All subbies are vulnerable at times, some of us most of the time, to various industry hangers on, leeches, unconscionables, thieves and charlatan's.
Our vulnerability makes us an easy and lucrative source of income for all sorts of people on the peripheral of our industry such as Lawyers, PPSR "experts", Liquidators, Accountants, Pre Insolvency Advisors, Insurance schemes such as debtor insurance brokers. Its expensive but if you don't have cover when a builder liquidates, you could lose your business.
The financial feeding frenzy reminds me of the the great herds of vulnerable Wildebeest on the Serengeti Plains, providing a banquet for the prides of Lions and then the crocodiles during their migratory river crossing.
In the past we didn't need debtor insurance but once you become a victim of a liquidation, its something you feel you must have. Many smaller subbies can't afford it and the fee for lodging a claim means its not cost effective for them. The 5k claim cost and 90% recovery of the claim might be more than the debt so they just absorb the loss or go out backwards.
Many of these people wine and dine, scratch each others back, drive the best cars and live the good life on the back or hard working subbies. They lunch with each other and do deals to increase their massive incomes. The liquidators and lawyers laugh and joke and share around their good fortune... with each other.
We are vulnerable because shonky builders, accountants, pre insolvency advisors, lawyers and liquidators run their business like it's a protection racket. Keep it in house and it's been going on for as long as I can remember.
If contracts were fair and if the client was fully funded and paid the builder and if the builder paid the subbies, there would be no need for the industry that voraciously feeds off our industry.
We are vulnerable to builders promised payment schedules. Many are not worth the paper they are written on.
We are vulnerable to receiving our retentions on time if at all. Rarely are retentions paid on time, most of the time we spend months chasing money that belongs to us.
We are vulnerable to signing unfair 220 page contracts where one clause might tie into 5 others "for the builders insurance purposes". So, rather than sign our lives away, we employ the services of "expert" construction (contract) lawyers which adds to the cost and of course that extra cost, eats into any profit.
We are vulnerable to effectively administering those contracts, you almost need to be a lawyer yourself to do that, at the very least, a bush lawyer.
Subbies are vulnerable to accountants providing false and misleading information to the QBCC so that their builders can keep their licence when clearly they do not meet the Minimum Financial Requirements.
When the inevitable happens and those builders liquidate, we are vulnerable to voidable preferential payment claims if indeed we were lucky enough to be paid anytime in the preceding 6 months (the relation back period). Cullen is a perfect example.
We are vulnerable to accountants passing themselves off as experts in preferences when they hold no qualifications and are full of cheap advice that can cost business owners the shirt on their backs.
We recently had the misfortune of contact with a sanctimonious, self serving bean counter who was claiming he had all the answers when it came to how not to be subject to voidable preferences yet he has;
- No construction experience
- Is not a lawyer
- Is not a member of CPA
- Is not a member of Chartered Accountants
- Is not a member of ARITA
- Is not a member of TMA
- He's not registered as a Tax Adviser
- He's only a Tax agent (Glorified book keeper)
He was all care and no responsibility yet he passes himself off as an expert.
MY CONTRACT
Under my contract with a builder I had the right to give 7 days notice and stop work for late or non payment of our account. To be sure I notified the builder correctly under the terms of the contract, I got professional advice from a top end of town construction lawyer, $2,500 of worthless advice I might add. Below is what he told me to write to a builder who was late paying us.
My email also pointed out a CreditorWatch default against the builder which is not that uncommon in an industry where payment defaults are as common as there are thieving arseholes in this industry. It doesn't necessarily mean the builder is insolvent, just that he didn't pay someone and didn't turn up to defend the claim. Most subbies would not know the meaning of the word "insolvent" because they are too busy trying to make a living in this dog eat dog world.
Anyway, my email went on to say;
DEFAULT
Under Clause 39.7 (a)(iv) of the contract, you are in default with the September invoice (as you were with the August invoice).
NOTICE
Under Clause 39.8 I am serving you notice to show cause. I am giving you the required 7 days’ notice. If payment is not received in that 7 day period, I will have no option other than to suspend work – Clause 39.9.
The next invoice will be much larger, what guarantees will you give us that we will be paid on time in the future?
The liquidator found my email after the builder liquidated.
Despite the fact I received professional advice, the email was enough for the liquidator to tell me I ticked all the boxes and that I knew the builder was insolvent so he sued me for a voidable preference despite the fact the builder assured me he was just waiting on payments and that I would be paid.
I did't have access to his financials but the QBCC did and at that stage, he was still a fully licensed builder so why would I suspect insolvency if the QBCC didn't?
As far as a Queensland subbie is concerned, if a builder has a current QBCC licence, then according to the QBCC, THE BUILDER IS SOLVENT!
Go figure..
Lawyers defending their preference clients should be using the QBCC as a valid defence.
According to liquidators, subbies have to be mind readers and financial experts even surpassing the builders accountants and the QBCC.
We do not have all the answers on how to protect yourself and become less vulnerable in an industry with so many great white sharks circling but we are doing our best - unlike so many others.
I can say there is safety in numbers, we have some good information in regard to early warning and non paying builders for our members on our private members forum.
We should always remain vigilant to slow payers and do not put anything in writing demanding payment as it can come back and bite you.
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