| Published by Kyle Gillan, Leonard Warren
The Commonwealth Government’s response to the Senate Economic Reference Committee Report on Insolvency in the Australian Construction Industry released in June 2017 is therefore a timely reminder to consider how best to protect yourself against insolvency in the construction industry.
The Committee’s Reports was critical of the effects of insolvency in the construction industry. It made a number of findings, including:
The Committee made 44 recommendations to Government to address the issue.
The Government’s response to the Report includes recognition of the high rate of insolvency within the construction industry and the problem of “pheonixing”.
The shared responsibility between the States and the Commonwealth for regulation of the construction industry makes the process of reform challenging. Nonetheless, the Government is taking steps to address this which will be of interest to the construction industry, including:
Regardless of the Government’s response to the Report, there are important steps that owners and principals can take to protect themselves against insolvency which are set out below.
Not surprisingly, owners and principals have developed mechanisms for protecting themselves against insolvency that have proved effective over the years. This includes:
Insolvency in the construction industry can often be sudden and disruptive for industry participants. It is possible for principals to protect themselves from insolvency if the right steps are taken at the inception of the project.
Principals should consider these protections before they enter into contract to ensure the right protections and safeguards are reflected in their construction contracts.
Read about Russell Kennedy's recent appointment, Kyle Gillan as Special Counsel, specialising in front end construction.