Yesterday national box builder Porter Davis Homes (PDH) appointed Grant Thornton as liquidator.
This basket case has been trading insolvent since before Xmas and was looking for a 20 million rescue package. We know they were insolvent from what subbies have told us in regard to non payment, chasing payment, staff avoiding subbies, no one available, staff phones off and when cornered, promises of payment that never came, even right up until yesterday.
Unfortunately, Grant Thornton Liquidators are the same company appointed to CRCG Rimfire and Walton Constructions.
PDH subbies and suppliers should expect to be sued for preference claims over the next 1 to 3 years.
For future reference, subbies contracts have an insolvency clause in them so you can terminate your contract rather than hang on and hope for a miracle, however this can be tricky so seek legal advice.
When a company commits an act of insolvency such as non payment without cause or requests for a payment plan, the first thing you can do is trigger the "insolvency" clause in your contract and cease working for them.
PDH said a last minute 20 million rescue package did not eventuate. I don't believe that for a second. When they knew they had a 20 million dollar hole in their cash flow, did they inform the QBCC of a material change to their financial position? I bet the answer to that is NO.
On the 1 February 2023 PDH dropped their build price by up to $50,000, which genius thought that would be a great idea when they couldn't make ends meet at their full build price?
I wonder how those homeowners PDH suckered in by that price drop feel now.
Lets hope that Grant Thornton does their job with a thorough investigation into what could be fraud or at the least, insolvent trading but their track record doesn't suggest they will.
Subbies must know by now that an insolvent builder does not all of a sudden become solvent again. It only gets worse with the debt to you growing the longer you stay and work for them.
QBCC Monies Owed Complaint (MOC)
You should carefully fill out a QBCC monies owed complaint (other states may have similar) and inform the QBCC for example that "the builder told you they can’t pay and asked for a payment plan" (an act of insolvency).
While not perfect, the Minimum Financial Requirements (MFRs) are being used to shut companies down a lot sooner than would otherwise occur. In the past we have had insolvent trading run on for many years causing massive trauma for everyone.
MFR's work to a degree but would work better if the QBCC knows that a builder is insolvent. MOC's are one way of letting them know.
We encourage people to put in well documented monies owed complaints.
The QBCC is seeing piles of incoherent paperwork that basically amounts to a "please sort out my shit for me" submission.
The QBCC is not there to build a case for you. It is there to act on the case presented to it by you.
If that case is sloppy and will not hold water, there is nothing the QBCC can do.
Remember, everything the QBCC does comes under the QBCC Act and is subject to review by QCAT and the courts.
This was demonstrated in the Groupline decision. The QBCC did what the public thought was a great idea but it went beyond the powers of the QBCC and it got shot down.
If the documentation submitted by a subcontractor is good, they will get a good result from the QBCC on a monies owed complaint.
To achieve a good result, you must submit a complaint STRICTLY by the book.
If enough well documented monies owed complaints are submitted, the QBCC has grounds to act against a builder but a lot of subbies don't want any action in the forlorn hope that the builder somehow miraculously recovers and becomes solvent again so they can get the money they are owed but that has never happened so cut your losses.
Just remember, the squeaky wheel gets oiled first.
If a subcontractor is simply having a wah wah wah emotionally good time moment with sloppy documentation, they are wasting everyone's time and they cannot blame the QBCC because it CANNOT act as opposed to being unwilling to act.
The sooner we stop subbies from having their hands caught in the log Read the whojungle article and to do good paperwork, the sooner we can knock over lame duck builders early and limit the damage to creditors.
Focus on Insolvent Trading
There should also be a focus on how these companies have traded insolvent for at least 6 months to allow the preferential payment claims to kick in but there is never a report issued by any liquidator on just how the builder met its MFR requirements for those 6 months. A report would potentially upset the preferential payment apple cart on the next job.
A builder can’t be both, insolvent AND have a QBCC Queensland building license. They do both at the same time but under the QBCC Act they can't so if they are both, someone has lied or provided false information.
In our view, insolvent builders are hiding crucial information from creditors and the QBCC and THIS MUST STOP and subbies can help stop it by quickly cancelling contracts and submitting those MOC's.
Why do we have licensing regimes if builders can so easily thumb their noses at them and provide false information to the licensing body?
There is crime being committed here that leads to preferential payment claims kicking in and making Liquidators and lawyers more wealthy by the day.
Grant Thornton is an international company, ask yourself how these companies get so big. "Grant Thornton International Ltd today announced its revenues grew to a record USD7. 2 billion for the financial year ended 30 September 2022, up from USD6. 6bn in 2021".
I can tell you in part how they get so big, on the back of lucrative construction industry liquidations.
We want the vulnerable builders weeded out and gone. The MBA wants to keep them operational by having access to money that belongs to subcontractors.
These comments are not aimed at the MFR’s themselves, but the rorting of the MFR’s by companies to trade in a higher category or trade at all when insolvent.
These licenses are shown on a public register maintained by QBCC.
Those who falsify financial reporting are committing Fraud which badly affects subbies more than any other creditor. Off the back of 408C fraud, trade creditors are being fleeced for all they are worth.
Liquidators are controlled by the Corporations Act. That is a Federal Act. Any change to that act will have to be done by Federal Parliament.
We think the liquidator should be obliged to provide a financial report to creditors and the QBCC showing how these liquidated companies had the Net Tangible Assets for their licence category.
Where are these liquidators reports?
When will they become mandatory for all construction industry liquidations?
A message to all Victorian builders, piss off back to the State of Comrade Dan, you have outworn your welcome in Queensland.
Subbies add a level of protection to your business and join SubbiesUnited and make use of our private members forum for up to date information but a warning, if you are NOT a subcontractor, DO NOT JOIN, we will weed you out, you are not welcome.