Michelle Cirson (00:01.048)
Hello, welcome to the Subbies Toolbox Podcast. I'm your host, Michelle Cirson, construction adjudicator, lawyer, and the founder of the Subbies Toolbox. Lately I've been hearing a lot of people talking about fighting on the principle of it. This is something that over the years I've helped people do. And when I was builder side, there was a lot of talk of no, it's the principle of it. We need to make sure that the Subys know that this can't be done this way. And
I want to talk to you guys about the real cost of fighting for the principle of something and why I think it's better if you take the emotion out of it and look strategically at the cost-benefit of fighting with somebody. Now, guys, when I tell you about this story, there's going to be some temptation from some of you listening to think that I'm taking a view on transgender people andor what my beliefs are politically.
I want to caveat this podcast with none of what I'm talking about here has anything to do with politics or gender identification. I'm completely agnostic in those views in every single way. In fact, I'm probably so agnostic that I'm borderline ignorant on some of the issues around those things. So please, when I give you this example, I want you to take it from a legal analysis standpoint, because that's where I'm coming from it with, and the cost of fighting for the principle of something.
So many of you might have heard of the case at the moment that's in the court. I think it's called Giggle versus Tickle. And some of you might get a giggle about that, but my understanding is that there was a lady who had an app for for women specifically who were victims of domestic violence to find each other and share house together. And a trans person wanted to be.
Involved in that community and had applied to be part or had tried to be part and participate in that app. And the owner of the app said, no, you can't be part of that app because you're not female. So the matter went to court because the trans person felt discriminated against and took this app owner to court. And the courts looked at the law, the current state of the law.
Michelle Cirson (02:17.343)
And said yes, that would be discrimination. The app owner was required to pay the trans person damages and lost the case. Now she very quickly appealed that case, went to the Court of Appeal, and tried to have the court overturn the decision, saying that there should be anatomical ways that people can be classified and that the laws got it wrong in whether or not people are male or female and
That these places that are supposed to be curated to be safe spaces for a particular gender should be able to be protected spaces. She also lost that case in the Court of Appeal and then was her damages were effectively doubled. So she was the court said, no, not only have you discriminated, but we think you should have to pay the trans person more money for now bringing this to the Court of Appeal. So that's a bit of pill to swallow for somebody who is taking a
values-based standpoint on something that she's effectively fighting for the principle of it. Now the reason I'm giving you this example and not a construction example is because this will really highlight for you what the consequences of potentially fighting for the principle of something could be. Because the way the legislation is drafted in terms of what constitutes a female or a male by law at the moment
and there's a little bit of talk about how Julia Gillard changed legislation and there was warnings that people would be able to, any person people of any sex could just go into toilets and, you know, our young children would be confused by that and people could just never mind those safe spaces, there would be consequences. So there has been a lot of talk about this in the media and everybody is incredibly inflamed about it. I think it's a really
emotive topic and that's why I'm using this as an example to highlight for you what the actual consequences of fighting for the principle of something could be. Because the app owner has now crowdfunded a case that is going to go to the High Court to again contest the Court of Appeals decision about whether or not she discriminated against that trans person by not letting that person have access to her community. And this worries me because as a solicitor
Michelle Cirson (04:38.293)
I know that legislation is created by the legislature and we have what's called the separation of powers where judges are actually separate to the legislature. They're there to interpret the legislation that was written by the government and decide in accordance with the way that legislation was intended to be applied. Judges don't actually have the discretion to go off on a frolic and change something.
There are certain circumstances where interpretations can take into account public policy matters, but where the government has very carefully and purposely legislated a particular point, the court can only follow. They can't just change the legal instruments in the courts. They can interpret the intention about how it was supposed to be applied and then follow those.
The consequences of fighting for the principle of it in this situation could mean that this woman is going to finance, using crowdfunded money, finance a high court appeal where that person, the trans person who has is saying I'm being discriminated against, will be vindicated, quite likely be vindicated if there is no change to the legislation. Because the likelihood that the lower courts got it wrong consistently when interpretating legislation on that point.
To my mind is probably not high. They're probably not wrong about how the legislation was intended to be interpreted, particularly given when the amendment was made to the Act that there were discussions around public places where people could be segregated based on gender. So you've got somebody who is trying to advocate for a minority group who are vulnerable people, i.e. women in domestic violence situations.
Then you've also got another vulnerable minority group of people who are discriminated against, which is trans people. And both of them have very, very deep, deeply rooted values-based principles on this point. So you can see how both sides are fighting for the principle of it. In fact, the trans person where the court decision keeps getting appealed isn't trying to fight anymore. They've got the decision.
Michelle Cirson (06:58.527)
It's actually this woman who's trying to have it overturned. So the consequences are she could take this all the way to the High Court, and the High Court could decide she's wrong. And not only has she financed that, but now she will have been the reason that there is a High Court precedent that goes against the values that she is trying to fight for. So
This is, like I said, a very emotive topic, and I don't want to get too bogged down in the who's and what's and I I am fully appreciating and expecting that there will be comments that come off the back of this podcast. It's quite likely I could get trolled for this, that's fine. The principle that I'm trying to highlight here is fighting for the principle of it can backfire if you don't do it strategically. And the way this translates back into the construction industry is where
Upstream parties will take a view or a position to say, I'm going to impose something on you downstream party, and you have to work out what to do to get it fixed. And there will be times where the value of money that you are fighting for or the complexity of the argument because it's morally wrong doesn't justify or is not cost effective for you to actually go and fight for the principle of it.
Now, a good example of this is where two years ago there was a builder in Queensland who had their head contract terminated. And as a result of them having a fight with their principal up the chain, they then terminated all of the subcontracts underneath. And the plaster on that project had just put $2.5 million worth of materials onto that high-rise just before being terminated. And the contract wasn't clear-cut.
About whether or not he could be paid for unfixed goods. Now, the builder and the developer had fights in court about this very point, and the builder had some success in being paid for unfixed goods. And the plaster, in the meantime, had two portions of money that he was chasing. He was chasing the amount for work that he had carried out up to the point that he was terminated, and then he had an amount that the builder had already certified as due for payment under a payment schedule where he had
Michelle Cirson (09:20.269)
Put in a payment claim prior to being terminated, and the builder had issued a payment schedule. Now, this particular payment claim had to be put through the payment platform that the builder required the subcontractor to use. So the sub-e couldn't even just hand the builder an invoice, it had to be in the format prepared by the builder in the payment platform. Now I'm not going to name payment platforms, I'm sure you can imagine which one I'm talking about, but the builder populated the trade breakup.
And the format that effectively said request for payment or amount due or amount claimed was part of the software setup that the builder mandated the subcontractor use. So what happened was the builder was in a position where they didn't know whether they were going to be paid under the head contract when they terminated all the subcontractors. So they had they needed some time to work out whether they were going to be able to get that money up the chain. So they took the most aggressive.
aggressive position they possibly could against subcontractors at that point in time and said you're not entitled to this. You're not entitled to be payment for unfixed goods. Now because there was a multi-six figure amount that had been certified, the Plaster commenced court proceedings fairly quickly to try to recover that money. And in that court proceeding the builder argued that the payment platform format that the subcontractor had submitted its payment claim via
Did not request payment. Now that you can imagine was infuriating for that plaster. He had done precisely what the contract said he had to do. He had jumped through every single admin hoop the builder had asked him to jump through. The builder admitted that the amount was payable, but because they were in court and the builder's circumstances changed in the background, it was better for the builder to sit back and say,
I'm not going to pay that money. I'm going to try and argue every single legal jargon argument I possibly can to delay payment. Now, the reason I'm telling you this story is because while the plasterer was fighting for the principal of it, and I'm not saying that that was the wrong thing to do in this situation, I think he had to, he was owed so much money that he just really had to go hard at trying to get that money. But the builder didn't actually have the money to pay. So it wasn't that the builder was fighting on the principle of it.
Michelle Cirson (11:43.51)
We assume that the builder was just trying to delay making that big, big payment for as long as possible. And so it was cheaper for the builder to pay the lawyers for a court hearing and to do the legal submissions than it would have been to have paid the full amount that the pastor was chasing. So you can see how the decision tree from the upstream party, while you're down there fighting emotionally and for the principle of it, they're just looking at it from a calculated maths perspective. Can I afford to pay the lawyer to keep the can down the road?
Yes. Can I afford to pay the subcontractor the full amount? No, I can't. What choice do I have? I have to pay the smaller amount to pay to keep fighting. So sometimes you can be having an argument with an upstream party and you don't have all the information about how they're making those decisions. And if you continue to fight for the principle of it, there's every chance you might run out of money, you might end up with a massive cross order against you. For example,
The Giggle versus Tickle case that's going through the court. When you take something to a court of appeal and you lose, the normal thing the court will do is say that you have to pay the other party's lawyers' fees as well. So if that goes to the High Court and that person loses that appeal, can you imagine the legal fees that that person's going to have to pay back to the other party if they lose? And likewise, if she wins in the high court.
And this trans person is found to have had the wrong principle to be fighting on, or that the law has been interpretated interpreted the wrong way, it's quite possible that that person could end up with a cost order against them. And the consequences for that could be well and truly catastrophic. You don't know whether either party has the money to pay back the other party for the lawyers' fees if they lose. So when we're going through the process of deciding whether or not to fight an upstream party.
You need to expect in business that there are going to be times when it's not fair. It is not fair. You're going to have to be the bigger person, or things are going to really sting, and you will need to be able to look at it from a helicopter view and go, hang on a second, what would be the consequences of me fighting on the principle of this? And if I'm this angry now, how angry am I going to be if I get all the way to the point that the judge says whether or not
Michelle Cirson (14:07.059)
I'm right, and the judge says I'm wrong, and the builder is vindicated. Can I live with that outcome as a consequence? So, in terms of fighting for the principle of it, usually the reason I find that people will tell me that is because they're not prepared to just let them get away with what they're doing at that point in time. They need to feel like they've got at least some kind of agency or some kind of control over the situation.
There will be times in construction contracts when you are incredibly def dependent on that upstream party doing what you need them to do, and the upstream party knows that you are. And those are the moments, those are the windows in your accounts receivable escalation process where the upstream party knows that it's going to take you six to twelve, possibly four weeks, possibly four to five months to work out how to get paid. And this is where I see subcontractors doing.
admin measures that don't support your ability to get paid under the security of payment regime. So all around Australia there are special laws to get you paid in construction. And you really need to have an accounts receivable escalation procedure that mirrors that process and is not on the back foot reacting to what the builder is doing because the builders will press your buttons and they will try to keep you engaged or entertained over here while time's running out over there.
Or they will press some buttons that might get you chasing something in the wrong direction while you should have been over here simply applying for adjudication or doing something like that. So it's important that you know ahead of time, before you even know who the builder is and what the circumstances are, if you set the scene for how you will deal with aged receivables and you have a procedure in place, when you get in these situations where you go.
I need to fight this on the principle of it, this is inherently wrong and unfair. You can separate yourself from that problem, separate your emotions from that problem, and then escalate it in the way that is going to support you in the best legal way possible. Oftentimes, the way that you will be inclined to chase money will be counterproductive.
Michelle Cirson (16:27.125)
So a couple of months ago I did a podcast with James Starbuck from Jimmy Talks Construction and you'll hear in that podcast episode Jim saying to me, it is easier to lean into the positive parts of the conversation when someone's not paying you because the cost of me suspending work across five jobs where I've got nowhere to send these trucks to is exponentially worse. And in that conversation I said to Jim, but it's only revenue if they can actually pay you.
And he's like, well, that's dead right. And in my mind, I'm thinking you're actually not just believing and hanging on to a thread that revenue might exist. You're also still spending money on fuel. Yes, you're going to have trucks that are idle and men or workers or operators that need to be stood down. You might have off-hire costs where you have to get things picked up. But all of those costs, demobilization costs, can be claimed under security of payment laws.
If you suspend work properly in accordance with security payment laws. So being mindful that yes, I might not have anyone to send my workers to if I suspend work, and it's not a good business decision to just do no work for a whole month, how short-sighted is it to be frightened of that outcome? I would rather you be more open-minded and let me say.
incentivized in the very best way possible to go and find new work from somebody who probably has the capacity to pay you versus flogging a dead horse over here and just sinking more and more work into the somebody. And what you're effectively doing is when you sink more money into the job for the person who can't pay you, you're giving them the benefit of the work. So you're not giving them any incentive to find a way to pay you. That person is not bleeding from the neck at that point because you've got a you're the bandage around their neck.
So you need to actually let them feel the pain of you walking off that job for just long enough that they come running back to you and go, yeah, sorry, I was silly about that. Here's your money. So there will be ways in almost every single negotiation and commercial arrangement where you can find what is the dependency leverage here that I've got, even if I'm so dependent on getting paid that cash and I'm really hurting because they owe me a million dollars and I need to take.
Michelle Cirson (18:51.691)
Machines off five jobs and now find somewhere to send them to. Yes, that hurts, but what actually fasts forwards your demise is doing more work for longer for the same person who will never be able to pay you. You need to more quickly get yourself off that job and get down the road onto a job who can pay. So I wanted to bring that to your attention today because a lot of people have been saying to me in the last few weeks.
I'm going to fight this on the principle of it. And I've been telling them the story about Giggle versus Tickle, and when I explain it to them, they understand. They're like, yeah, it's wrong. I can see why both sides want to fight on the principle of it. Somebody's going to be found to be incorrect on the law. And the cost involved in getting all of that way, you know, there are public policy implications. For you in your business, it's not just a public policy problem, it's personal.
I was having this conversation with a block layer about two weeks ago and she said to me, Michelle, it is personal, it's our money. Those staffers over there, they're playing with Monopoly money. It is not personal for them. All they're doing is trying to comply with their cost reports and not get in trouble for the month. Some of them have already got jobs with other builders and they're ready to fly the coop. And here we are, this is our money, actually our money. It is putting food on the table, it is paying wages of so many families.
For people who we employ, and that's why it's personal. Now, I'm not saying to you that you're wrong for not being emotion for being emotional about this type of a problem. That is natural, that is completely normal. In fact, if you weren't worried, I'd be worried that you were quite quitting your own business. So it is going to be an emotional situation. The way to make sure that when you are emotional about it and you can see the face of the human being who is
Cutting the guts out of your progress claim and refusing to pay you or not paying your attention or trying to give you an unfair backcharge. When you have that rage and you're making decisions about fighting on the principle of it, you're more likely to be impulsive in spending money on a process that may be short-sighted. And if you have ahead of time, before you even know who the builder is, before you even know who the staffer is, you don't even know what the back charge is going to be for.
Michelle Cirson (21:09.675)
You have a procedure in place that will support you in making the best decisions. At the very least, when you are in that hot under the collar moment and you're trying to make that decision and you're feeling impulsive and you're feeling like you just want to go like a bull at a gate, you will have the procedure there to remind you what the deadlines are for the alternative process that you might be needing to use at that point in time.
And that can keep your eyes on the prize in terms of making sure that the builder doesn't distract you, the builder is not playing to your emotional position, emotional situation, and then keeping you distracted for long enough so that you run out of time to use the process that you need to use to get yourself paid. So hopefully that's helpful. I I really do say all of this with love in my heart and empathy because the only time I've
not been paid for an invoice was only for a couple of hundred dollars. Most of our clients pay us because their values aligned when they come to us and in fact I have more problems with people trying to pay me early than I do getting paid late. But the t the two times that it's actually happened, I've been pretty upset too. And it was only a couple of hundred dollars. So if you're in a situation where you're owed $10,000, $30,000, $50, $150, $7 million
I've seen it in all scales that people have been strung out and the upstream party is choking your revenue. Your decision tree will be impacted by your cash flow in a massive way. You just simply will not have options available to you if your cash flow is so heavily impacted. So having an accounts receivable escalation procedure that can support you every step of the way will make sure that you don't get too deep so far so that you're handing the builder.
cash flow leverage to stop you from being able to afford to get help so that you can get yourself paid. So that's all for today. My next podcast is going to be about what to put in your accounts receivable escalation procedure. So if you enjoyed this podcast, jump straight back into the next one and I'm going to ask a favor too, if you've been enjoying these podcasts and you're getting a lot out of them, please could you subscribe to my podcast.
Michelle Cirson (23:28.894)
and possibly even go to my show and give it a five-star review. Or any stars, if you think I'm dodgy and you don't like my podcast, give me the feedback. It can be really difficult to keep putting this much effort into putting things out into the world. And to be honest, it takes guts to put your face on camera and have to do this type of thing to get messages out to the industry. So if you guys can give me the little bit of encouragement and spur me on, I'd be so grateful if you could jump onto my show and give me a review or
If you don't feel comfortable putting your name on the internet affiliated with us, that's absolutely fine. But don't hesitate to share these episodes with somebody else who might need them as well. Until next time, get yourself paid.
