Steve Irons (Swan, Liberal Party) Share this | Hansard source

I too rise to speak on the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015. It is a pleasure to follow the member for Hinkler. I actually ran into the previous member for Hinkler at the member for Canning's funeral in Western Australia. He asked me how the current member for Hinkler was going, and I said he was doing a great job. Listening to him speak just then about his experience of small business and his understanding of the contracts, particularly in the retail sector, was interesting. I have listened to some of the other contributions from this side of the chamber. Again, the member for Reid told a great anecdote about Peter, the guy who came to unlock his door when he locked himself out recently. They are the types of experiences on this side of the chamber that show that we get small business.

It was also interesting to hear the Leader of the Opposition tonight, up at the ACCI cocktail party in the Mural Hall here, saying that Labor get small business and explaining some of the areas that Labor did get small business. Then he went on to speak about how the coalition had blocked their small business measures in one of the budgets. But the fact is we had not blocked it. We had spoken against it but we had not blocked it, because they actually had the numbers in this place when they put forward those measures. They had their coalition with the Greens and they had the numbers in this place to get that 1.5 per cent tax cut to small business through. But you know what the flaw was? And, Mr Deputy Speaker Goodenough, I am sure you would, coming from the great state of Western Australia. It was that it was all based on an anti-Western Australian tax, the mining tax, which as you know has now been scrapped by the coalition, as we promised to do when we went to the 2013 election.

I congratulate the Minister for Small Business on bringing this legislation forward. I have spoken to him about it on numerous occasions. I understand that there was some work done in 2009 on contractual arrangements for larger businesses. But the previous, Labor government, during their six years in government, did nothing to help small business, and that belies what they were spruiking—that they are all for small business and understand it.

The minister has worked in a consultative manner, and I know it has been appreciated by many small businesses. In my electorate of Swan, we have about 18,000 small businesses, and I know they understand that this will be a very important piece of legislation for them, once it passes the House.

We are committed to ensuring Australia is the best place to start and grow a small business. That is why the government is extending the consumer unfair contract term protections to small businesses. We made a commitment to the bill, as I said. In the lead-up to the September 2013 federal election, as shadow minister for small business, competition policy and consumer affairs the Hon. Bruce Billson articulated the coalition's commitment, if elected, to extend the consumer unfair contract protections to small business.

Following that election, as Minister for Small Business, Mr Billson outlined the government's plans to extend protections already in place for consumers under the Australian consumer law to the small business sector. He said:

Small businesses often receive standard form contracts from business on a "take it or leave it" basis, and encounter the same disadvantage as individual consumers when it comes to negotiating contracts.

For example, we understand that primary producers are increasingly contracting directly with the large supermarkets and that in many instances, supermarkets insist on standard form contracts.

We agree that many benefits flow from using standard form contracts—they save time and keep costs down. But they can also be used to shield a business from risk unfairly ….

In extending these protections, we recognise though that there may be several issues to work through. A thorough consultation process is going to be essential if we all want to get this reform right.

That was the Minister for Small Business, and he has thoroughly consulted to make sure that we have got it right.

The government took more than 20 small business specific promises to the last election. A key promise was its commitment to extend the unfair contract terms protections available to consumers to small business. With this legislation we have met yet another small business election commitment. Consumers have been protected from the unfair contract terms since 2010; however, the former government, despite its initial interest, decided not to offer those protections for small business, as I previously stated. In many cases small businesses have no more market power or ability to vary take it or leave it standard form contracts than an individual consumer but lack the consumer-style protections that provide for unfair terms to be struck out of such contracts. We knew it was time small businesses, which often face the same vulnerabilities as consumers, also receive protections when offered take it or leave it contracts.

The Treasury Legislation Amendment (Small Business Unfair Contract Terms) Bill will amend the Australian consumer law, which is set out in schedule 2 of the Competition and Consumer Act 2010, and the Australian Securities and Investments Commission Act 2001. This legislation will extend the consumer unfair contract terms protections to cover standard form small business consumer-like contracts that are valued below a prescribed threshold. This is a long sought after and very much welcomed new protection for small business and one that the coalition has long supported.

I would just like to give a bit of background. Mr Deputy Speaker Goodenough, you are from Western Australia and you understand the construction industry where I also originated from before coming to this place. I would like to highlight some of the contractual problems that are currently going on in Western Australia, particularly those related to contracts and subcontracts. There was an article in TheWest Australian on Monday, 27 July. I will read parts of that article to give a bit of background about what is actually happening in Western Australia. The article headlined 'Builder in subbies pay row cleared' says:

WA Treasurer Mike Nahan has cleared building giant John Holland over payment disputes with subcontractors on the $1.2 billion Perth Children's Hospital project.

The Government pledged to mediate mounting contract disputes last month amid reports subcontractors were awaiting payments totalling millions of dollars, including ceiling company managing director Ross McGinn who recently took his own life.

Acrow Ceilings Pty Ltd claimed it was owed $2 million and Yuanda Australia, which worked on the hospital's external facade, reportedly sought $8.6 million. Other subcontractors had similar claims.

Dr Nahan met Mr McGinn's family after his death and officials from the Treasury's Office of Strategic Projects met John Holland representatives in recent weeks. Dr Nahan said yesterday that the Acrow dispute arose when it claimed for work it considered to be over and above its contracted scope of works but which John Holland considered part of the contract.

He said the State had reviewed all payment claims, certificates, details and correspondence provided by Acrow and "this examination has confirmed that the payment process in the subcontract is being followed".

Dr Nahan said subcontractors could seek rapid adjudication of payment disputes under the Construction Contracts Act, but no CCA applications had been lodged by Acrow.

The State had requested from John Holland details of payment to all subcontractors and in each case during the past calendar year due payments had been made "in strict accordance with terms and conditions".

Mr McGinn's son, also named Ross and a director at Acrow, said the company had not lodged a CCA application because it had been awaiting advice from the Government on the outcome of its discussions with John Holland. The company would now consider making an application.

This gets back to the heart of the matter about contracts with major companies and subcontractors not only across the construction industry but across all sectors of the Australian community and Australian business. This has been approached and dealt with by some of the smaller business associations in Western Australia and as far back as 18 December 2009 they had legal advice from a company with regards to some of the actions that should be taken and recommended to change the act in Western Australia. I know we are talking about the federal act but I would like to highlight some of the issues with the Western Australian act. One of the things it states in that particular area is that the Western Australian and Northern Territory acts are dissimilar to the eastern states acts. That advice says:

The main problem with the Constructions Contracts Act is that it does not follow the procedures or fundamental principles embodied in the eastern States' Acts. As you are probably aware, South Australia and Tasmania are going to adopt the New South Wales Act to the extent that it is relevant to them, which will mean that all of the States on the eastern and southern seaboard (ie NSW, Qld, Vic, SA & Tas) have Acts which are essentially similar, whereas WA and NT are completely out of step in respect to the procedures under their Acts.

This highlights yet again the fact that, despite the fact that we have a population of only 20-25 million people, our legislation varies considerably between various parts of the country. There is, in my view, a compelling argument that WA should in effect amend its Act so that it now accords with the procedures of the NSW Act upon which the other States have based their Acts. Presumably, if WA agrees to follow the broad basis of the NSW Act, then NT would follow suit. It may be advantageous in due course to support these differences between the WA/NT legislation with the legislation of the other States by doing a comparison of the procedures, time limits and legal effects of the two sets of legislation in order to highlight not only their differences but also their superiority, in our view, of the eastern States' legislation over the WA legislation.

If the WA Parliament is not prepared to entertain fundamentally changing its Act so that it accords with the NSW Act, then there are still two major items that need to be addressed in the amendments to the Construction Contracts Act in order to make it much more effective.

It goes on to say:

In the eastern States, a claim under the Act can be made up to 12 months after the work has been done. This means that in relation to variations, for instance, variations can be accumulated where they have not been paid in full or at all, until it becomes commercially advantageous to bring a claim consolidating those variations within that claim. This is not possible under the WA Act because a claim must be made within 28 days of a dispute arising. At the latest, a dispute arises under the WA Act when a payment has not been made. Consequently, if a Contractor submits a claim for the variation and that variation is not paid within 28 days of the due date for payment of that variation, then that variation cannot be the subject of an adjudication under the WA Act. It is commercially unviable in many cases to start an adjudication for, for instance, one or two small variations in order to preserve a right to adjudicate those claims. In our view, the time limit for bringing claims should be extended to 12 months to enable consolidation of small variation claims to be included in the one adjudication. This is a serious anomaly in the Construction Contracts Act and needs to be rectified. The NT Act extends this time to 90 days which is still insufficient.

One of the many issues that has been raised in WA—and I am sure it appears across Australia, particularly on construction sites—is that when the subcontractors are offered a contract, a 'take it or leave it' contract, as we are trying to deal with here, they are told: 'Here, sign this. If you don't sign it, you don't get the job.' If they do not sign it, because it does not suit their contract or it is too onerous, the major contractor just moves on to the next subcontractor until they find one who is obviously looking for work and is desperate enough to sign that contract.

But the issue arises when it comes down to defaults on the standards and the specifications of the job. The major contractor will call in an independent so-called expert who will review the work done by the subcontractor. They will say that it is substandard; it does not meet the specifications. They will then get someone else to rectify it and charge an exorbitant price against the bill of the original subcontractor. In that situation, the subcontractor has the right to take legal action; but, in the terms of what the value of that payment may be, the subcontractor will normally have to walk away from that contract. We hope these amendments will make sure that those types of things, particularly in the construction industry, do not continue to happen.

The coalition is committed to small businesses in Australia. Unfair contract terms can come in a variety of forms and can be used to shift risk to another party who may not be well placed to manage it. For example, the contract may permit one party to unilaterally vary terms, limit their obligations, terminate or renew the contract, levy excessive fees on outstanding moneys, as I just mentioned, or affect the availability of redress. So, in designing the legislative amendment, the government consulted extensively with the stakeholders. This transaction value threshold was chosen so that the protections apply when small businesses engage in day-to-day consumer-like transactions, while encouraging them to conduct due diligence on large contracts fundamental to the success of their businesses. The reason we chose the prescribed threshold of $100,000 or $250,000 for a multiyear contract is to say that we are the government that looks after small business in this area, not big business. It is a well thought-out, well consulted piece of legislation, and I commend this legislation to the House.

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