The amendments provide that the retention monies are: • not available for the payment of debts of any creditor of party A other than party B, and • not liable to be attached or taken in execution under the order or process of any court at the instance of any creditor of party A (other than party B). Implications for Owners and Head Contractors Under the new regime, sufficient liquid funds will need to be held on trust to cover the full value of the retention monies. The reforms will prohibit any contractual provisions: • making the payment of retention money conditional on anything other than the performance of B’s obligations under the contract, • making the date for payment of retention money later than the date on which B has performed all of its obligations to the standard agreed under the contract, • requiring B to pay any fees or costs for administering a trust, or • having the purpose, among other things, of avoiding the application of any of the provisions of the new regime. Implications for Funders and Borrowers The new regime effectively creates a statutory super-priority for contractors in respect of retention monies over claims by secured and preferential creditors (e.g., investors, employees, and the Revenue). The new law therefore has potential impacts on project finance. Implications for Insolvency Practitioners The context in which the statutory trust regime is most important – and the policy concern to which it is primarily directed – is the insolvency of the party holding the retentions. Insolvency practitioners are therefore likely to be on the front line of the early test cases under the new regime. Some potential scenarios include: • An insolvent party holding retentions for multiple contractors in its bank account fails to account for the funds as retention monies. Who is entitled to the monies: the contractors or the company’s secured creditors? o In the context of contractual obligations to hold retentions on trust, the common law position is that no trust is created until the monies have been set aside. Once the funds are set aside, they are impressed with a trust and the contractor has beneficial ownership of the money. Otherwise, no trust arises and the contractor would be an unsecured creditor.6 o However, that outcome would be contrary to the evident purpose of the statutory regime – which is to protect subcontractors against the consequence of the head contractor’s default – and arguably inconsistent with section 18H, which provides that retention monies are not available for the payment of debts of any other creditor. o Furthermore, even if the owner or head contractor properly accounted for the retentions, the funds may nonetheless be commingled under the CCA; i.e., there may be no separation of the company’s own monies (subject to security interests) and the monies held beneficially by each contractor (subject to statutory trusts). Equity can trace trust assets but the principles and their application are not straightforward. • The receivers or liquidators of a company holding retentions obtain advice that the company has a good, arguable basis to withhold the retention money on account of defective workmanship, but that there would be litigation risk.