Creditors Could Lose $846,000 in Construction Collapse 3

Monday, October 5th, 2015
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Hundreds of unsecured creditors could lose almost $1 million in the latest construction collapse in the Sunshine Coast as the region experiences its second building firm collapse in less than a month.

According to the Sunshine Coast Daily, Worrells Maroochydore liquidator Paul Nogueira says collapsed home builder Desu had gone into liquidation with secured debts totalling $491,000 and unsecured debts worth around $359,000. The money is owed to between 50 and 60 unsecured creditors.

Nogueira said the decision to shut the firm’s operations was regrettable but was the right thing to do.

“It’s not pleasant for creditors but the directors have obviously done cash flow projections and decided it was wiser to close now than to continue trading,” Nogueria is quoted as saying, adding that the firm’s demise may partly have been caused by a decline in demand for its kit home product.

The collapse of Desu – which had previously traded as Nu-Steel Homes Australia Pty Ltd and Nu-Steel Homes Qld Pty Ltd – follows the earlier collapse of Seachange Caloundra Pty Ltd, which was operating the Hotondo Homes Caloundra franchise.

A creditors meeting is scheduled for October 9.

Generally speaking, building industry conditions within the Sunshine Coast region are improving as demand for new housing gathers momentum.

Almost 3,600 new dwellings were approved for construction throughout the region in the 12 months to July – up by nearly a quarter compared with the previous 12-month period.

Nevertheless, the sector has seen a number of collapses in recent months involving building, flooring and roofing companies.

The latest developments come as the Senate Inquiry into Construction Industry Insolvency continues.

Recent hearings in Melbourne have focused around the collapse of builder Walton Construction and evidence it had been trading insolvent since June 2012.

Walton collapsed in October 2013 with debts totalling more than $80 million.

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  1. Grant Spork

    Queensland and some other states have considered an insurance scheme for sub contractors, which would pay out a percentage of a contract after the insolvency of a head contractor, on a quantum meruit (Paid for work complete) basis. Security of payment should be a mandatory clause in all construction related contracts. The fallout from a cascade of insolvencies, is that all construction companies find it more difficult to get finance, and finance costs become more expensive. Ultimately the cost is transferred to those who continue to remain solvent. As well as more predictable economic activity, an industry insurance scheme could reduce collateral damage to subcontractors. Such a scheme could be manipulated, though the cost in consequential insolvency to the economy would improve productivity and improve outcomes such as safety.

    • Bob Gaussen

      All monies paid by the developer to head contractor to contractors to sub-contractors for work performed should be made via a statutory trust system as recommended by Bruce Collins SC in his report to the NSW Government. Further all payments in dispute should be retained in the statutory trust until the adjudicator orders the release pursuant to adjudication under Security of Payment (BCIPA) legislation.
      The interest earned on the money in the statutory trust can fund an insurance scheme.
      The Queensland government, rather than sitting on its hands while more insolvencies occur, should be reestablishing the support structure for claimants in the use of BCIPA which the former Newman government dismantled to help their developer friends.

  2. Grant Spork

    It is time for the QBSA Qld Building Services Authority to create either a levey to ensure payments to sub-contractors where head contractors become insolvent or an insurance scheme. The cost of cascading insolvencies when a head contractor goes down the gurgler, takes the sub contractors and suppliers with them. In a regional area like the Sunshine Coast the cost in terms of the community is devastating. It also cost all builders and sub-contractors when trying to gain finance from lenders if you are a sub-contractor. We need to make the security of payments act mandatory on all supplies and sub contracts. Then all subcontractors should be required to take out an industry insurance to be paid on a quantum meruit basis if a head contractor folds. The cost to the economy and in terms of wrecked families and destitution requires action. Every sub contractor who does not get paid, there are employees who have mortgages to pay. A levy of 2.5% on all subcontracts to be paid into an insurance scheme, would be far less onerous than the current situation where so many viable local businesses are destroyed. Regional areas economies are hollowed out, in fact our entire economy is hollowed out when head contractors get into financial trouble.