Fighting For Subbies Rights
Building Company Liquidations & Illegal Phoenixing are rampant under the noses of the industry watchdogs while they peacefully sleep
What is a Phoenix? It is a new company rising from the ashes of the old liquidated company. It's a get rich quick scheme for crooked builders and developers with little or no consequences for those that participate.
This is how the get rich quick scheme works
1. Builders that wish to maximise profit or get out of a tricky financial situation go and see consultants (Pre Insolvency Advisors).
2. These consultants know liquidators and solicitors that will be "friendly" to their needs.
3. A new company is created (Phoenix).
4. The original company engages in a process of avoiding payment obligations as much as possible.
5. Contracts and the retention monies held by the developers, the most valuable assets, are transferred to the new company.
6. the new company takes up where the old one left off.
7. There is no magic accounting practices or legal loopholes being exploited.
8. They are simply relying on the lack of enforcement by enforcement agencies such as the QBCC and ASIC.
9. The crime is inducing subcontractors to provide goods and materials from the date the original company was insolvent or a phoenix decision was otherwise made until the time the company goes into liquidation in the knowledge that the original company should have been liquidated earlier.
10. The crime is so rampant that there are Pre Insolvency entities openly advertising their services.
A select group of lawyers, accountants and liquidators have been facilitating an illegal phoenix trading scheme targeting the unsecured revenue of Qld building and construction industry subcontractors (small business).
7% of Liquidators get 51% of Building Liquidations
Only 7% of liquidators get 51% of the building industry insolvency work. The other 49% of building related insolvencies are shared by 93% of Liquidators.
The only conclusion we can come to is it's because 93% of Liquidators are not part of the pre insolvency referral network. The massive imbalance tells the whole story.
Since the collapse of the Walton Construction companies in late 2013 there have been 3500 subcontractors suffer losses of in excess of $450 million in QLD alone. Not long after Walton Liquidated, their Phoenix company Peloton Builders also liquidated destroying even more subcontractors.
Newman Government Changes Helped Proliferate This Fraud
The Newman governments 2014 changes to the Building & Construction Industry Payments Act (BCIPA) opened the door for this fraud to occur on a grand scale. The Minister responsible should have stuck to refereeing football games. An investigation should look into exactly which organisations lobbied the Newman Government to make these changes.
These changes have contributed to costing subbies and suppliers almost half a billion dollars. It's not just about the dollars, some lost their homes, their families and their lives but still, no one in the halls of power do anything constructive to stop it.
There was a senate inquiry in 2015 that addressed this nationwide fraud but nothing has been done since.
Many of these liquidated companies had Phoenix operations up and running. Some have since liquidated such as Walton's Phoenix Peloton Builders.
There was a public warning issued by the QBCC about Cullen Groups Phoenix Onpoint Construction Pty Ltd soon after Cullen liquidated.
We believe that public warning was issued because at that time there was an announcement that the Government was cracking down on Illegal Phoenixing. Since then, nothing has been done about subsequent cases despite SubbiesUnited and Subcontractors Alliance providing evidence of Phoenix operations on a number of occasions to the QBCC.
Since Walton in late 2013, there are over 25 large builders who have liquidated with evidence of Phoenixing. One Gold Coast builder has fled to the USA on a one way ticket leaving subbies unpaid.
There are directors of some of these companies who have liquidated 3 times, they are then permanently excluded by the QBCC. One has liquidated 5 times. Unsecured subcontractor are always the biggest losers.
There are a lot of liquidated building companies we haven’t listed and dozens more in serious trouble such as Rimfire Constructions (Qld) Pty Ltd with their QBCC license cancelled.
Its BOOM time in the industry and BOOM time for 7% of builder friendly liquidators, their accountants, pre insolvency advisors, their lawyers and liquidating builders voraciously feeding off subcontractors hard work.
If it's BOOM time for them, its the Great Depression for Subcontractors.