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Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.
The proposed Act is intended to apply when a person (a principal) engages
another person (a defaulting contractor) under contract to carry out work or
supply materials and that defaulting contractor then engages other persons to
carry out the work or supply the materials, or to carry out any work or supply
any materials that are part of or incidental to the work or materials. If the
defaulting contractor fails to pay those other persons (unpaid persons) for
their work or materials, the proposed Act allows the unpaid persons to obtain
payment of the debts owed to them out of money owed to the defaulting
contractor by the principal in connection with the work or materials.
There are 2 steps to recovery of a debt under the proposed Act.
First, the unpaid person must successfully sue the defaulting contractor for
the debt that is owed to the unpaid person for work carried out or materials
supplied by the unpaid person and obtain a certificate from a court that
certifies the amount owed to the unpaid person by the defaulting contractor.
Second, the unpaid person must serve a notice of claim on the principal.
Service of the notice effects an assignment to the unpaid person of the
obligation of the principal under the contract to pay the defaulting contractor
money that is payable to the defaulting contractor for or in respect of work
carried out or materials supplied by the unpaid person. This means that the
principal is obliged to pay the unpaid person the debt that is payable to the
defaulting contractor under the contract until the debt owed to the unpaid
person is discharged. If the principal fails to pay, the unpaid person can sue
for and recover the money from the principal as if the debt owed to the
defaulting contractor under the contract with the principal were owed directly
to the unpaid person.
The Bill repeals and replaces the Contractors' Debts Act 1897.
Clause 1 sets out the name (also called the short title) of the proposed Act.
Clause 2 provides for the commencement of the proposed Act on a day or
days to be appointed by proclamation.
Clause 3 defines certain words and expressions used in the proposed Act.
Clause 4 provides that notes do not form part of the proposed Act.
Part 2
Obtaining payment of debt
Clause 5 allows an unpaid person to obtain payment of a debt owed to the
unpaid person for work or materials out of any money that is payable to the
defaulting contractor by the principal in connection with that work or those
materials.
Clause 6 sets out the procedure for obtaining payment. The unpaid person
must obtain a certificate in respect of the debt (see clause 7) and then serve a
notice of claim on the principal.
Clause 7 allows a court in which any proceedings are taken for the recovery
of a debt owed to a person for work or materials to certify that the debt is
owed to the person.
Explanatory note page 2
Clause 8 provides that service of a notice of claim effects an assignment to
the unpaid person of the obligation of the principal to pay the money owed to
the defaulting contractor in connection with work carried out or materials
supplied by the unpaid person. The assignment is limited to the amount
certified in the debt certificate.
Clause 9 requires a principal who is served with a notice of claim to pay the
debt owed to the unpaid person by the defaulting contractor out of the money
that the principal owes to the defaulting contractor.
Clause 10 provides for priority of assignments under the proposed Act.
Clause l 1 allows the unpaid person to sue for and recover from the principal
the debt assigned to the unpaid person under the Act.
Clause 12 provides that an assignment ceases to operate when the debt
owed to an unpaid person is discharged or the judgment or order pursuant to
which the debt certificate is issued is set aside.
Clause 13 requires an unpaid person to give a discharge notice to a person
who makes a payment in discharge of the debt owed to the unpaid person.
Part 3
General
Clause 14 allows a court in which proceedings are commenced by an
unpaid person for the recovery of a debt owed to the unpaid person for work
carried out or materials supplied by the unpaid person to make an attachment
order against any other person from whom the unpaid person may be able to
recover the debt under the proposed Act. Such an order requires the principal
to refrain from paying the defaulting contractor until the proceedings are
finalised.
Clause 15 requires a defaulting contractor who owes a person money for
work carried out or materials supplied by the person to give the person
information concerning any person from whom the person may be able to
recover the debt under the proposed Act. The provision of false or misleading
information will be an offence.
Clause 16 allows an unpaid person to seek payment of a debt from other
persons. For example, if a person engages another person (a contractor) to
carry out work or supply materials and the contractor then engages another
person (a subcontractor) to carry out the work or supply the materials, a
person engaged by the subcontractor can recover money owed to the person
by the subcontractor in accordance with the proposed Act from the
contractor. If the contractor fails to pay, this section allows the unpaid person
to then seek payment from the person who engaged the contractor.
Explanatory note page 3
Clause 17 provides for a limitation period of 12 months for proceedings
under the proposed Act.
Clause 18 prevents persons from contracting out of their obligations under
the proposed Act.
Clause 19 makes it clear that the proposed Act does not affect any other
remedies, rights or obligations that a person may have.
Clause 20 provides that proceedings for an offence against the proposed Act
are to be dealt with summarily before a Local Court.
Clause 21 contains a general regulation-making power.
Clause 22 repeals the Contractors' Debts Act 1897.
Clause 23 gives effect to Schedule l , which contains savings and
transitional provisions.
Clause 24 requires the Minister to review the operation of the proposed Act
5 years after its enactment.
Schedule 1 contains savings, transitional and other provisions.
Explanatory note page 4