Fighting For Subbies Rights
A 2nd year Uni student sent me an email today;
"I am a second year uni student and for our final project in the Contract Law Module we are required to research a building project that has gone south. Most of the information I need I have been able to find on Google however for the purpose of demonstrating our understanding of Contract Law we are required to find out what type of contract was used in the failed project and if it could have been better".
My answer to her;
The contract we signed with them in late August 2016 was a Standards Australia contract number AS4901-1998 and was amended by CDI Lawyers and reproduced.
Cullen was the catalyst for me really firing up SubbiesUnited to change the industry for the better.
We do fencing, screens and balustrade.
No building contract is fair, they are always one sided and completely unfair but they certainly couldn't be any fairer for a builder.
When the builder defaults on payment, we can give them notice but under the contract we are required to give them 7 days notice before ceasing work until payment has been made. In that 7 days we may have installed another $50,000 in product getting ourselves in even deeper than we were.
Contract terms
The contract contains the usual provisions which require you to perform work, and invoice for that work, with payment due later, and with an entitlement to suspend and then terminate the contract on notice if payment is not made within the contractual time frames.
The contract does not contain any provision which would entitle you to security from Cullen or any builder, prepayment for work.
Monthly claims are allowed. Cullens contract - Clause 37.1 requires you to provide ‘claim documentation’ two days prior to making a claim, and the claim is due to be made on the 25th day of the month. (The date for submission of the claim is in item 31 of annexure part A).
There is a different time frame for the claim made after Practical Completion, and for a final claim after the end of the DLP (again, item 31 of annexure part A).
The claim is then assessed by the superintendent. The amount of the claim as assessed is due for payment 25 business days after receipt of the progress claim (ie weekends and public holidays are not included in calculating time). The clause reference for this is clause 37.2.
If payment of the claim as assessed is not made on time the main contractor is in default (clause 39.7(a)(iv)
Clause 39.8 allows you then to serve a notice to show cause. We have to give 7 days’ notice and if Cullen does not pay, we can then suspend the work if we have not been paid (clause 39.9).
We then have to wait another 28 days before you can terminate the contract for non-payment (clause 39.9).
Negotiations
There is often a practical way around the time frames. If they are applied strictly you can be left waiting for payment for a long time – you can’t claim until the end of the month, you then wait 25 business days, you then give a 7 day notice, and then you may have to wait a further 28 days before you can terminate. In ‘real life’, this may take to you to 2.5 months before you can terminate.
For one month of that time period you can suspend work, but for the first six weeks the contract requires us to continue performing work.
The practical answer is generally to encourage or persuade the main contractor to adopt a more realistic approach to meeting your cash flow needs. You need to be careful that you don’t overstep the mark, and show an intention not to follow the contract requirements to keep performing the work as required by the contract.
If you do that, the main contractor may try to argue that you are in breach of contract.
I now negotiate very hard in regard to retention of title clauses, short payment dates and I don't sign contracts with Liquidated Damages or retentions because under ACCC laws, we are required by law to give a warranty, why add another layer to it for free?
If the builder doesn’t like my terms, they can find someone else.
With Cullen our first claim was unpaid.
How would you feel if you worked for 6 weeks, put your hand out for your pay and your employer said “we have no money to pay you, you will get paid when we get paid.
Following is an email I sent to the principal of Cullen Group re non payment of our account.
Hi Wayne
Our administration manager spoke to the lady in your accounts department in regard to payment for the September invoice which is now due (attached).
Your staff could not give our admin or myself a payment date. She said you are waiting on funds and while I understand the constraints of cash flow, your non-payment is affecting our cashflow.
I have already put a lot of resources into this job to get to the stage where it is predominately installation required from us to finish it but we need to be paid on time as per the contract.
You can only imagine the angst it causes when the time comes for payment of the first AND second claim, we are told the same thing, that Cullen is waiting on money.
Couple that with the publicised default judgement in March awarded against Cullen for $73,610.99 and you can understand why I am extremely concerned.
Our company subscribes to Creditor Watch, I am extremely disappointed in them for only publishing that judgement in October, 7 months after the judgement.
When our first payment was due on the 6th of October, we were told by your admin and Construction Manager the same thing then as were told today, that Cullen had just finished a number of jobs and were waiting for payments.
That invoice was finally paid on the 14th October and then only after numerous calls between myself and your manager when he said “I will help you out”.
To me that is an insult, paying an overdue account 8 days late is not “helping out”.
We don’t need help, we need prompt payment.
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?
It gives me no joy to be put in a position to have to write an email like this so if you can come to an arrangement, please call me on
Future ramifications of this email
An email like the one above can have a negative flow on effect. The director of Cullen Group would have known he was trading insolvent for 12 months before I signed a contract with him.
The new Cullen liquidator did his job under the corporations act and pursued everyone for preferential payments who had sent Cullen an email or letter demanding payment.
I received a letter of demand for a "voidable transaction". The liquidator said the email I sent was a clear indication that I knew Cullen was insolvent and that the money I was paid was a “preferential payment”.
Can you imagine going to work every day, pouring your money and resources into manufacturing product for a builder when you have no collateral or guarantee that at the end of the day you will be paid.
At the same time we continue to pay our staff, pay the rent, the ATO, Super, our suppliers and hope at the end of the day there is enough left to feed ourselves.
After all that, If we am lucky enough to ream some of our hard earned money out of the likes of Cullen (he was one of about 34 builders who liquidated last financial year) then the liquidator wants to take it back as a preference to add insult to injury.
The building industry is really an absolute bastard of an industry overseen by unmitigated fools and needs a major overhaul.
As you can see, you need to be a lawyer to understand a building industry contract or at least the services of a lawyer and even then you can still be sued for a voidable transaction.