Cullen Group subbies: the legal strategy to dodge an $8 million payback to liquidator

Gold Coast subbies have a potential “get out clause” enabling them to avoid the firestorm which will see them pay back millions of dollars as part of the Cullen Group liquidation.

GOLD Coast subbies have a potential “get out clause” enabling them to avoid the firestorm which will see them pay back millions of dollars as part of the Cullen Group liquidation.

A Bulletin report at the weekend detailed how subbies, already out of pocket, may have to pay back millions of dollars after a liquidator alleged they were given preference payments.

A claim has been made against 29 subcontractors for $8.4 million allegedly paid out in the six months before the company collapsed in December 2016 and the Robina site for the Boheme apartments locked down.

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Boheme Apartments at Robina. Photo: Steve Holland

Andrew Harris, a senior taxation and insolvency advisor based with The Harris Group on the Coast, said subcontractors should have been advised of such contingent liabilities, their potential defences and other strategies.

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Subbies are stunned by the development and unsure whether to return the funds or stage a legal action.

“Unfortunately, this type of outcome is more about the general poor level of advice available to these parties, especially on the Gold Coast,” Mr Harris told the Bulletin.

“For all the talk by the Subbies United, these actions are always fertile ground for administrators and unfortunately some subcontractors will bear further loss, absent better advice or previous better planning.

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Outside the Boheme Apartments at Robina during the company’s collapse. Photo: Steve Holland

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“This firestorm was always on the horizon. Usually it is only a question of time, funding capacity for recovery and the affected subcontractor’s financial position.”

Given the current liquidator was appointed in January 2017, Mr Harris has questioned the advice given to subcontractors. He said the liquidator, Michael Caspaney, was only doing his job and acting according to provisions of the Corporations Act.

But Mr Harris urged subcontractors to consider the advice given on “voidable unfair preference claims” and how four key conditions needed to be satisfied.

The fourth condition is the creditor must have suspected or had reasonable grounds to suspect that the company was insolvent at the time of the transaction or would become insolvent as a consequence.

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The lockout at the Robina site. Photo: Steve Holland

Subcontractors said they had no idea about the inner financial workings of the Cullen Group apart from, at that point, knowing the builder had a strong reputation.

The Cullen Group only had its licence suspended on December 15, 2016. The Queensland Building and Construction Commission rated the builder as a $30-60 million company as it constructed major developments in southeast Queensland.

“Basically, if a subcontractor was being paid in accordance with its usual payment terms — had not started to accept late or part payments re-their invoices, then satisfying this last condition is a hard exercise, even for a liquidator,” Mr Harris said.

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“That is not to say that a liquidator will or may not still seek to pursue such parties in any case, because they are often the easiest targets and lack the resources and assistance to support and fund a defence.

“This is more about the unfairness of the legal system, and the need to fund a fight, than the merits of the case.”

Mr Harris said the Cullen Group liquidation raises the question of whether subcontractors were prepared for these challenges.

“The question is whether they were best prepared for the contingency, aside from the correctness or otherwise of the liquidator’s claims. “In most cases, the answer is no. Again, the subcontractors have had more than enough time to consider available options, or perhaps the issue is also about whether they were properly structured in the first instance should this contingency arise. Again, the usual answer is no,” he said.

Originally published as Cullen Group subbies: the legal strategy to dodge an $8 million payback to liquidator