Today, external administrators were appointed to construction company, Builton, following an unpaid subcontractor’s application to wind Builton up in insolvency.
Where there is one unpaid subcontractor, others typically follow. Then there are the owners of the twelve Perth-based developments that Builton cannot afford to finish and the employees of the collapsed builder who were reportedly told last Friday not to turn up to work on Monday.
There are currently no laws to protect subcontractors’ right to be paid by insolvent builders, outside of government projects. As a result, subcontractors are often left with nothing after the Tax Office, banks, employees, trade suppliers and plant hire companies have taken their share.
As for owners of unfinished developments, they will generally be left to find new contractors to finish their projects at higher cost and in longer timeframes. In the case of apartment developments like Quattro in Burswood and Vue in Maylands, developers may then be unable to settle on time, placing them in default under their sale contracts and allowing buyers to pull out. Even where sales proceed, the loss to developers due to increased completion costs and delayed settlement may be too much to bear, sometimes causing a chain reaction of insolvencies.
One possible solution being tested in government projects is the use of Project Bank Accounts. Private home building projects may benefit from reform of WA’s home indemnity insurance scheme. We at HHG Legal Group continue to work with insolvency, industry and government representatives to find solutions to this pernicious problem of builder insolvency.