carried.

The Hon. I.F. EVANS: Clause 6(2), at the bottom of the page provides that, 'related goods and services does not include goods or services of a kind prescribed by the regulations'. Could you give the house some indication of what goods and services you think will be exempt from the operation of the act that you may be looking to put into regulation?

Mr KENYON: In fact, I cannot. We would be relying very heavily on the New South Wales regulations, I suspect, when we draw them up. I apologise to the member for Davenport for not being able to answer his question. Again, I undertake to get that answer back to him between the houses.

Clause as amended passed.

Clause 7.

Mr KENYON: I move:

Page 7—

Lines 7 to 25 [clause 7(2)]—Delete subclause (2) and substitute:

(2) This Act does not apply to a construction contract under which it is agreed that the consideration payable for construction work carried out under the contract, or for related goods and services supplied under the contract, is to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied.

Lines 31 to 33 [clause 7(3)(b)]—Delete paragraph (b).

After discussions with the MBA and private builders, these clauses bring in residential housing. This particularly affects smaller builders who often find that they finish a house and put in their final invoice, which may be for an amount of $5,000 or $10,000, to the homeowner for completion of the house and the homeowner just does not pay. This particularly affects smaller builders; it is not as much a problem for larger builders. Going back to the principle of the other clause with the financial institutions, it brings in the entire chain from the customer right through to the smallest contractor; everyone is involved in the process.

The Hon. I.F. EVANS: Can the member confirm for the committee that the HIA supports this amendment?

Mr KENYON: I have received correspondence from the HIA just recently—in fact, in the past couple of days—and it is happy with this amendment. I am happy to show the documentation to the member.

The Hon. I.F. EVANS: I would be interested to see that, because I will read a letter that the opposition has received from the HIA in relation to this matter. The HIA wrote to me on Tuesday 20 October regarding the bill in response to a letter that I sent seeking feedback in relation to the amendments tabled by the member for Newland. So, it is in direct response to the amendments. It states:

I refer to previous correspondence in relation to the above Bill, in particular your letter dated 23 September seeking feedback in relation to the amendments tabled by Mr Kenyon. HIA believes that any new legislation must be based on a demonstrated need for increased regulation, in the case of this Bill, HIA does not see such a need in the residential construction sector in South Australia. It is our experience that payment disputes between builders and their sub-contractors are usually dealt with in a timely and effective manner by invoking the procedures available pursuant to the Worker's Liens Act 1893.

Having reviewed the Act, it our view that the Security of Payment system proposed under the Act would add another layer of complexity and regulation, which ultimately would result in our members being forced to seek legal advice and incur the expense associated with doing so, this is something often avoided under the current arrangements. Furthermore, we are concerned that the timeframes and penalties strictly imposed by the Act may result in an unjust outcome simply as a result of an administrative oversight.

If the chair would indulge me for 10 seconds I will finish reading the rest of the letter and that way we will not have to deal with it in another clause. The letter continues:

Despite our concerns with the Act as a whole, we do commend some of the amendments tabled by Mr Kenyon. HIA believes the amendment number 5 (to clause 7(2)) will make the Bill much more effective. By far the largest volume of payment disputes arises between a home owner and a builder and the failure of a home owner to make a payment then impacts on a builder's cash flow and in turn their ability to remit payment to their sub-contractors. The removal of the restriction on taking a Security of Payment action against a home owner is a welcome step.

The way I interpret the HIA's letter is that it supports amendment 5 to clause 7(2) which we are dealing with at the moment. They reason they support it is that the homeowner is going to be brought into the provisions of the security payment legislation so that they could be subject to a claim by a builder for a security of payment under the scheme. For that reason, the HIA supports it. Individuals who contract with a builder will now be subjected to this particular provision.

I think this goes back to what the banking industry is saying. Given that that is going to occur, if the bank has a problem with the site, for some reason, or with the agreement with their customer as to at what point they are going to pay the money, the question becomes: how will that private citizen fund the payments of the builder if the bank has not paid them?

I will not talk any longer. The HIA supports this and the member has outlined the reasons for the particular amendment. It is clear to the committee what it is voting on.

Mr KENYON: With the indulgence of the member for Davenport, the information I was going to provide is very similar to that letter and if he is okay with it, then that is fine.

Amendments carried; clause as amended passed.

Clauses 8 to 10 passed.

Clause 11.

Mr KENYON: I move:

Page 9, line 18 [clause 11(1)(b)]—Delete '10' and substitute: 15

It may be possible to do amendments 7 through—

The CHAIR: We cannot, member for Newland, because they apply to different clauses. However, if you speak to one we will put them very quickly.

Mr KENYON: Suffice to say that, after consultation with industry, it was decided that 10 days to respond and adjudicate was, in fact, far too short and it was extended to 15 days, mirroring the New South Wales legislation.

The Hon. I.F. EVANS: I am not going to hold up the committee unduly. Some of the industry groups think that should be 21 days and it is likely that the opposition will move an amendment to that effect in the other place.

Amendment carried; clause as amended passed.

Clause 12 passed.

Clause 13.

Mr KENYON: I move:

Page 10, line 35 [clause 13(4)(b)]—Delete '12' and substitute: 6

In the present bill, people wishing to avail themselves of the provisions of the bill have 12 months to do so. Again, after discussion with industry, it was decided to reduce that from 12 months to six months. Given that the time to respond is quite short, when the claim is put in it is best to try to minimise the burden as much as possible on those who have to respond and ensure that they do not have to go back through 12 months of records, so it was reduced to six. That is the purpose of this amendment.

The Hon. I.F. EVANS: The committee needs to understand what the process is. The person wishing to lodge a claim, under the member for Newland's amendment, will now not have 12 months to do so, but will have six months to do so. The person responding will have 15 days, instead of 10 days. One side of the ledger had 12 months but it is now six months to lodge a claim, and the other party gets only 15 days to respond. The proposal was to make it 12 months and 10 days. The opposition will, at least, support the shorter time frame down to six months.

The reason the industry has sought these different time reasons to stop what they call ambush claims. You can imagine, finding on your doorstep on a Friday night a claim that dates back to figures 12 months and all the paperwork you have to do and you have only 10 days to respond, how one party could ambush the other, in effect.

So, what the industry is trying to protect itself from—I think quite fairly—are ambush claims. There has to be reasonable time to act in the first place (if it is a serious issue, then let's act) and a reasonable time in which to respond. Certainly, the opposition will be supporting the six month time frame.

Amendment carried; clause as amended passed.

Clause 14.

Mr KENYON: I move:

Page 11, line 20 [clause 14(4)(b)(ii)]—Delete '10' and substitute: 15

Amendment carried; clause as amended passed.

Clause 15 passed.

Clause 16.

Mr KENYON: I move:

Page 12, line 20 [clause 16(1)(b)(ii)]—Delete '10' and substitute: 15

Amendment carried; clause as amended passed.

Clause 17.

Mr KENYON: I move:

Page 13—

Line 34 [clause 17(3)(c)]—Delete '10' and substitute: 15

Line 38 [clause 17(3)(e)]—Delete '10' and substitute: 15

Amendments carried; clause as amended passed.

Clause 18.

Mr KENYON: I move:

Page 14, after line 20 [clause 18(2)]—Insert:

(ab) if either or both of the parties have nominated the person to be an adjudicator in relation to the contract; or

This amendment is the result of consultation, as are all the amendments. There were concerns that it may be possible for a nominated adjudicator to be written into building contracts and that that would prejudice one party over the other. I think this is a reasonable amendment, and hence I move it. Essentially, it should rule out an agreed adjudicator.

If one or other party nominates an adjudicator, they are not allowed to undertake the adjudication. It prevents the stipulation in a contract or an unfair use of adjudicators. The intent is to have, pretty much as close as possible, allowing for experience, the first cab off the rank—an adjudicator comes along the line and adjudicates on the dispute.

The Hon. I.F. EVANS: What the member for Newland is trying to prevent by way of this legislation is the more powerful party in the contract negotiation demanding of the other party to the contract to agree to a pre-nominated adjudicator. The reason he has that concern is that you might, for instance, have the more powerful party in the contract demand that the adjudicator come from a panel of adjudicators who come from a particular industry that might favour the more powerful party to the contract.

The opposition thinks that the amendment is reasonable, and we will be supporting it. The industry groups have a mixed reaction to the provision. Something I think the member for Newland needs to check between the houses is whether the act protects against a contract having a different adjudication process rather than a different adjudicator. For instance, could a contract say that, in the event of an adjudication being required, the adjudicator will be nominated by a process established by the Australian institute of adjudicators? So, the contract does not nominate the adjudicator but, rather, nominates a process for a different adjudicator outside of the intent of the legislation.

The member may want to have parliamentary counsel look at that to see whether the legislation is strong enough to protect against that avenue, because I am sure that some lawyer will try to think up a way around it if they think it is in their party's interests. However, the opposition supports the principle and we will be supporting the amendment.

Mr KENYON: I undertake to obtain that information for the member for Davenport. My suspicion is that the act will take precedence over the contract, because the act specifies an adjudication process and to whom the claimant must make a request for adjudication. However, I will obtain that information and bring it back.

Amendment carried.

The Hon. I.F. EVANS: If the chair gives me some tolerance here, the committee stage will not last a lot longer, because this clause starts to deal with one of the main issues in the bill and once we resolve that issue the rest of the bill can go through without much debate at all.

Clause 18 deals with the eligibility criteria for adjudicators, and the following clauses deal with things such as the appointment of adjudicators, adjudicator responses and adjudication procedures. One of the key issues about the consultation in relation to this bill between what I will call in general terms the subcontracting groups as against the building groups has been this issue of the adjudication appointment process. There is essentially, for want of an easier description, what is called in the industry a Western Australian/Northern Territory model and then there is an east coast model.

The member for Newland has picked the east coast model, and this has attracted some criticism from the industry groups, particularly the Housing Industry Association and the Master Builders Association. It has the support generally of the subcontracting groups. The concern of the Master Builders Association and the Housing Industry Association is essentially to do with the issue of what they call the for-profit adjudicator nominating authority.

They do not have a problem with the adjudicators being private individuals operating a private enterprise as an adjudicator; that is not the issue. That is covered because there is generally a schedule of fees. So, it is not an open market fee process in that sense; there is a cap, a schedule of fees, generally in all the pieces of legislation, and my understanding of the member for Newland's legislation is that there will be a schedule of fees for the adjudicators.

The question then is about what is called the nominating authorities, for ease of description: should they be for-profit, should they be a government agency or should they be not-for-profit? That is essentially the argument. The Master Builders Association and other building industry groups do not like the for-profit model, which is the Eastern States model. They prefer the Western Australian model, which is the not-for-profit model. The subcontracting groups tend to support the for-profit model, which is the Eastern States model. This has been one of the more complex areas of the consultation in relation to this matter, and I have found that the more I delve into it the more complex it can get.

The opposition had amendments drawn to make the Commissioner for Consumer Affairs the person who, essentially, nominates the adjudicator. In response to industry concerns about the for-profit model, we had drafted a model that was run by a government agency. We have put that out for consultation, but we have not had feedback from all the industry groups as yet. Although, in fairness to the committee, I have to say it is now my least preferred model, having listened to some of the groups. That is why we drafted the amendments; that is, to listen to what the industry wants, because this is quite a complicated piece of legislation. Then I looked at the for-profit model—and that is probably an unfair description. The for-profit model is what the member for Newland is using in his bill, which is the Eastern States model. It is probably an unfair description to a degree because it is not an open market model.

I am reading from the 2008-09 annual report of the Queensland Building Services Authority which regulates all the building activity in Queensland. On page 5, the report deals with the issue of adjudication fees. This is interesting because I think this clarifies a few things for the committee. It sets out the level of adjudication fees under their particular security of payment provision. I will read some examples. If the range of the claim is under $5,000, the average fee for the respondent is $661; the average claimant fee is $129; and so the total fee is around $790.

Then there is a scale of fees which increase for claims under $10,000, claims under $25,000, claims under $40,000, claims under $100,000, claims under $250,000 and claims over half a million. Then there is another series of fees and I will quote the highest fees. I am giving the committee the lowest and highest fees. The highest fee is if the claim is over $500,000, then the average respondent fee is $12,105 and the average claimant fee is $4,219. So, the total fee is $16,324.

I met with Mr John Thomas and Dr Tony Sidwell, who have had experience with the Queensland system. They got back to me quite quickly with their response. It is fair to say that they are adjudicators in the Queensland system and have some experience with it. They tell me that those fees, whether they be the $790 fee for the under $5,000 claim or the $16,324 fee for the over $500,000 claim, are then split between the adjudicator and the nominating authority. The people involved in the dispute, say, if it is over $500,000 will pay between them a total of $16,324, and then the adjudicator gets a set amount of that fee and the nominating authority gets another set amount of the fee, which I think is 40 per cent. I think it is split 60-40. It is not an open market approach necessarily.

I would be interested in the member for Newland clarifying for the committee whether, under his bill, there will be a schedule of fees for the respondents and the claimants, and can the nominating authority only then get its payment out of the schedule of fees? What I am trying to establish for the committee is whether the nominating authority, under the member's bill, will be an open market charge or is it limited to take its income source for the nominating authority purely out of the schedule of fees for the respondent and the claimant?

If the nominating authority's income source is restricted to a schedule of fees for the claimant and the respondent, then it is hard to argue that it is an open market and therefore an open-ended cost to the industry. There is a cap on the cost. If there is not a cap on the cost, then I can understand the industry's concern about having a for-profit model. That is the Eastern States model. I will give the member for Newland a bit more time to think about that.

The Western Australian model is a little bit different, and I thank Dr Tony Sidwell for his response almost the same day in relation to some questions that I asked him. One of the questions I asked him was: 'In Western Australia, if it is not a government authority that then plays the role of a nominating authority, and if it is not a for-profit business, then who actually nominates?'

In Western Australia, the nominating authority is what I would call not-for-profit groups and they are groups like the Australian Institute of Arbiters or it might be the architects and those sort of groups. In fact, I have misled the committee to a degree. Dr Sidwell did get back to me with some information but it was not that. It was actually Tom Earls in the Housing Industry Association and I have found the list.

The prescribed appointers in Western Australia are: the Australian Institute of Building, the Australian Institute of Project Management, the Australian Institute of Quantity Surveyors, the Electrical and Communications Association of Western Australia, the Institute of Arbitrators and Mediators Australia, the Master Builders Association of Western Australia, the Royal Institute of Chartered Surveyors and the Royal Australian Institute of Architects. They are the groups that can, if you like, provide the adjudicators in Western Australia.

This is really the nub of the industry complaint. I should make it clear that the MBA and the HIA do not really want the legislation, but I think they are resigned to the fact that they are going to get it in one form or other, so the issue for the committee and ultimately the other place is: which model?

The opposition will not be proceeding at this stage with any amendment in relation to making the Commissioner of Consumer Affairs the group, so we come back to the two existing models. I will be interested in the member's answer as to the for-profit groups and the schedule of fees because that will give the opposition some guidance to what the intent of the legislation is.

Mr KENYON: I will just make some comments. I think it is probably fair to say that the differences between the Western Australian model and the east coast model are greater than just the profit motive or otherwise of the nominating authorities. My understanding of it is that there are significant differences in the way the adjudications are heard and carried out, and it is a little bit more court-like, for want of a better word.

The east coast model is specifically designed to avoid being court-like. It is more a quick assembling of the information and then a decision. It is specifically designed to be a quick process and avoid a more court-like process because, as I understand it, it is the court-like process—the Western Australian model—that is responsible for delays in payment, and of course the delays in payment are the thing that we are trying to avoid. I suspect that it is not possible to effectively achieve the goal of a quick process of payments and have a model that is more like Western Australia. That is the reason for going down the east coast road.

The member for Davenport asked if there was a cap on the fees. My understanding of the bill is that there is no cap on fees. Clause 29(1)(a) provides:

such amount, by way of fees and expenses, as is agreed between the adjudicator and the parties to the adjudication, or—

if there is no such agreed amount, then reasonable expenses should be paid.

There is also the opportunity for a claimant to withdraw a claim and make another claim, because there is more than one nominating authority. That may include the HIA, because there is nothing that precludes the HIA or the MBA, or other contractor associations, from becoming nominating authorities. As it is possible for them to become a nominating authority—there may even be a number of for-profit nominating authorities—I suspect that there will be a certain amount of competitive tension in the area, and that should put a bit of a brake on fees.

I am having a bit of a guess here—and I apologise to the member for Davenport for that—but I suspect that it would be possible in regulation to have a schedule of fees—or perhaps not, the way the act is written. However, I come back to the fact that in this respect it is pretty much a mirror of the New South Wales act and, for want of a better defence, it is working there and I assume it will work here because we are not that different from New South Wales.

The Hon. I.F. EVANS: There is the nub of the issue, and it will make interesting reading in Hansard for those who wish to follow the debate. The building industry associations, the HIA and the MBA, ask: how can the industry have certainty if there is an open-ended fee structure? The member for Newland, the mover of the bill, suggests that in New South Wales the nominating authorities can set a fee with the agreement of the parties. So the question comes: what happens if there is no agreement with the parties? Will that be the first dispute about the adjudication: how much we have to pay?

The issue is that the nominating authorities then have a for-profit motive. I suspect that there is some truth in the suggestion that there might be some competitive tension, but there will not be that many nominating authorities. I think I listed six or seven in Western Australia. So, I can understand the industry's concerns regarding this for-profit motive about the nominating authorities.

The member for Newland may want to contemplate, between the houses (because I do not have the numbers to stop it here), that having the private sector as the nominating authorities does not make it less court-like. It is the other provisions of the bill that make it less court-like, the other processes; it is not the for-profit nominating authorities that make it less court-like. Therefore, I think it is possible to pick up the Western Australian concept of having the not-for-profit organisations as the nominating authorities and still leave in place the not-for-profit court-like processes that the member for Newland wishes to have the upper house debate and consider.

It does concern me to some degree that there is no schedule of fees. The way I read this—and my apologies to Tony Sidwell and John Thomas if I have misunderstood their briefing; I must say that I was fairly tough on them the other day, I really did quiz them to make sure I understood what they were talking about—is that if there is a schedule of fees, as per Queensland, the industry knows that there is a cap. If it is going to be over $500,000 then there is a fee, and that brings uncertainty to the industry.

I am not going to hold the committee any longer on this point, because the member for Newland has accurately outlined his view of the bill. I have put on the record, as best I can, the two industry associations' views. I am happy to discuss the issue with the member for Newland in between houses.

The member for Newland came to my office the other week and we tried to work through this issue, or a number of issues relating to this particular principle, and that is where the idea of the Commissioner for Consumer Affairs came up. It was an example of the two sides of politics trying to work through an industry issue, and we will still try to do that in between houses, because I think that both sides of politics do want to bring certainty to the payment system in the building industry, but we want to end up with a model that the industry can live with.

I will not hold the house any longer, other than to say that we will continue to talk to the member for Newland between the houses, but I think it is fair to say to the member that the opposition still has concerns with the open-ended nature of the fee structure as it stands.

Mr KENYON: I understand the points the member for Davenport is making, and I am happy to speak with him again between the houses. I make the point that there is nothing to stop, under this bill, not only for profit but at the same time should they choose to nominate as authorised nominating authorities, the appointment of the HIA and the MBA and other like bodies as nominating authorities. In fact, it would probably be of great benefit if they were to do that and were to be appointed because you would have somewhat of a break on the fees. I understand the point the member is making about fees and the certainty of fees and I have to say that I am not violently opposed to it but, again, discussion between the houses is probably the best way to deal with that.

Clause as amended passed.

Remaining clauses (19 to 35) passed.

Schedule 1.

Mr KENYON: I move:

New Part, page 22, after line 30—Insert:

Part 1A—Amendment of Building Work Contractors Act 1995

1A—Amendment of section 30—Payments under or in relation to domestic building work contracts

(1) Section 30(1)—delete 'the payment'

(2) Section 30(1)(a)—before 'constitutes' insert:

the payment

(3) Section 30(1)—after paragraph (a) insert:

(ab) the person is entitled to the payment under the Building and Construction Industry Security of Payment Act 2009; or

(4) Section 30(1)(b)—before 'is of a' insert:

the payment

(5) Section 30(2)—delete 'paragraph (a) or (b)' and substitute:

paragraph (a), (ab) or (b)

(6) Section 30(3)—delete subsection (3)

As a result of including the full chain, including residential houses in the bill, there is a need to amend the Building Work Contractors Act, and that is what these provisions do, synchronise the two bills.

Amendment carried; schedule as amended passed.

Title.

Mr KENYON: I move:

Delete 'a related amendment to the' and substitute:

related amendments to the Building Work Contractors Act 1995 and the

Amendment carried; title as amended passed.

Bill reported with amendment.

Third Reading

Mr KENYON (Newland) (17:50): I move:

That this bill be now read a third time.

I thank members for their contributions. I particularly thank the members for Torrens and Hartley for their efforts with this bill and the member for Davenport for his contribution. A fair amount of work has been done behind the scenes with the Attorney-General's Department, and also parliamentary counsel have suffered my running backwards and forwards asking questions, and I thank them for their efforts.

I make the note that I forgot to mention something regarding the point about the Western Australian model versus the east coast model. It has been put to me that there is some movement for change about that in Western Australia and that they may be looking to move across to the east coast model. I want to include that in my remarks now and I apologise for not including it in the committee debate. Having said that, I commend the bill to the house and I thank everybody involved.

Bill read a third time and passed.

PARLIAMENTARY BUSINESS
MEMBERS
GET INVOLVED
ABOUT PARLIAMENT
VISIT
LEGISLATIVE COUNCIL
HOUSE OF ASSEMBLY
CONTACT