Marino Law | Gold Coast Law Firm

The Probuild collapse: are subcontractors the biggest losers yet again?

On 24 February 2022, Probuild announced that it has placed itself into voluntary administration. By doing so, $5 billion worth of major building projects in Victoria alone will stall for weeks if not months. Other states, such as Queensland, will also be impacted by the Probuild collapse. In this regard it is estimated that between $7 – $10 million is owing to subcontractors engaged at Probuild’s major project at 443 Queen Street in Brisbane , Queensland.

Subcontractors are generally unsecured creditors such that they will be in the last group of Probuild’s creditors to be entitled to be paid in the administration and/or liquidation, at which time it is likely the return to subcontractors will be negligible.

Subcontractors of Probuild in other Australian states and territories may be left to lick their wounds if Probuild is unable to meet the payment obligations owed to those subcontractors pursuant to their contractual arrangements. However, the position could potentially be different for Probuild’s subcontractors in Queensland.

In Queensland, the primary statutory instrument regulating the relationship between Probuild and it’s subcontractors is the Building Industry Fairness (Security of Payment) Act 2017 (the “BIF Act”).

Provisions exist in the BIF Act pursuant to which a subcontractor can direct that another party contracting with Probuild, such as a developer, withhold from any payment from that developer to Probuild, any payment owing to the subcontractor by Probuild. Such a mechanism could see the subcontractor paid without the need for the subcontractor to prove his or her debt in the administration and/or liquidation of Probuild, thereby avoiding the negative consequences of being an unsecured creditor as discussed above. Ultimately, the withheld payments would be paid directly to the subcontractor.

There are strict time limits and notice requirements that subcontractors must comply with in order to commence the necessary process to have a claim determined and enliven the right to issue a payment withholding request. Such time limits are determined by reference to the BIF Act, together with each subcontractor’s individual contract. Subcontractors wishing to avail themselves of such a process should seek legal advice to ensure the strict timeframes and notice requirements are complied with correctly.

While the provisions of the BIF Act can assist a subcontractor to recover sums owed by an insolvent builder, subcontractors should also take other steps to protect themselves from the impact that a builder’s insolvency may have on their business. Such steps would include adopting diligent practices with respect to the management and recovery of receivables.

Any subcontractor who has contracted with Probuild, or has concerns that their head contractor may not have the capacity to meet the prompt payment of its claims, should immediately contact the experienced litigation and construction law team at Marino Law to receive legal advice on the appropriate and requisite course of action to take to ensure payment.

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