Fighting for Subbies Rights
Update - 05.10.18 after the Cullen Creditors Meeting
Its with no joy that I inform you that creditors defeated Resolution 3 put forward by the liquidator for creditors to accept FEG funding. It was to be used for litigation against subcontractors for voidable preference transactions.
No joy because it should never have come to this. The stress it has caused to subbies cannot be described and its not over yet. The liquidator has other avenues of funding available.
In changing the liquidator, it was not the aim of creditors to get a dividend because we know it would be that small its not worth the pain it causes and certainly there is no desire by the majority for dividend at the expense of other subbies who were just doing their job.
If one is forthcoming down the track from developers or professional indemnity insurance or other sources, that would be a bonus.
There are so many reasons why subbies could not be expected to know Cullen was trading insolvent. We are not privy to a builders financials, we rely the honesty and professionalism of accountants (no doubt misguided trust) and on the QBCC to keep that under control and to that end, Cullens license was current and renewed in April 2016. That was 4 months after the liquidator has deemed him to have been trading insolvent.
If the QBCC didn't know, how were subbies to know?
We are not mind readers, we are not accountants, we are not forensic investigators, we are subcontractors working in the building industry, making these jobs rise out of the ground, plying our trades from daylight to dark and at times, 7 days a week.
Creditors main aim in changing the incumbent Cullen liquidator was we wanted to remove the liquidator appointed by the builder to a liquidator who was not aligned with the builder. While he says he is only doing his job, its not very "friendly" suing over 40 subbies for millions of dollars and using the subbies own tax payer dollars to do it.
We all know where the bulk of that would go if successful, to FEG (priority number 1), to the lawyers running the litigation and to the liquidator. We were told at todays meeting that as part of the agreement FEG would be the first in line for payment from any successful litigation.
If there were a few shekels left over, creditors might see a few cents in the dollar but the main beneficiaries of this injustice are those mentioned above.
Creditors wanted a thorough investigation in the pursuit of justice. We wanted to see someone charged with fraud and jailed as a deterrent to other building company directors who are considering going down this path.
In this case 45 million of creditors money has disappeared, where did it go? There was a phoenix shut down by the QBCC, who was meant to benefit from that?
Who are the beneficiaries of this money? Someone is and thats what we need to know.
I believe the liquidator has done a good job in that regard, we wish him all the success in the world with the public examination of the director and others.
Vote NO to resolution Number 3 at tomorrows Cullen Creditors meeting at 10am.
- Christies Conference Centre, Room E, Level 1, 320 Adelaide Street Brisbane.
- If you cannot attend in person, you can attend by conference call.
- Call - 1800 062 923
- Password - 7848 5951 7874# (hash key)
FEG Funding for Cullen, Is it really a Public Interest Issue?
Its my understanding that FEG doesn't offer funding to liquidators so the liquidator was the one who made an application to FEG for funding to pursue subbies for preferences which, if and when recovered, will be used to fully reimburse FEG for all those legal costs only incurred in litigating against those individual subbies.
A portion of the FEG funding is already in place but we need to stop FEG gaining any further advantage where we can. That includes a seat on the Committee of Inspection and to do as much as we can to force the liquidator to justify his position in court if the funding is to proceed beyond 3 months.
That is essentially what resolution 3 is about.
Our aim is to protect all subbies and those subbies who are being pursued for preferential payments should get some good advice.
On 22nd December 2016 Brisbane based builder Cullen Group Australia collapsed owing in excess of 30 million to unsuspecting Subcontractors and Suppliers. You know, all sorts of tradies, plumbers, carpenters, electricians, tilers, painters, paint shops, timber yards and the like.
It’s become a common story in recent times, you will have heard of them, many of us have been severely affected by them.
All builder insolvencies have one common element, Subcontractors and Suppliers are always left empty handed. Its fraud pure and simple and despite evidence of fraud being presented, the Police don't want to investigate, they say refer it to the likes of ASIC but you only have to look at the banking Royal Commission to know how useless and ineffectual ASIC are.
Following the Cullen Group collapse the immediate effect was devastating. Many of these mum & dad businesses could not survive the cash flow black hole. The result was their businesses collapsed leaving staff unemployed and the ATO unpaid. Those staff's entitlements would have been funded by FEG.
It also affected local business in the wider communities and so the effects continue down the supply chain.
Those businesses that survived, did so from the support of their employees, suppliers and families. Many of the business owners worked countless hours over many months trying to get back into the black.
So it came as a shock to those businesses and the construction community that the ATO’s department of Federal Employment Guarantee (FEG) was proposing to fund lawsuits against those exact businesses to clawback millions of dollars of “voidable unfair preferences”.
Why? The reason FEG wants to fund lawyers to sue these small Businesses is that they claim it's "in The Public Interest".
The law of preference claims almost defies logic from a construction industry view.
What is Deemed A Preferential Payment?
If a subcontractor is paid late (out of terms) in the last 6 months prior to the Builder’s collapse and made demands on the builder to pay their progress claims, the Subbie automatically is assumed to have known the builder was insolvent, therefore the payment received is deemed a preference claim.
If you’re a subbie or supplier, cast your mind back, when, if ever, has a builder paid every payment on a project on time without follow up emails, BCIPA or demands for payment from you?
We won't hold our breath waiting for a positive answer.
Picture this, most of us have been here;
- Your tender is successful, you win a job worth $500,000.
- Excitement abounds throughout your organisation in anticipation of all this work going forward, the security it offers to the employees and the potential profit at the end of the job.
- The contract says you can supply the builder with $500,000 in product, he will not sign off on PPSR, he does not offer collateral so the half a million of credit you give him is unsecured.
- Lucky you eh, you have won the right to offer a complete stranger half a million free of encumbrances to do with it as he will and you have to trust the slob.
- You don't know him from a bar of soap but you do your due diligence to the best of your ability.
- Part of that is relying on the fact that the building regulator has done their job.
- They must have because the builder holds a current QBCC licence and that can't happen unless they are financially viable right?
- The have to meet current MFR's for their licence category right?
- You get stuck into the work, order materials, hire more staff and manufacture the finished product.
- Your only real protection is trade credit debtor insurance which kicks in when and if he liquidates but that won't happen because he is currently licensed and there is nothing adverse on his credit rating. As a result you don't take out the insurance, you trust the system. Bad decision guys.
- You install half of it and are paid $250,000 2 weeks late.
- You prepare the rest and have it on site and installed to avoid liquidated damages.
- You have submitted your claim for 250,000, the remainder of the job.
- We won't even mention retentions, getting those back is like extracting blood from a stone.
- Out of the blue, the builder liquidates.
- You are shocked and deeply concerned at how you will survive, you are searching for answers.
Where do you turn to get funds to survive a 250k hit to you finances? But wait, there is more bad news coming your way.
You become an unsecured creditor of the liquidator who is now in control of the building company.
- The liquidator starts sifting through the builders emails and finds one from you demanding, almost begging that you be paid as per your signed contract.
- In your email you said "I have suppliers, rent, staff, Tax and superannuation to pay. The contract said I was to be paid 25 business days from the end of the month, its now 40 business days, under clause 12.15 I am entitled to give you 7 days notice and then stop work until you pay me".
That email ticks all the boxes for the liquidator to sue you for the $250,000 payment you received last month. He and the law says its a clear indication that you knew the builder was insolvent.
He has a current QBCC licence, the regulators who investigate his financials didn't know so how the "F" were you to know he was insolvent?
Is that an unfair preference, hell yeah it is, unfair to you that you did 500k of work providing goods and services, then were only paid for half of it and now the greedy bastards what that half back.
What are we meant to do, just sit back and say to the builder, yeah no worries, you guys keep the money. If we chase it we will only be sued anyway so f it, just hang onto it old mate.
If you are even a mildly emotional person, you know the absolute feeling of outrage and helplessness you feel at the injustice of what is happening to you.
Essentially you have won a contract for 500k, completed all the work and while you were paid half the money, they are taking that half back as a voidable preferential payment so you end up with nothing.
So instead of a 250k hit to your finances, its a 500k hit to your finances then add in the cost of the lawyers you have to hire to defend the voidable preference claim. Make it a 550k hit to your finances.
In every builder liquidation, the message from liquidators and lawyers is "burn subbies to the ground" because they are easy targets, they are the "low hanging fruit".
HAVE YOU EVER HEARD OF ANYTHING AS UNFAIR AS THAT?
Even worse, any money they claw back goes to pay the circling vultures, the lawyers suing you, the liquidators, the "secured" creditors like the banks and FEG but never the unsecured creditors, we are the mere serfs of the industry.
And people wonder why SubbiesUnited worked so hard to keep Bloomer Constructions out of liquidation. Imagine the field day the vultures would have had with preferences with that company. Sums of 35 million were mentioned, its no wonder a bevy of law firms were hellbent on tipping them into liquidation. Keeping them in administration cost the vultures millions of dollars in potential fees.
Recently a business that had barely survive the collapse of Cullen Group, later folded under the weight of Lawyers demand for $75k repayment of “preferential payments”. The subbie lost more than $200k for unpaid material left on Cullen sites. Regrettably he had to sack 35+ staff and wind up his business.
Of all the parties that played a role in the Builders collapse, Builder, Director, Developers, Licensing Authorities, Accountants and advisors, why is FEG targeting the businesses which are the most financial affected, the most vulnerable?
Is this really serving the Public Interest? How is it in the public interest to sue a subbie to the point where he liquidates his business putting 35 staff out of work. Many of those staff and their families would now be relying on the same Government to survive while they look for other work.
The ideology of FEG is to recover funds from insolvencies where it paid out employment benefits.
In the Cullen Group it was the employees who lost entitlement who are covered by the FEG safety net.
Remember FEG is part of the ATO, they are spending taxpayers money so there is logic to recover taxpayers funds.
Is logic in any way related to common sense?
Common sense you say? We all know by now those clowns we elect do not possess an ounce of common sense, its all about self preservation for them. They misuse and abuse the power we give them.
The problem in this instance is FEG is targeting small businesses that are already in financial distress. Preference payment or not, they can’t afford the legal fees to defend themselves from Lawyers funded by FEG’s deep pockets. So another round of employee sackings and insolvencies will perpetually occur putting more of their staff out of work who will then rely on the public purse to feed their familes.
Ironically and unfortunately, FEG’s actions are driving these small businesses to Pre-insolvency Advisors who primary trademark advice is to “burn the ATO” and partake in business phoenixing.
Just maybe when it comes to the construction industry, FEG should re-concentrate it’s resources on the Directors and Builders who trade insolvently on the credit of Subbies. They could then fund the liquidators pursuit of the developers who play a major role in sending builders to the wall near the end of their projects.
Do you remember the story of that Builder who was prosecuted for fraud and for trading whilst insolvent?
No? You don't remember?
I can't remember either, because it has never happened.
FEG your job is to look after the interests of subcontractors and the community at large and to spend our money wisely and prudently.
Its not to sit on the committee of inspection of a liquidated building company. Its not to provide funding to sue the most vulnerable targets you can find, the easy meat, those that are the worst affected, many of whom will lose everything through your actions, the unsecured creditors, the subcontractors.
If you have success, some of those you succeed with will end up living on the public purse that you pay for with ours and their taxes.
Its outrageous that you would even consider this you pack of useless bastards.
The message is piss off FEG, subbies don't want you using our money to sue our subcontractors.
Go and sue the banks for keeping building companies like Walton alive long enough so that they got their investments back at the expense of subbies.
Vote NO to resolution Number 3 at tomorrows Cullen Creditors meeting.