16.06.2021

Retentions Regime: On the Road to Repair

The retentions regime in the Construction Contracts Act 2002 is on the road to repair with the introduction of the Construction Contracts (Retention Money) Amendment Bill (Bill) on 1 June 2021.  The Bill has passed its first reading and has now been referred to the Transport and Infrastructure Select Committee for consideration.  Public submissions are invited by 23 July 2021.

The shortcomings with the retentions regime are well known and were exposed by Ebert Construction’s failure in 2018 (we have covered these in earlier articles which are linked further below).  The Bill is therefore welcomed and MBIE appears to have largely listened to the industry’s feedback. 

The key changes proposed in the Bill are:

  • Automatic Trust: Retentions would be automatically held on trust as soon as an amount becomes retention money, regardless of any payment or other steps taken.
  • Retentions Account: Retentions would need to be kept in a dedicated retentions account, and could only be co-mingled with other retentions.  Proper accounting records to be kept.
  • Reporting Obligations: The retentions holder would need to provide prescribed information about how/where retention money is kept at the outset and at least every three months.
  • Offence/Penalties: Breaching the regime would be an offence, with a fine of up to $200,000 for the holder and $50,000 for the holder’s directors.  “Directors” is widely defined.

For our further discussion and Quick Guide to the proposed changes, please click HERE.

See our previous commentary on the Retentions 

Retentions Regime: Government Announces Changes

Administration of Retentions Trust:  Oorshot v Corbel Construction

Ebert Construction:  Court provides Guidance on the Retentions Regime

Ebert Construction:  Receivership and Liquidation

Ebert Construction:  What you need to know

Clarification of retentions requirements for construction contracts

Changes to the Construction Contracts Act 2002

If you have any questions about the Bill or retentions generally, please get in touch with our Construction Team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

The Impact of Unclear Communication
The recent decision of the New South Wales Court of Appeal in Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No. 2) [2021] NSWCA 9 is an example of an unclear direction resulting in a principal being unable to rely on a notification time bar in a construction contract.
11.10.2021 Posted in Construction
Penalties imposed for a single phone call attempting to enter a price-fixing agreement
The High Court in Commerce Commission v Specialised Container Services (Christchurch) Ltd recently imposed pecuniary penalties under the Commerce Act 1986 (the Act) for an attempt to enter into a pric...
07.10.2021 Posted in Business Advice & Regulatory
Update – August/September 2021 Lockdown – what financial support is available?
The Government is offering various support schemes to help employees and businesses cope with the 2021 COVID-19 Lockdown.  Given the differing eligibility requirements it is easy to become overwhelmed.
07.10.2021 Posted in Business Advice & COVID-19 & Employment
Exclusion of liability for deliberate breaches of contract 
In Mott Macdonald Ltd v Trant Engineering Ltd [2021] EWHC 754 (TCC) the English High Court considered a summary judgment application on the applicability of a limitation of liability clause to an alle...
How low can you go?  Commerce Commission’s prosecution against Bunnings dismissed
The District Court recently dismissed the Commerce Commission’s case against Bunnings for alleged misleading and deceptive representations under the Fair Trading Act 1986 (FTA). In dismissing the Co...
Civil Aviation Bill introduced to Parliament
After five years of preparation, the Civil Aviation Bill has been introduced to Parliament.  The aviation industry has seen dramatic change in the three decades since the current Civil Aviation Act w...
30.09.2021 Posted in Aviation
Regulators do not “bend” on AML/CFT compliance: Financial Markets Authority v CLSA Premium Limited
Earlier this month, the High Court released its decision in Financial Markets Authority v CLSA Premium New Zealand Limited.
23.09.2021 Posted in AML/CFT & Business Advice & Regulatory
Send us an enquiry
For expert legal advice, please complete the form below or call us on (09) 375 8700.
  • This field is for validation purposes and should be left unchanged.
-->