ACCC Warns Big End of Town to Pay Subbies 5

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Monday, July 11th, 2016
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The competition watchdog, ACCC, has put those in the big end of town on notice that it will take them to court if they refuse to pay subcontractors, amid growing complaints on major projects in Western Australia.

Complaints about late and nonpayments are rampant in WA’s building industry and the state government has been criticised for not protecting subcontractors, some of whom had been ripped off on government projects as lead contractors refuse to or simply can’t pay.

Multibillion-dollar major public and private projects such as the new children’s hospital, Perth airport extension and Elizabeth Quay riverside development have been notable for subcontractor complaints over massive amounts of unpaid work.

The issue was raised in parliament last week by Opposition Leader Mark McGowan, who named the owners of six small businesses owed massive amounts of money, including Ross McGinn, who took his own life last year.

Laws that protect consumers from unfair contracts will be changed in mid-November to protect subcontractors from unfair contracts used by big businesses.

The effects should include helping stop big businesses unilaterally changing prices and striking unfair terms out of contracts and ensuring dispute mechanisms are not lopsided, said the Australian Competition and Consumer Commission’s acting chairman Michael Schaper.

“This speaks to a much bigger issue, the massive power imbalance that exists between big business and small business often reflected in the contracts imposed effectively on small businesses,” he told 6PR radio.

“This is not going to give universal protection for every situation but goes a long away to rectifying what is clearly a very substantial imbalance. In WA the issue about subcontractors is the one that’s most obvious.

“We do carry a big stick. The ACCC doesn’t take things to court lightly but when we do our success rate is in the vicinity of 90 to 95 per cent … The large end of town needs to be on notice we really are serious.”

Acting Finance Minister Sean L’Estrange said the government had improved payment security for subcontractors and had implemented 14 recommendations from a 2013 Construction Subcontractor Investigation report.

It was also exploring a NSW-style scheme involving project bank accounts so if the contractor went bankrupt, there was money to pay out subcontractors, he said.

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  1. Les Williams

    IT IS NOT JUST WA. The ACCC needs to look at the rest of the country as well. In QLD since 2014 2400 subcontractors have borne $110m debt from main contractor pre-packaged insolvency. Recently another main contractor undertaking government contracts appointed administrators to avoid litigation of $20m from defective work and took another 207 subcontractors for another $4m. A retention trust covers only 5% of the subcontractors funds, what about the remainder. To continue to refer to retentions only is simply subterfuge and displays an unwillingness to address the real problem of massive fraud in the industry. . The NSW model has been described in a legal piece as " A CLAYTONS TRUST" operated by the contractor and absolutely useless in a contractor insolvency setting. Neither is the NSW model in accordance with that recommended by the Collins report. Who introduces deceptive legislation like this and more importantly who influences it. What we have here is ongoing national construction industry fraud, whilst our state governments sit and watch. We want uniform national minimum SOP legislation for all states that secures 100% of revenue for subcontractors . The problems that exist in the industry were outlined in the report from the Senate inquiry held in 2015. Every main player in the political landscape supported the abovementioned and the 44 recommendations except the LNP. The purpose of the QLD BCIP Act was undermined in 2014 and the architect of those amendments is now in federal parliament. Happy days.

  2. Les Williams

    It appears to me that those responsible for legislative change around Australia have absolutely no bloody idea of how the industry works, the massive fraudulent practices, the use of phoenix trading and pre-packaged liquidations to defraud and just how peak industry groups seek and gain unfair advantage by promoting themselves as industry experts . Subcontractors around Australia lose more from insolvency and wrongful withholding of money per annum from main contractors than the entire revenue generated by the dairy industry. There is no point in the ACCC waving their finger at the big end of town — what does that achieve — take action. Look at the amendments to QLD's BCIPA and similar amendments being planned in SA to see if the removal of a marketplace of ANA's contravenes competition laws. Why should we have to ask — any legislation that removes a market place and damages consumers should automatically be reviewed. What a crock. What we have in reality is cheque- book legislation that is not in the public interest. The senate report identified these practices as costing the ATO around $670m in tax receipts and a further $200m from a bludge on the Fair Entitlements Grants every year Add the huge human cost of this tragedy to 350,000 construction industry small business playing out all over Australia. The construction industry is a seriously flawed and dishonest industry, with legislation that attracts thieves and supports fraud. Our federal and state politicians coupled with our regulators including the ACCC have to bear the responsibility for their failure. They simply allow those who benefit from this feast on the hard work of others to set and run the agenda.

  3. Joel Nash

    If genuine protection is given to subcontractors, then it is about time.

    Of course, none of this should obscure the fact that more that it is now eight months after the final report of the Senate Inquiry into non-conforming products and still we have NO RESPONSE from the government. Labour, The Greens, Xenaphon and Lazurus all indicated their support, but the Coalition have swept it under the carpet.

  4. Mervyn Sher

    "Laws that protect consumers from unfair contracts will be changed in mid-November to protect subcontractors from unfair contracts used by big businesses." Although there is new legislation that is enlivened in November which offers some protection to subcontractors with regard to the construction of a contract between the parties, it will not be the magic bullet that it could have been, not by any means.
    In the absence of specific legislation prohibiting unfair or unjust clauses in a contract, with no contracting out of such prohibition, the parties are pretty much open to market forces prevailing on the day – which means that if one party finds the clauses in a contract unacceptable to them, they are quuite entitled to walk away from the contract.
    Australia has a history of attempting to rectify all that ails it with legislation, and then once legislated seemingly refuses or is utterly incapable or unwilling to enforce the legislation.
    Western Australia has the highest resistance to any such enforcement, as well as the highest resistance to any such change. I'll wager London to a brick that despite the ACCC's acting chairman Schaper's bold words above, nothing, absolutely nothing is done to the head contractors in the projects mentioned above – absolutely nothing!

  5. Juanita Gibson

    These investigations and threat of court need to be taken Australia wide by ACCC, as this issue is epidemic in all states and peoples lives continue to be torn apart every day.
    One day more is to long, we need action now