Times are tough in the Queensland construction industry.
In recent times we have seen the demise of names such as
Glezeil, Carmichael Builders, SX Projects, TRAC Construction, Gary
Deane Constructions and JM Kelly (Project Builders) Pty Ltd.
Insolvency affects all industries, but, given the hierarchical
nature of construction contracts, when a construction company is
unable to pay its bills, it can cause devastating results both up
and down the contractual line:
Principals are left with a half-finished project, inevitably
costing more to complete than would have been the case had the
original contractor remained on the job;
Subcontractors are left unpaid – despite (often) having
accrued significant out of pocket costs in relation to the work;
The directors, secretaries and other influential persons of the
company which has collapsed face an exclusion period of three
In recent times we successfully assisted clients in all three
Whilst you can do little to prevent a contractor from becoming
insolvent, you can take steps to ensure that your exposure is
The key step is to obtain legal advice early. The earlier the
advice, the more options there will be to staunch the (figurative)
bleeding. For example:
If you are a principal – have you thought about propping
up the contractor until the end of the project (it may be cheaper
than bringing in another contractor)? Conversely, have you
considered what rights you might have to suspend payments or use
retentions and securities if you take the works out of the
contractor's hands? Should you encourage subcontractors to
utilise the Subcontractors' Charges Act?
If you are a subcontractor – are you utilising all of the
rights in your toolbox; you may have the right to suspend work,
have you considered whether you might have a right to use the
Subcontractors' Charges Act?, do you have a right to terminate
the contract for non-payment – if so – how?
Each solution is different, but early advice is the key to
minimising the pain.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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