Subcontractors owed millions of dollars let down by 'basket case' laws, builders say

Posted March 17, 2017 13:28:39

Photo: David Panetta and Claire Dunne lost $4 million when their contractor became insolvent. (ABC News: Joanna Crothers)

David Panetta's roof plumbing business once employed more than 40 people and turned over $7 million in profit a year.

But after the company it was contracted to became insolvent, Mr Panetta lost his business, his home and $4 million.

"I worked so hard for that," the father of four said. "I'd built the company from the ground up over 12 years, right from when I was earning $7 an hour."

The financial strain almost drove him to take his life.

"Personally, my biggest hurdle is just to get my head right again, and mainly trust people again," he said.

"I get anxiety when I go to a site sometimes. Not all the time. But I do get the trembles and I do worry.

Mr Panetta is among hundreds of subcontractors in the building and construction industry who say they are owed large debts — in some cases millions of dollars — but who have not been able to recover the money because of overly complex recovery processes and poor enforcement of the law.

The Subbies Alliance, which has 80,000 members across the country, is calling for new national legislation to replace existing state-based laws.

Mr Panetta said Victorian subcontractors were being let down by weak enforcement of the Building and Construction Industry Security of Payment Act.

His partner, Claire Dunne, said he could not get out of bed for three months because he was so worried about the money he owed his employees and friends in the industry.

"That's how it is. All our friends are tradies and we owed them thousands of dollars. We didn't want to be in that position," she said.

"David had me to help him through that. Whereas a lot of other tradies don't necessarily have that, or they're hiding it from their family because they don't want to lose their pride.

"Men are killing themselves because of this, because they don't know how to handle it."

After trying to go through the Victorian Building Authority (VBA) and lodging an application with the Victorian Civil and Administrative Tribunal (VCAT), the couple decided they had to find the money for a lawyer.

It took months of paperwork and involved costly fees.

Ms Dunne said many small businesses like theirs wouldn't have been able to afford a lawyer, so would often walk away from a job and lose thousands of dollars.

Photo: David Panetta says it is often difficult to chase down builders to be paid. (ABC News: Joanna Crothers)

'Cheque's in the mail' a standard excuse

The couple suffered another blow after a contract dispute on a commercial property in Plenty left them without $45,000 a week before Christmas.

Mr Panetta said the builder kept saying they would be paid.

"It's either 'we haven't been paid yet', 'the cheques in the mail' is usually a good one, 'they're not in today'. And then you can't chase them down for weeks," he said.

"That was happening to about 90 per cent of my projects. I was owed $1.6 million."

The Building and Construction Industry Security of Payment Act was introduced in 2002 to help builders and subcontractors work through disputes over the timing of payments and recovery of debts, without the need for lawyers to become involved.

It is enforced by the VBA, but subcontractors say it is not effective.

Photo: Les Williams believes large sums of money are being wrongfully withheld from subcontractors. (ABC News: Jonathan Hair)

Victorian laws a 'basket case'

Les Williams formed the Subbies Alliance after the collapse of Walton Constructions three years ago, which left him owed more than $600,000.

Mr Williams said companies were frequently collapsing and leaving subcontractors unpaid. Eight companies in Queensland had been made insolvent since December, he said.

"That's cost probably 1,000 subcontractors in excess of $50 million dollars. It's harrowing to go through," he said.

Last month, Watersun Homes was placed into voluntary administration, leaving about 1,000 creditors out of pockets, and subcontractors owed $5 million.

A 2015 Senate inquiry into Insolvency in the Australian construction industry found: "the industry is burdened every year by nearly $3 billion in unpaid debts, including subcontractor payments, employee entitlements and tax debts averaging around $630 million a year for the past three years".

Mr Williams believes that figure would be significantly higher if it included money wrongfully withheld from subcontractors because of disputes over contracts.

The inquiry also found serious problems in the industry, including false statutory declarations, intimidation and retribution and the lengthy resolution processes.

The alliance is calling for a national legal overhaul, including effective federal legislation to replace laws that differ from state to state.

Mr Williams said New South Wales had made some changes to better protect subcontractors, but described Victoria's laws as a "basket case".

"I think it's time that subcontractors of Victoria were heard. And consumers. There's a lot of consumers that have been hurt very badly," he said.

The VBA said it had developed and published a number of resources to help subcontractors use the Security of Payment scheme.

"The VBA continues to work closely with industry to help them navigate the system," it said in a statement.

Topics: building-and-construction, community-and-society, vic