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How the subcontractors of Cullen Group Australia could have got paid on time.

The recent collapse of the Brisbane-based building company, Cullen Group Australia, has left many subcontractors angry and significantly out of pocket, reportedly to the tune of $18 million.  Those same subcontractors are now faced with the prospect of having little, if any, legal remedies to recover the monies owing to them.

If there is a key lesson subcontractors can draw from collapses like Cullen, it is that their interests are best served by taking advantage of relatively simple and cost effective legal options available to them before any building company they work for collapses.  A relatively modest up-front investment in obtaining sound legal advice at the outset of a project can potentially save subcontractors thousands of dollars down the track.   For example, a recent decision of the Queensland District Court highlights the potential cash flow benefits builders and subcontractors may obtain if their construction contracts are drafted in a way which enhances their rights to submit progress claims as and when they need money.

In CKP Constructions Pty Ltd v Gabba Holdings Pty Ltd, the Court adopted a commercial approach to interpreting the builder’s (CKP Constructions) right to claim progress payments on the 25th day of each month under the parties’ contract.  Rather than restricting the builder to only making single progress claims on the 25th of each month, due to the way the contract had been drafted the Court found that the builder had a right to submit multiple progress claims each month which would not be invalidated if they submitted them on a day other than the 25th day of the month.   This meant that the builder was able to recover monies under multiple progress claims and was awarded judgment against the head contractor for $701,321.17, including interest.  By making simple changes to their contracts, subcontractors can similarly benefit from rights allowing them to submit multiple progress claims each month to boost cash flow, rather than hoping for the best at the end of a project when funds may be unavailable to pay them.

Ramsden Lawyers specialises in building and constructions matters and can quickly and cost-efficiently assist builders and subcontractors in protecting their contractual rights to payment and enhancing cash flow during projects.  Please feel free to call Benjamin Twomey, Partner (btwomey@ramsdenlaw.com.au) , and Derek Finch, Senior Associate (dfinch@ramsdenlaw.com.au), of our office, on (07) 55 921 921, if you require any legal advice or assistance with a building and construction matter.