David Norris (Independent)

I compliment Senator Quinn on the initiative he has shown in introducing this legislation, which is timely and important. In light of current difficulties, everything possible must be done to facilitate the return of the construction industry to a state of good health.

The Bill addresses a specific problem, namely, instances where main contractors or developers are paid but where those who subcontract with them do not receive payment. It provides for notice of intention to withhold payment, a speedy and cost-effective dispute resolution mechanism which would operate on the basis of adjudication, and the right to suspend work for non-payment.

I also welcome the Government amendment. This is one of the occasions on which I am happy to see an amendment from the Government, particularly as it is positive rather than destructive in nature. Too often at Private Members' time we are obliged to engage in ding-dong battles across the floor of the House. On this occasion, the significant element of the amendment is the final phrase which states that Seanad Éireann "resolves that the Construction Contracts Bill 2010 be deemed to be read a second time this day 5 months". This indicates the Government is serious and intends to progress the legislation through the House.

A practical and observable difficulty in respect of this matter arises from the fact that there is a kind of hierarchy of payment which exists. At the top of the pile is the main contractor and then there is a series of tiers within the supply chain. In positive circumstances, there is a trickle-down effect. However, the money does not always reach the most vulnerable people in the lower reaches of the hierarchy to which I refer. The very real problems people encounter include the improper retention of money. Funds are often held back because the main contractor wants to massage its own cashflow. This happens at the expense of those to whom it subcontracted work.

Manufactured, false or spurious reasons are also often offered in respect of the withholding of money. For example, a tiny defect which might not be significant in the context of the overall project might be used as an excuse and a justification for withholding payment. Such behaviour is plainly wrong and unfair. At present there is no provision for the making of proper staged payments and this, as Senator Quinn pointed out, can lead to insolvency and redundancies. These are the last things that are needed in the current climate.

Sections 7 to 9, inclusive, are the three most important in the Bill. I did not rely on my own intuition or intelligence - which, in the context of this matter, could be weak - in identifying this fact. I relied instead on a very good briefing document I received from elements within the construction industry. I am not sure but previous speakers may already have placed on the record that which I am about to say.

Section 7 deals with the notice of intention to withhold payment. It suggests that subcontractors should be placed on notice that the main contractor proposes to withhold payment in order that they might take whatever action they regard as being appropriate. The section states that it should not be possible to withhold money without two key factors first being addressed, namely, that prior notice has been given and that sufficient, specific and justifiable reasons have been provided to the person at the lower end of the chain with regard to why the money is being withheld.

Section 8 provides for adjudication, which is important. It is different from the normal method of arbitration. It is straightforward, simple and quick. It is essential to have speed in deciding the amount that should be paid by one party on an interim basis. This will have the benefit of helping with cash flow difficulties. In most commercial contracts, if there is a dispute over payment, a party can go to the courts to seek enforcement, but most construction contracts provide for alternative methods of dispute resolution, including conciliation, arbitration and so on. They may lead eventually to justice, but they have two cardinal difficulties. They tend to be slow and expensive. For example, payments can be delayed for several years while the matter is in arbitration and the contracts also give an opportunity to the main contractor to manufacture causes of dispute. Once legal advice is sought, the reasons multiply. Following adjudication, the parties can continue to conciliate, arbitrate or litigate the ultimate resolution of a dispute. The adjudication is binding in the interim and enforceable and the parties can then go to the courts to seek enforcement.

I am sure Senator Quinn has examined what happens in other jurisdictions. The nearest is the United Kingdom which provides a good justification for such legislation. It addressed this situation in legislation within the past few years, as a result of which cash flow throughout the entire industry has improved dramatically and 90% of disputes are settled at adjudication or shortly thereafter. Since the enactment of the construction Bill in the United Kingdom, there have been 18,000 adjudications, of which only 300 have ended up in court, a small proportion.

Some provisions could be included in the Bill such as the right to payment by instalment, except for a project of less than 45 calendar days; a statutory requirement for an adequate mechanism for determining sums due, including default provisions where the mechanism is not agreed by the parties; a statutory requirement for agreements on the dates on which payments, including the final payment, will be made and default periods such as five and 17 days, respectively; and the prohibition of payment provisions which are conditional on receipt of payment from others, in other words, where the sub-contractor is put in the position where he or she has to collect on behalf of the main contractor. The Bill provides adequate protection. Some Members said the Prompt Payment of Accounts Act 1997 would be useful and could be applicable in this regard, but it is not for the reasons I outlined. The construction industry is different. Work is carried out in advance of payment and, as Senator Quinn mentioned, when the building is erected, it cannot be dismantled to recover the value of the bricks, the plumbing, the ground work and so on.

The introduction of an independent, impartial adjudicator would be positive. The United Kingdom has the Housing Grants, Construction and Regeneration Act 1996; New Zealand, the Construction Contracts Act 2002; Malaysia, the Building and Construction Industry Payments and Adjudication Act, which is pending; Singapore, the Building and Construction Industry Security Act 2004; and five states in Australia have introduced similar legislation. We are moving in a direction in which the rest of the world has seen fit to move and I applaud Senator Quinn for his foresight in producing this valuable Bill. In a week that is almost void of Government legislation, it is remarkable that a Senator from the Independent benches has introduced a Bill that has received a welcome on all sides of the House.