My builder has gone into administration or liquidation. What do I do today?
Whether it is voluntary administration or a liquidator has been appointed, find out which entity is in and confirm it is the one on your contract. Stop extending credit: do not deliver more material or labour on the old terms until the administrator tells you in writing what happens next. Secure anything on site that is still yours. Lodge a proof of debt with the administrator for every unpaid claim, variation and retention amount, with the documents behind each. Then understand the queue: secured creditors and employees are paid before unsecured trades, and most of your money is unsecured.
The first 48 hours
The ASIC published notice names the company and the administrator. Check it against your subcontract, because a brand often has several companies and only one of them may be in administration. Email the administrator with your details and ask to be put on the creditor list; they will send a proof of debt form and notice of the first creditors' meeting.
Do not keep working on the old terms. The administrator may ask you to continue, and some do, but any work after the appointment should be on new written terms with the administrator, who is personally liable for debts they incur. Work done before the appointment is a claim against the company; work done after, without new terms, can be a gift.
Secure unfixed materials you still own and anything you registered on the PPSR. Photograph what is on site, by date. Materials that have been fixed into the building are no longer yours, whatever the invoice says.
The proof of debt and the queue
Lodge a proof of debt for everything: unpaid progress claims, unapproved variations with their evidence, retention held, and any amounts the builder short-scheduled. Attach the claim, the schedule, the dockets and the emails. The administrator values claims on documents, the same way an adjudicator does.
Then be realistic about the queue. Secured creditors, the lender with security over the builder's assets and the equipment financiers, are paid first. Employees' wages, superannuation and entitlements come next. Unsecured creditors, which is every trade on every job, come last and share what is left. In builder collapses that share is usually a small fraction of what is owed, and sometimes nothing. Retention that was not held in a trust account that applies to your project was part of the builder's working capital, not security.
Protecting the next job
Administration ends in a deed of company arrangement or a liquidation. Under a deed the business may continue, sometimes under the same directors, sometimes under a new company with a familiar name. Before you work for the successor, run the check again on the new entity: ABN Lookup, the licence register, ASIC's notices, the courts. The name on the sign is not the name that pays you.
Builder Check runs the registers in a minute, free, at review.theconstructioncontracts.co/builder-check, and Builder Watch emails you if the ASIC status of a company you nominate changes.
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Scan my subcontract freeCommon questions
Can I still serve a payment claim or adjudicate against a builder in administration?
Serve the claim, so the amount and the date are on the record for the proof of debt. Enforcement against a company in administration is restricted by the Corporations Act, so get advice before spending money on an application; the administrator's process is usually where the claim is dealt with.
Will I get my retention back?
Only if it was held in a trust account that applies to your project, as the NSW Act requires for retention on larger projects, or if the pool of funds stretches to unsecured creditors. Otherwise it is an unsecured debt like the rest. Ask the administrator in writing where the retention was held.
The directors have started a new company. Can I refuse to work for it?
Yes, and you can price it accordingly if you do. Run the registers on the new entity, ask for shorter payment terms and a retention arrangement you can see, and claim on every reference date from the first month.
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General information for Australian subcontractors, not legal advice. Statutory deadlines and details vary by state and change over time; verify them before relying on them. Written by Mat Kennedy at The Construction Contracts Co.