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.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
New South Wales is now aligned with all other states in the Commonwealth and the Federal Court on this important issue.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).