Introduction
Hard and dangerous times are here.
We are going to see a lot of builders in trouble who are going to desperately try and get a project finished, allegedly so that everyone gets paid.
That process is fraught with danger for subcontractors.
The danger
I have specialised in building and construction since January 1990.
I have encountered many such heroic rescues.
I have not seen a single heroic rescue where most if not all the subcontractors were owed more on completion of the project (for which they were not paid) than they were when the rescue was first proposed.
The reality
Most heroic rescues are nothing more than a thinly veiled 408C Fraud.
The others are simply the collapse of a builder that was never going to be rescued from its inevitable collapse.
No matter how you cut it, as the industry contracts due to a lack of work, nothing is going to enable a stricken builder to lift its game.
Proof of that is that I have not witnessed one yet and I have seen a lot of heroic rescues.
As to the survivability of the builder, they inevitably fail as soon as they are paid their practical completion retentions.
You should also be very wary if a so called white knight is introduced into the scheme. You will need very detailed advice in these circumstances and you should not agree to it as it even if it seems to be the only way to get paid.
The consequences in any so called heroic rescue situation is that even if the subcontractor does receive some payment it is then exposed to a Preferential Payment claim and so the subcontractor loses anyway.
Payments by third parties on the insolvent builder’s behalf are still a preferential payment. That is, if the developer pays the subcontractors direct, it is still a Preferential Payment.
What to do
Do NOT agree to a heroic rescue under any circumstances.
You will need VERY good advice.
Contact us if you are confronted with any hint of a suggestion of a heroic rescue.
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