New Zealand
New Zealand matters to this vault out of proportion to its size because it is the world’s clearest natural experiment in the retention-trust alternative to abolishing Construction Retention Payments. New Zealand has had statutory Construction Adjudication since the Construction Contracts Act 2002, but its distinctive contribution is the retention-money regime — and the lesson of that regime is that legislating a trust is not the same as protecting the money.
New Zealand [relates] Retention Trust and Project Bank Accounts New Zealand [part-of] Prompt Payment Legislation
The first retention regime was added by the Construction Contracts Amendment Act 2015 and took effect on 31 March 2017, largely in response to the 2013 collapse of major contractor Mainzeal, which left a trail of unpaid subcontractors after retention monies had been used as working capital. The regime required head contractors to hold retentions on trust for subcontractors. It then failed its first real test: when Stanley Construction Ltd went into liquidation in 2019, the company simply was not holding the retention funds on trust as the Act required, so there were no funds to pay subcontractors. A 2019 KPMG implementation review for the government found widespread non-compliance, co-mingling of retention money with other funds, no penalties, and unclear trust requirements.
Mainzeal [precedes] New Zealand New Zealand [supports] Construction Payment Problem
The government responded with a second reform — the Construction Contracts (Retention Money) Amendment Act 2023, in force 5 October 2023 — which made the trust automatic, required retention money to be held in a clearly labelled account at a registered New Zealand bank separate from other assets, mandated quarterly reporting to subcontractors, created offences for non-compliance, and let subcontractors access retentions on a head contractor’s insolvency without a court order. Only the second version put real teeth behind the trust.
New Zealand [contradicts] UK Late Payment Reform 2026
This two-stage history is direct evidence for the vault’s central reform debate. It shows the retention-trust model can work — but only with ring-fenced labelled accounts, mandatory reporting and penalties — and that a trust obligation without those features is not complied with in practice. It is the strongest cautionary precedent for the UK’s 2026 choice between regulating retentions in trust and banning them outright.
Connections
- Retention Trust and Project Bank Accounts — NZ is the lead example of the trust model, source: 2023
- Mainzeal — collapse that triggered NZ retention reform, source: 2013
- Construction Retention Payments — practice the NZ regime governs, source: 2023
- UK Late Payment Reform 2026 — NZ trust model is the contrast to UK abolition, source: 2026
- Construction Adjudication — available in NZ since 2002, source: 2023