January 31, 2014

Rouse Lawyers success for subcontractors against insolvent building giant Walton Construction

The collapse of Walton Construction (Qld) Pty Ltd (in liquidation) (Walton) in late 2013 left many subcontractors unpaid and out of pocket. Rouse Lawyers acted for two such subcontractors, Biondic Investments Pty Ltd (Biondic) and Costall Drainage Pty Ltd (Costall), with outstanding invoices to Walton in the order of over $700,000.

Subcontractors’ Charges Act

The Subcontractors’ Charges Act 1974 (Qld) (the Act) applies where building, construction or civil work is carried out on land in Queensland by a subcontractor (generally for a head contractor).

The Act allows a subcontractor to claim a charge on money payable to a head contractor by a principal (eg. a landowner), where the subcontractor performs work on land for the head contractor.

A charge can secure payment of money that is payable to the subcontractor for work done by it under a subcontract. It effectively directs the principal not to pay the head contractor, and allows the subcontractor to access those unpaid monies directly, ahead of the head contractor.

Enforcement Proceedings

If a subcontractor serves a valid charge for the money owed under the subcontract, and payment is not made to the subcontractor, the subcontractor is able to commence proceedings in a court to enforce the charge.
Once a charge is served, proceedings must be commenced within 1 month, unless a charge is in respect of retention money only (in which case the time period is extended to 4 months).

Rouse Lawyers prepared and issued charges for Biondic and Costall, and subsequently commenced enforcement proceedings in the District Court when payment was not made. This enabled the subcontractors to bypass the insolvent head contractor (Walton), and secure the monies payable to Walton by the principal, Hydrox Nominees Pty Ltd (Hydrox).

A principal may at any stage pay into court the amount claimed in the notice of claim of charge – and this is what Hydrox did. This payment discharged the principal from any further liability for the amount paid and of the costs of any proceeding for the amount paid.

Outcome

Unfortunately there were insufficient monies payable by Hydrox to Walton to fully compensate Biondic and Costall, however both companies received over 60% of the monies owed to them by Walton, in circumstances where the forecast for other creditors for Walton was, and remains, extremely grim.

Takeaway

It is vital that subcontractors act quickly to issue a notice of claim of charge to secure monies that are not yet paid by the principal to the head contractor.

If you have any questions about subcontractors’ charges, please contact Matthew Rouse or Eloise Pawley.