Is Privium Pty Ltd insolvent?
Any money that subcontractors and supplies claimed before 1st November 2021 and remains unpaid is now overdue by any measure and we know that creditors have Put Privium on stop credit for that reason. The payment time limit has expired.
Therefore it is beyond doubt that this company is insolvent and is now burning up time.
Unless there is a cash injection by shareholder or directors, it is unlikely that Privium's insolvency status will change.
All creditors and home owner will be better off the sooner this company goes into liquidation. We call it a quick kill.
One of the problems for subbies is that any payments received in the 6 months before insolvency, depending on the method of claiming overdue monies, can be considered by a liquidator as a preferential payment (see link at the bottom).
The exception to that is the longer there is a delay in appointing a liquidator, the more it benefits the shareholders and directors of the company taking into consideration the 6 month relation back period for preference claims.
What is happening with Privium is almost a daily occurrence in the Queensland Construction Industry. The difference here is the size of the builder.
The main complication is the fact that they operate across the 3 Eastern states so no one size fits all.
Home owners who signed contracts with Privium are not faring well. It's a waiting game and while they wait their lives are on hold and their finances are suffering with holding costs, increases in material and the cost of land and housing skyrocketing.
Many of them live in hope, its understandable because they don't know how builder insolvency works, for most of them, this is their first rodeo.
Home owners are not able to sleep, they are angry, some of them are praying for divine intervention but as usual, there is no one coming to save the day so you will need to help yourselves.
Are you all in this together?
No you are not. While the sentiment is that you are all in this together, in reality it couldn't be further from the truth.
While you have things in common, your situations are all different, your contracts are at different stages. You are in different states with separate industry oversight. You will all go your own way to get your builds finished when the opportunity arises.
Others have paid deposits and their builds have not started so do they get their deposits back? That depends on which state they live in and what their home insurance covers. I would think that would be covered but you need to check and that is providing Privium actually took out an insurance policy for you. A builder this deep in trouble no doubt would have cut corners.
Others who could be considered the lucky ones, have homes finished and occupied and in need of maintenance but no one is coming and no word from Privium.
Others have homes almost finished but not handed over so there is the worry that it will be vandalised causing further setbacks.
This is a logistical nightmare but one most of you can find your way out of with good advice and clear thinking.
Now is not the time to be having an emotionally good time and while it's human nature to do that, now more than ever, you need to stay calm, you need to think with clarity, act with purpose and not panic.
The first item of business is to get legal advice so that you know your contract, the terms of the novation and what it means for you financially.
Only some Queensland contracts are being novated to the new builder nominated by Privium and that builder is Torsion Pty Ltd.
While not intending to cast aspersions on Torision, do you feel comfortable signing a contract with the company Privium has recommended after what Privium have done to you?
There may be other builders involved. The contracts Torsion are accepting are first home owners and investment houses. We don't know what is happening in NSW and Victoria as Torsion are Qld based and licensed.
You need to be sure that the company you are contracting to build your house has a good track record and is financially viable so do a licence search on the QBCC website. Read the licence carefully, no matter who the builder is you're researching. Don't take their word for it that they are financially strong, ask for proof.
You could also do a directors, key persons and licence nominees search to satisfy yourself of the history of those to whom you are now entrusting your build.
Your solicitor will have other searches they will recommend.
Politicians do nothing, the Qld Minister for housing and public works stays silent, the QBCC sit by while Privium still holds an active licence even though their intentions have been made clear, homeowners lives are on hold.
Novation of contract in Queensland
Privium's lack of communication is abysmal but its not unusual for a builder in the death throes to bunker down with little communication.
The novation of contracts to a new builder is in itself a huge task and one fraught with danger and that is only in Queensland, without considering NSW and Vic
What are the ramifications of transferring a contract from one builder to another?
The ramifications depend on the terms of the novation and the viability of the company to whom the contract is novated.
However, there are two novations that must occur.
A novation requires the agreement of all three parties. That is the homeowner, the old builder and the new builder.
Same for the subcontractors. The old builder, the new builder and the subcontractor.
Problem for a lot of subcontractors is that their subcontract normally contains an "agreement to novation clause". These clauses may not be as conclusive as you think, you need to get legal advice.
The first is between the homeowner and the builder, the second is between the builder and the subcontractor. Two separate agreements with different terms.
In the past we have seen novations where the novation is poorly executed where a subcontractor is contracted to Builder A and the subcontractors simply gets told they are now working for Builder B without clear legal documentation being put in place.
In those circumstances it is more like the termination of the first contract and a new contract with Builder B without builder B agreeing to pay the old debts.
The viability issue is clear.
If the company the contract is transferred to only agrees to pay debts arising after novation, it is akin to the builder going under and a new builder taking over.
If it is a true full novation and the new builder pays everything under the building contract, then happy days but that is a most unlikely scenario.
There is also the question as to what the agreement provides with respect to retentions.
As to the issue of a novation between the builder and the homeowner where the project has not started, the only real issue for the homeowners is that they are not having a house built by their first choice builder. There may even be benefits if they move up a list.
Will the new builder increase prices to be able to complete the build? Economics would indicate they would have to. Privium could not make a profit so how does a new builder hope to complete the builds at the same price with costs rising rapidly?
Credit for new builders
Do subcontractors who gave credit to Privium and remain unpaid, move over to the new builder and put their trust in them?
Do they extend credit terms to a new builder after being burnt by Privium? Clearly Torsion has been in talks with Privium for some time, at the very least for weeks but we assume much longer than that. Has Torsion been in talks with Subcontractors who they will need to finish the builds?
That is a question to ask the prospective new builder and get the answer in writing.
As Privium said on the 25th October 2021, Torsion understands our systems and is able to work with us in an efficient manner to ensure active jobs will be able to proceed largely uninterrupted".
Understanding a builders system takes time, with Cullen Group, they introduced a new system in mid 2015 and the director claimed it still had major issues and anomalies 18 months later when they liquidated on 22nd December 2016.
Do you believe what Privium said in regard to novations? How can a new builder make ends meet with the same contracts when a builder with Priviums longevity in the industry and with their 20 years of experience could not?
What are the terms of the Novation in the contract?
Privium's current track record is poor, there is no communication with hundreds of owners, subbies, suppliers and the media. The longer they remain silent, the more it indicates the imminent appointment of an insolvency practitioner and that cannot happen soon enough.
Do large suppliers give credit to a new builder after being burnt by Privium? No would be the answer. There are plenty of suppliers in that situation and more will come forward as this disaster unfolds.
At this early stage, if they say that the debt owed to creditors could be 26 million, you can be sure that it will be 2, 3 or 4 times that debt, it always is. The early estimates are always well under the real cost.
Pre Insolvency Advice
Who is the liquidator or pre insolvency adviser to Privium? They will have had advice going back months and the advice given is never good for creditors and home owners. It's always designed to protect the builders assets and to defeat creditors.
It's alway about what is best for company directors. The pre insolvency industry is one of the worst, most morally bankrupt factors in any insolvency and there is rarely a paper trail leading back to them. They cover their tracks very well.
Guidance
It's an unholy mess and home owners need some guidance so where are the Privium directors and where is the QBCC in all of this?
The QBCC would be doing what they always do, sitting on their hands, keeping Privium licensed so the contracts can be novated to other builders to save as much of their home owners warranty insurance as possible. After all, that is where most of their profits come from.
Are the QBCC having a close look at the new builders as the contracts are novated? What about other states watchdogs?
In Qld the QBCC at some stage will suspend Privium's licence but by then, it will be too late as always.
Unless the shareholders invest cash to prop it up it should be put down immediately.
The sooner that happens the sooner everyone can get on with their lives and begin the process of solving their problems.
In the old days we assumed it was in everyone’s interest to help a failing builder limp across the line. The following articles by our friends at whojungle set out clearly why the benefits to creditors and especially subcontractors are to have a quick kill.
http://whojungle.com.au/articlesfree/articlesfree/PreferentialPayments.jsp
http://whojungle.com.au/articlesfree/articlesfree/IsYourHandCaughtInTheLog.jsp
http://whojungle.com.au/articlesfree/articlesfree/HeroicProjectRescues.jsp
Subcontractors in Queensland have been reluctant to make monies owed complaints to the QBCC on the basis that if they do, the QBCC will suspend the builder’s licence and the builder will go into liquidation.
As outlined above, a quick kill is the best thing for subcontractors, creditors and home owners.
Subcontractors, for your own protection, join SubbiesUnited, we have 2 membership options available.
Disclaimer; This article is not legal advice.
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