The collapse of Brisbane based building company, the Cullen Group, a week short of Christmas sent shockwaves around the construction and building industry both in South East Queensland and further afield. The Cullen Group was a well-known and highly regarded building contractor having been involved in a number of notable developments in the Brisbane and Gold Coast areas, most recently being the principal contractors on the $100m Boheme development in Robina on the Gold Coast.

Early reports from the company’s initial liquidators indicate creditors are owed in excess of $19m. The liquidators’ initial report to creditors revealed a large number of subcontractors are owed sums varying from thousands of dollars to hundreds of thousands of dollars. Given the National Australia Bank has appointed receivers to take charge of the company’s secured assets, it appears a return to the company’s trade creditors will be reliant upon the liquidator making recoveries in the liquidation.

For the majority of unsecured creditors, it is highly unlikely that they will see any return in the liquidation. Any dividend that may be payable would be contingent upon recoveries made by the liquidator in respect of pre-appointment transactions effected in the weeks and months prior to the company’s demise. There is already talk of recovering residential properties in Queensland once owned by the Cullen Group’s director but transferred to his wife prior to Cullen’s collapse. That being said, such recoveries are expensive, complex exercises and it will take many months, if not indeed years, before those actions begin to bear fruit.

Statistically, the building industry accounts for more insolvencies, both in terms of numerical appointments as well as in the value of creditors, than any other industry in Australia. There has been much media attention over the past number of months, and prior to and unrelated to the demise of the Cullen Group, seeking further and better statutory protections for subcontractors engaged in the building industry.

In Queensland, subcontractors in the building and construction industry are afforded a certain level of protection that is not available to those engaged in other industries. The Subcontractors’ Charges Act 1974 (Qld) provides a statutory framework whereby subcontractors can, in circumstances where payment is not forthcoming from the contracting builder, serve a notice upon the principal employer/developer so as to secure for the subcontractors’ benefit, monies that would otherwise be payable to the delinquent builder. The effect of the notice is to require the principal employer/developer to redirect monies from the builder to the subcontractor. The process has the effect of bypassing a potentially insolvent builder thus securing monies due and owing to a subcontractor for work completed, which work the developer will ultimately benefit from.

Following the collapse of the Cullen Group, we at Rose Litigation Lawyers have been engaged by a number of subcontractors to act on their behalf in respect of the preparation and service of those statutory notices. If those subcontractors/creditors have any prospect of securing a recovery in the Cullen Group collapse, it will be under the Subcontractors’ Charges Act 1974.

The requirements under the Subcontractors’ Charges Act 1974, most particularly the form and time frames for lodging a notice of claim, are strict and a failure to comply with the statutory framework will result in the charge being of no effect. As such, it is imperative that any subcontractors that are affected by the Cullen Group’s collapse take immediate action to secure a statutory charge over monies due and owing to them that will otherwise be paid to the liquidator. Once the time to lodge a claim under the Subcontractors’ Charges Act 1974 has passed, a party is precluded from seeking to secure the charge at a later time.

Should you or any building subcontractor you know be affected by the collapse of the Cullen Group, or indeed the failure of any construction company, you should immediately contact the team at Rose Litigation Lawyers and obtain an advice as to whether you (or they) have a claim under the Subcontractors’ Charges Act 1974.

To assist members of the building industry we will review your case on a no obligation basis and provide a preliminary opinion on whether your claim falls within the confines of the Act.

One of the most worrying aspects of the Cullen Group collapse was that it took so many in the industry by surprise. The concern now is what the knock-on effects that collapse will be. The Cullen Group demise is a timely reminder to subcontractors as to importance of remaining vigilant with respect to debtor days and the collection of debts.

In addition, it is imperative that subcontractors and suppliers in the building industry (and any other industry) have up to date Personal Property Securities Act (PPSA) compliant Supply Agreements.  Subcontractors who have had these signed and registered over the Cullen Group, have been named priority creditors and will be paid in priority to all other unsecured creditors in the liquidation.  Our firm can assist with the preparation of fully compliant Supply Agreements and the associated PPSA requirements & registrations.

Finally, it is important to remember that a subcontractor is not limited to relying upon the provisions of the Subcontractors’ Charges Act 1974 simply upon the appointment of a liquidator and the process can be used at any time by subcontractors when there is a concern as to non-payment from a contracting builder.

 

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