Building industry probe is long overdue

Bill Hoffman explains the issues impacting the building industry and why investigation is vital

The News Ltd Back Our Subbies campaign has helped raise awareness about serious problems in the Queensland construction industry.

OPINION:

By BILL HOFFMAN

THE Palaszczuk Government should be congratulated this week for announcing a special Task Force to investigate complaints of white-collar crime in the building industry.

It has been clear for some considerable time now that behaviour that in any other sector of society would draw immediate censure was being allowed to occur unchecked.

Those left with shattered lives and businesses were somehow accepted as a cost of business.

It has encouraged behaviour that a 2015 Senate Inquiry found was developing as an emerging business model that had become a three-billion dollar annual drag on the economy.

In this age of truth, telling a forensic examination of an industry that has been beset with problems for decades has been long overdue.

The Government when it came to power in 2015 did so with the support of then Nicklin independent Peter Wellington who made addressing construction sector payment security a point of agreement in his exchange of letters with the Premier.

From that stance, emerged the Building Industry Fairness Act of 2017 that was driven by Housing Minister Mick de Brenni and whose effects are still coming into play.

What the Government has appeared reluctant to do until now has been to act on the formal complaints laid by the Subcontractors Alliance and others about industry behaviour.

It of course has its own problems primarily related to the involvement of government departments in transferring contracts from one failed central Queensland builder to another in the same group of companies leaving behind unpaid trade creditors.

The LNP, which two days earlier than Labor's announcement this week committed to a Committee of Inquiry into the industry, has had its own legacy issues.

Its fund-raising arm Altum had in 2013 been the landlord of Walton Construction Queensland that went broke owing subcontractors and other trade creditors across the state in excess of $30 million. Losses nationally were $90 million and impacted over 1300 businesses many of which have never recovered.

In the period of the Newman Government, Walton Construction Queensland had rapidly increased the number of state contracts it was awarded at the same time the rent on its Montpelier Road, Brisbane, headquarters rose significantly.

The way in which Walton over many months structured its departure from industry with the complicit support of its financier was to become an early example of a series of insolvent trading schemes that have since emerged in a number of the more than 50 building company liquidations that left more than half a billion dollars of debt to 7000 small businesses.

These schemes see companies allowed to continue to trade long after they are later found to be insolvent.

They are instead, propped up by their principal creditor while new work is won to generate income to pay down its exposure while relieving the director of personal liability.

In effect new money is generated to pay old secured debt, in the process creating new unsecured debt to subbies and other trade creditors who were never going to get paid.

Retired Justice John Byrne will head the Special Task Force to investigate wrong doing in the Queensland construction industry.

It will be up to retired Judge, Justice John Byrne to guide a team of detectives and lawyers from the Department of Public Prosecutions as they forensically examine several examples of this pattern of behaviour that has already been the subject of formal complaints previously shunted off to ASIC.

Public examinations are also due to be held in the Federal Court of Brisbane in the first half of this year into the collapse of two companies - the Cullen Group and Q1 Homes - whose liquidations left debt in excess of $50 million.

Legislative change is a must. Equally so is justice.

A first principles approach by the task force is essential.

Money, like energy, is never lost but transferred.

If you are engaged to work on a project and the client pays the principal contractor money owed at each stage of its contract, it should in turn be available to pay those who supplied the labour and materials.

New progress payments aren't made unless the principal contractor provides statutory declarations that has occurred.

Where the statutory declarations have been made but the trade creditors have been left unpaid there is a problem.

Getting that problem, and issues of insolvent trading addressed has been a six-year exercise driven by a team of people in the Subcontractors Alliance and the Subbies United who had been hurt and had had enough.

They were supported by liquidators, barristers, accountants and other construction sector specialists with a sense of justice keen enough to keep them engaged over that time.

News Ltd's Back Our Subbies campaign was ultimately to bring the issues into a sharp focus that could no longer be ignored.

What emerges from this point will be closely watched nationally.

Originally published as Building industry probe is long overdue