This article is from the Australian Property Journal archive
THE electrical industry peak body Master Electricians Australia (MEA) has called on state governments to administer better protection for small business after liquidators revealed that subbies would lose out on their share of $71.55 million in payments in the collapse of Porter Davis.
While subbies will miss out, the Commonwealth Bank will get back the $32.9 million it is owed.
MEA CEO Malcolm Richards said statutory trust accounts regulated and overseen by state governments would ensure that small business owners are not left out of pocket when big businesses go bust.
“The sweat of too many mum and dad businesses has been used to prop up failing construction companies for too long in this country,” Richards said.
“This is despite the fact that almost a decade ago the Murray Inquiry recommended establishing trust accounts for major construction projects to ensure that small business could not be used as proxy cash flow by the big construction companies.”
Porter Davis Homes collapsed at the end of March with 1,500 homes under construction in Victoria and about 200 in Queensland, owing $147 million to creditors, and was found to have not taken out domestic building insurance with the state’s Victorian Managed Insurance Authority (VMIA). A further 779 customers signed contracts and paid a deposit without building having started, and 410 people were made redundant.
The Victorian government is offering support for those who were left without insurance through no fault of their own in the form of a $15 million bailout package.
Metricon and Simonds Homes were among the companies deemed financially capable of delivering the unfinished homes left in limbo by the collapse. Victorian construction firm, Nostra Property Group, had already committed to finish building 375 townhouses
Richards said that with a statutory trust account administered by a third party, major companies would be forced to plan their cash flow and expenses better, and sub-contractors would face less risk from building company collapses.
“Sub-contractors should not have to bear the brunt of poor planning and mismanagement by the building contractors.”
He said the statutory trust account model introduced by the Queensland government for major public projects in the state was working well but it needed to be introduced into private works immediately.
“We are facing an economy that is spiralling.
“These collapses will only hasten the slowdown. If a proper trust account properly administered had been in place with Porter Davis, subcontractors would be able to have been paid for their unpaid work.
“This is a sensible protection that is long overdue.”
News.com.au has reported that Commonwealth Bank is owed $32.9 million by Porter Davis, and company founder Anthony Robert’s Chesapeake Holdings $24.6 million, while employees of the collapsed builder are owed $18 million in unpaid wages, leave and superannuation. Only the Commonwealth Bank is expected to get all its money back. Priority creditor Chesapeake and its employees will receive a “partial dividend”, while the remaining 1,000-plus unsecured creditors are “dividend unlikely”.
