Hidden Valley Harvest liquidation: Government grant program under scrutiny and builders fight battle for payments
The Queensland company in the midst of building a pineapple food processing plant filed for liquidation following a legal battle with its contracted builder. The company was ordered to pay more than $750,000 to the builder who is still yet to see the money.
Rockhampton
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In the wake of the $6.8 million liquidation of Central Queensland company Hidden Valley Harvest (Facility) Pty Ltd, questions still remain why the project was given a $5 million grant by the Australian Government.
The builder involved in the project claims final design plans weren’t submitted to it until late 2020 - more than two years after the now-liquidated company was awarded the government grant.
The project was for a 2000 sqm pineapple processing plant at The Gateway industrial estate at Hidden Valley, on the outskirts of Yeppoon.
The $11.6 million project was estimated to support 46 jobs during construction and create 26 ongoing jobs after completion, pinned for June 2020.
Hidden Valley Harvest (Facility) filed for liquidation on March 7, 2022.
ASM BUILDERS
Rockhampton business ASM Builders was engaged as the head contractor and construction manager for the project, following a tender process released in November 2019.
ASM Builders alleged it did not receive a full construction design until October 2020, despite having begun the construction of the facility earlier that year.
ASM Builders have claimed through its solicitor that the project was delayed from February to June 2020, as it waited for project documents, and it was delayed again in mid-June until September, and from October and November 2020 due to key plans for concreting work.
ASM Builders had partially completed the build before work ceased in April 2021.
The liquidation reports state ASM Builders is owed $754,744 for construction work completed on the facility, $105,378 in interest as of March 15, 2022, and legal fees of $100,788.
GOVERNMENT ASSISTANCE
ASM Builders director Sam Milfull emailed the Grants Web Reporting at the Department of Industry, Science and Energy and Resources in April about his concerns in relation to the federally funded project, attaching supporting documentation of his involvement in the project.
A response was sent on behalf of the Department a week later, which was seen by this publication.
The email told Mr Milfull the relationship between the liquidated company Hidden Valley Harvest (Facility) and the Commonwealth was “confidential”.
The information Mr Milfull requested could not be provided.
PAYMENT DISPUTE
ASM Builders lodged a claim for the outstanding disputed payment through Queensland Building and Construction Commission (QBCC) in July 2021 - more than six months before the company went into liquidation - and QBCC appointed an adjudicator from Adjudicate Today.
ASM Builders was claiming $1,378,221.57 under the Building Industry Fairness (Security of Payment) Act 2017 (QLD) Act.
According to the adjudication documents, a construction management contract was signed between the two companies in January 2020.
The construction management fee was a lump sum of $585,222.
The contract stated the target price for the trade packages was $3.7 million, estimated by Hidden Valley Harvest (Facility).
The adjudication report states despite the execution of the contract, the design of the project had not at that time been finalised, meaning ASM Builders couldn’t seek tenders for the trade works.
Hidden Valley Harvest (Facility) served ASM Builders with a Show Cause notice in February 2021, just over a year after the contract was signed and construction work was well underway on the site.
Hidden Valley Harvest (Facility) then terminated the contract on April 8, 2021.
On May 24, 2021, ASM Builders served a payment claim to Hidden Valley Harvest (Facility) for $1,378, 221.57.
The claim was made up of preliminaries, profit and attendance: $203,707.73; subcontractor trade packages: $959,936.62; subcontractor trade package variations: $88,284.35; extension of time costs: $1,000; and GST: $125,292.87.
Hidden Valley Harvest (Facility) countered this by claiming that ASM Builders breached a term of the contract by engaging and paying subcontractors directly, saying that ASM Builders should have engaged subcontractors as agent for Hidden Valley Harvest (Facility).
This unsubstantiated claim was made a year into the contract and previously there had been no complaints.
“Engaging subcontractors that way would have meant Hidden Valley Harvest (Facility), not ASM Builders, was liable to pay them,” ASM Builders said.
“What has in fact occurred was that ASM Builders paid all subcontractors in full, to the knowledge of Hidden Valley Harvest (Facility). Hidden Valley Harvest Facility then inherited their works without paying ASM Builders for it,” ASM Builders added.
The adjudication report was 184 pages long and the invoice stated the adjudicator had spent 263.5 hours on the adjudication.
The adjudication report went into fine detail of the contract between the two parties, scrutinising and analysing the clauses with balances of arguments from each side.
ASM Builders defended in the adjudication process that Hidden Valley Harvest (Facility)’s Show Cause notice had no backing.
“(Hidden Valley Harvest (Facility)) at no time prior to serving its show cause notice in February 2021, raised any such objections. Instead, (Hidden Valley Harvest (Facility)) sat back and allowed ASM Builders to pay its subcontractors for the work that they performed, inherited the benefit of that work, and is now seeking to deny liability to pay (ASM Builders) for the work that it has inherited,” ASM Builders stated in the adjudication documents.
The adjudication report confirms up to the date the parties’ relationship broke down in April 2021, ASM Builders had made 11 progress payment claims.
ASM Builders paid subcontractors directly from its own funds.
Up until January 2021, Hidden Valley Harvest (Facility) had never raised concerns with this process.
The adjudicator noted this was a “conventional” process of engaging subcontractors.
ASM Builders asserted in the documents it would not have continued to engage subcontractors directly and pay for the work if it knew there was a risk Hidden Valley Harvest (Facility) would refuse to pay for the work.
“Had (Hidden Valley Harvest (Facility)) raised objection at an early stage of the project, any commercial party in (ASM Builders) position would naturally have responded by requiring (Hidden Valley Harvest (Facility)) to pay all subcontractors directly,” ASM Builders said in the adjudication report.
The adjudication report cites written approval from members of the Hidden Valley Harvest (Facility) company, approving ASM Builders to engage various subcontractors and accepting quoted prices.
The adjudicator determined there was “no material breach sufficient” for the Show Cause Notice lodged by Hidden Valley Harvest (Facility).
Hidden Valley Harvest (Facility) claimed in the adjudication process a sum of $294,497.36 for alleged defective work by ASM Builders in the construction.
The adjudication report individually analysed each alleged defect and went through various quotes to fix the work.
The adjudicator determined many of the alleged defects were unfounded, as ASM Builders had planned to finish them in its final site clean, but because of the termination of the contract before the site was completed, it wasn’t able to do so.
“I am not satisfied that the Claimant (ASM Builders) was in substantial breach of contract and nor am I satisfied that the notice of termination that the Respondent (Hidden Valley Harvest (Facility)) had given on 6 April 2021 was a valid notice,” the adjudicator wrote in the report.
Some defects were approved and the adjudicator awarded Hidden Valley Harvest (Facility) $81,840.44, which was taken from the final amount it owed ASM Builders.
The adjudicator awarded on October 25, 2021, in ASM Builders favour, finding Hidden Valley Harvest (Facility) liable to pay $757,744.34 with an 18 per cent per annum interest rate.
The adjudicator noted in the report “many of the arguments that the Respondent (Hidden Valley Harvest (Facility)) had advanced were not accepted”.
“I was required to spend significant time considering many of the Respondent’s (Hidden Valley Harvest (Facility)) unsuccessful arguments,” the adjudicator wrote.
It was noted ASM Builders submitted “extensive material” with “some 14 arch lever folders”.
This final adjudication figure is noted in the subsequent liquidation reports.
The adjudicator submitted an invoice of $118,575, of which ASM Builders was to pay 15 per cent and Hidden Valley Harvest (Facility) 85 per cent.
This publication understands ASM Builders paid the full costs of these fees to enable the decision to be released.
This money had not been paid prior to the company filing for liquidation, despite letters of demand from solicitors.
On December 13, 2021, ASM Builders filed the outstanding adjudication debt in the Supreme Court of Queensland and subsequently registered a charge over the property.
ASM Builders had filed to the Court for the Pineapple Drive property to be sold and the hearing was adjourned to March 8, 2022.
On the evening before the court hearing, Hidden Valley Harvest (Facility) shareholders and directors resolved to place the company into liquidation.
ASM Builders has cited in its legal documents that it incurred more than $600,000 in legal and professional fees in March, but this figure had increased higher.
An auction of the property was held on June 22, on behalf of the liquidators.
The property sold, with the 85 per cent partially completed warehouse, for $4.6 million to a Yeppoon company, Keppel Brand.
THE GOVERNMENT GRANT
The grant which the company received was under the Federal Government’s Regional Jobs and Investments Packages Fund.
This program came from a 2016 election commitment for a $200 million grant funding program to deliver regional jobs and growth.
The program received more than 700 applications for grant funding across the region and 233 grants were approved, totalling $220.5 million of funding.
The program guidelines state the grant funding would be up to 50 per cent of eligible project costs and applicants were required to provide co-funding towards the project, to show their commitment to the project.
The program was divided across 10 regions, with the region the Hidden Valley Harvest project awarded under being the Bowen Basin.
A total of 83 applications were received for the Bowen Basin and 17 projects were funded totalling $29.99 million.
Hidden Valley Harvest (Facility) was awarded $5,808,00 on April 19, 2018, for a “new fruit processing plant for Central Queensland”.
GRANT PROGRAM AUDIT
The Australian National Audit Office reviewed the grants program, handing down the findings in October 2019 - two and half years before the Yeppoon project fell over.
The audit found the eligibility and merit assessment processes “were not to an appropriate standard”.
“The Ministerial Panel most often cited incorrect scoring by assessors as the reason for not agreeing with departmental funding recommendations. Those applications were not re-scored,” the audit report of the grants program stated.
The audit further found appropriate checks and controls were not in place for eligibility and merit assessments.
“An assurance review contracted by Infrastructure identified that applicant claims were being taken at face value without appropriate scrutiny,” the audit report said.
Conflicts of interest were scrutinised in the audit.
“The program guidelines foreshadowed that grant applicants would be required to declare whether they had any conflicts but the application form did not follow through and require applicants to actually do this,” the audit said.
The audit report does note “there was no bias clearly evident in the assessment and decision-making processes.”
The audit review was welcomed by the Australian Government departments and recommendations were agreed.
WHAT HAPPENED TO THE GRANT MONEY
Federal Member for Capricornia Michelle Landry told this publication previously she would be writing to the new Infrastructure Minister, Catherine King, for clarification on what will occur with the Australian Government grant and ensure all affected parties are not left worse off with the company’s liquidation and sale.
The liquidation reports for Hidden Valley Harvest (Facility) state the entirety of the government grant was paid to the now liquidated company.
The Hidden Valley Harvest (Facility) directors said they used the money to pay the builders, contractors and suppliers for the construction of the facility.
The liquidators have requested accounting details of how the grant money was spent.
Hidden Valley Harvest (Facility) had a parent company, Valley Harvest (Group) Pty Ltd, of which former Federal Minister Andrew Robb was a director.
Mr Robb did attend the official sod turn of the project in December 2019, along with Ms Landry, members of the Hidden Valley Harvest (Facility) and former Livingstone Shire Council mayor Bill Ludwig.
Mr Robb resigned from his director position earlier this year and cited concerns about the running of the project.
It is understood he resigned after Hidden Valley Harvest (Facility) went into liquidation.
It should be emphasised that Mr Robb was the director of the parent company, not the company that went into liquidation.
It is not suggested that Mr Robb is in any way responsible for the conduct of Hidden Valley Harvest (Facility).
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