Cascading deemed statutory trusts in the construction sector
The Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) inquiry into the construction industry supply chain resulted from calls from subcontractors, who lost money due to the insolvency of their contractor.
Statutory trusts have been considered and proposed by a number of inquiries as a means of ensuring prompt progress payments to subcontractors, and ring-fencing payments in the event of insolvency of their contractor.
Mr John Murray AM commenced a Review of Security of Payments Laws on 21 December 2016. Mr Murray recommended introducing deemed statutory trusts as a way to protect payments due to subcontractors even where a contractor above them becomes insolvent.
We have considered the various arguments for and against cascading deemed statutory trusts and, on balance, support their implementation in the construction sector. Our research has shown that the benefits of implementation outweigh the potential costs and impacts on working capital.