15 Feb 2018

In a move described by Subcontractors WA as “unprecedented”, the administrators of insolvent construction company, Cooper & Oxley, have set up special purpose bank accounts to ensure subcontractors are paid to complete their works.  These special accounts, often called Project Bank Accounts (PBAs), are compulsory in government building projects worth between $1million and $100million, where they must be set up before the works commence, as a condition of contract award.

If PBAs are set up early and correctly, they can be effective in protecting subcontractors and suppliers of building materials, plant and equipment, from losing out to the banks when the head contractor becomes insolvent.  PBAs offer this protection because they operate as trust accounts that are placed beyond the reach of the liquidators and administrators of insolvent head contractors.

One way for banks to get around the protections that PBAs afford subcontractors and suppliers is by registering security interests on the Personal Property Securities Register.  This was recently considered in the case of Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (In Liquidation) (Receivers and Managers appointed) [2017] WASC 152. In that case, the WA Supreme Court said that where:

  1. a head contractor borrowed money from a bank or other lender;
  2. that lender registered a security interest over the assets of the head contractor to secure repayment of the loan with interest; and
  3. the head contractor then became insolvent and therefore unable to make repayments on the loan,

the head contractor’s assets that were used as collateral for the loan basically become the property of the bank.

In the case of Forge, the assets in question were basically progress payment claims, or in other words, money that the head contractor had a right to be paid for work done under a construction contract, but had not yet been paid.  However, there is no reason in principle why a PBA would not also become the property of a lender that has a security interest registered on the Personal Property Securities Register against that PBA.

The WA government has dealt with this issue by requiring construction contractors tendering for government contracts between $1million and $100million to arrange for their banks basically to give up their right to enforce their security interests in a way that defeats the rights of protected subcontractors and suppliers.  And that is effectively what the administrators of Cooper & Oxley are seeking to do: that is, to get banks and other priority creditors to agree to forego their right to take part or all of the progress payments that subcontractors will be claiming to complete the works commenced by Cooper & Oxley before it went into voluntary administration.

This sounds like a hard ask, but really, when you think about it, it is actually a way to let the banks have their cake and eat it too, whilst at the same time, keeping subcontractors on site, doing productive work and earning a living.  This will be achieved in two ways:

  1. First, the administrators are not proposing to interfere with the rights that the banks already have to progress payments claimed before Cooper and Oxley’s insolvency.  Where the law says that a bank is entitled to take monies that were intended as a progress payment to a subcontractor or supplier, the administrators will let the banks have those monies, as the law requires them to do.
  2. However, as an incentive to subcontractors to see out their works to completion, the banks are being invited to forego their rights to all future progress payments where the exercise of those rights would mean that a subcontractor or supplier misses out on any further payments.  Practically speaking, this may be seen as the only way to keep the existing workforce of subcontractors on site and completing the work that they have started. So, by giving up some of their legal rights in the short term, banks are likely to gain more in the long run.  What they ultimately stand to gain is access to the money that will only become available to them once the works are practically complete.

Overall, then, the administrators of Cooper & Oxley should be commended for adapting the latest thinking in relation to construction project financing in a way that represents a win-win for subcontractors, suppliers and lenders alike.

HHG Legal Group has long been at the cutting edge of research and law reform in the area of construction and insolvency and often presents to industry and professional audiences about the use of PBAs in construction projects. For information about how PBAs may benefit your construction business contact our expert construction law and litigation team.

DANIEL MORRIS | Download as pdf

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office at reception@hhg.com.au or call us on 1800 609 945.


100 years of Supporting West Australians

"My family law experience with Mary Roubos has restored my faith in solicitors in general. She not only demonstrated her legal expertise and flair, but also showed a compassionate and understanding nature during the lengthy process. I felt that Mary went above and beyond her obligations as my solicitor, and really listened to me. I would highly recommend Mary and her assistant Debra Wilson, who also demonstrated professionalism and excellence on all levels."

Renee Frangiosa

"Always fast and thorough service. Thank you"

Sitka Pil

"I found Ben most helpful and always prompt to let me know where things were at. Will definately use Ben again and will recommend to others."

Gerrit and Mary Van Bralal

"We wish to express our thanks for your help in attending to our mother/ wife's will - Mrs Grace Margaret Vessey. Aimee was extremely helpful and easy to deal with. We are greatful for your help with our affairs."

Ms Rosalyn Norman, Mr Stephen Vessey

"Thank you ever so much for all your hard work on my case Nicole, I really appreciate everything you did for me."

Workers Compensation Client

"Thank you for such great assistance with the transaction of Flying Domestics on behalf of Lorna Good. It has been such such a pleasure to work with the HHG Legal Group and I look forward to working with you in the future."

Jim Goodwin

"Simon Creek and his team were at all times empathic, professional and confident.  My matter needed to be addressed within a pressing time frame, and their availability at short notice and contact after hours was much appreciated.  It caused me considerable stress, but having such a thoroughly reliable and competent team to call on helped me to feel in control. Although I hope not to need their services again in future, I would be confident in doing so!"

Dr Lana Bell

"A good outcome is what we can expect.  A great outcome is a sign of a company which does the very best for their clients. A very big thank you to Daniel Morris for showing empathy towards my small and much needed legal action.

To HHG Legal Group, thank you for a great outcome.  I would recommend your company to anyone seeking legal services."

Jan Atkinson

"Your support this morning was amazingly kind, not to mention your totally reassuring competence, knowledge and wisdom that you used on my behalf.  It was extremely reassuring to have your knowledgeable support, and I particularly appreciated your real and obvious kindness to me. It means so much at a very difficult time. I'm so grateful to you."

Family Law Client

"I highly recommend the services of HHG Legal Group for both personal and business needs. HHG is very up to date with legal advice and are in tune with the evolution of business."

Robert Forgione

"Sue and myself would like to thank HHG for the way in which our dispute was resolved. It is good to know that people who do not have an understanding of the legal system can rely on people like yourself and the company you represent. Without the assistance of HHG we could not have resolved the problems we were facing, not only have we resolved the issue but the outcome was more favourable then we would have thought possible. Thank-you and please pass on our thanks to all those who worked behind the scenes to achieve this outcome."

Rick and Sue Ashton

"Janene was very professional and we established a good rapport quickly. The subject of death and wills can be quite confronting to deal with, however Janene's approach was soft and accommodating."

Lynette Livesey

"A big thank you to HHG for their professional service, continued support, and wide range of legal knowledge. Our clients have given us nothing but kind words regarding HHG Legal Group and so we have no hesitation in referring and recommending Simon Creek and HHG Legal Group for their outstanding services and legal expertise."

Nigel Plowman, Director at McKinley Plowman & Associates

"Simon is a friendly and practical legal advisor. I have received great feedback from the clients I have referred to him and his team at HHG Legal Group."

Richard Beal, Director at BDO

"Over the last few years, I have been impressed by Simon’s legal ability, management skills, entrepreneurial spirit, personal integrity and people skills. He appears to be that rare breed of lawyer – both knowledgeable and commercial."

Michael Malone, Founder of iiNet

"Our family has been a client of HHG Legal Group over many years and most recently in 2013 and February 2014.  Business has included drawing up of wills for three generations and preparing of probate for my father in law.

I would have no hesitation in recommending HHG Legal Group to anyone requiring such services."

Bernice Climie

"You should be congratulated for the manner in which your staff address clients and we found our dealings with your company, once again a very pleasant experience and we would like to truly thank you for your efforts."

Steve Harvey and Jane Powell

"HHG Legal were absolutely fantastic. Extremely responsive and brought calm to our chaotic family situation through their knowledge and caring attitude. Extremely professional from our very first contact with them and they expertly guided our family though the required legal process over almost a 12 month period."

Amanda Williamson

"Fantastic team! They really care about their client. Tim Colcutt is a 'go that extra mile' guy who gives his client his all. I can't recommend HHG and Tim enough."

Kerry Samson

"Anne Hurley has been such a valuable resource of information and advice, her wealth of knowledge is truly impressive and her ability to explain things in a way that makes them easily understood is very much appreciated. Anne and the wider HHG Legal Group are always a pleasure to work with."

Giorgia Parham

"I had a fantastic lawyer in Anne Hurley. She helped me out a great deal with good, sound advice in a friendly , professional manner. First class, thanks Anne"

Graeme Hammond

"Marine Plant Systems has been working with HHG Legal Group for a few years now and they continually provide first class service. Their professional advice has been invaluable to our company."

Carolin Grimm

"We were kept up to date at all times. Pricing was always updated over the time period so we remained "in budget". Personal access to someone whenever I had questions. All in all a great experience without too much fuss."

Rosslyn Tasker - COO AltusQ Pty Ltd

"Good service you can count on."

Miles Lee

"HHG Legal Group have provided outstanding support as I have taken the journey of buying a business, their professionalism is beyound reproach. Their assistance throughout the Due Diligernce process have been invaluable, I would fully recommend them."

Mark Armitage

"I have experienced how good the HHG Legal Group team are over the last 6 years and highly recommend them."

Lyn Hawkins

"Very friendly and efficient service - what a pleasure working with Anne."

Jacques Taylor

"I highly recommend Daniel from HHG Legal Mandurah. When dealing with a complicated legal property matter recently I was extremely impressed by Daniel's honesty and integrity and the legal advice I received. I am very happy with the service from HHG Legal."

Tony Walker