A Win for Subcontractors and Suppliers

When a construction company goes broke, the subcontractors and suppliers often receive letters from the liquidator demanding repayment of so-called ‘unfair preferences’.

When an ongoing business relationship has existed between the creditor company and the company in liquidation, liquidators have historically worked out the amount of the ‘unfair preference’ on a ‘running account’ basis by reference to the so-called ‘peak indebtedness principle’. For example, if the following transactions took place:

What’s insolvency got to do with it….

Times are tough in the Queensland construction industry.

In recent times we have seen the demise of names such as Glezeil, Carmichael Builders, SX Projects, TRAC Construction, Gary Deane Constructions and JM Kelly (Project Builders) Pty Ltd.

Insolvency affects all industries, but, given the hierarchical nature of construction contracts, when a construction company is unable to pay its bills, it can cause devastating results both up and down the contractual line: