High-profile business collapse fuels payment law push

Family First Party Senator Bob Day of South Australia has quit parliament to deal with problems with his housing business group.
Family First Party Senator Bob Day of South Australia has quit parliament to deal with problems with his housing business group. MICK TSIKAS

THE collapse of Senator Bob Day's Home Australia Group bears uncanny similarities with the Walton Construction group of companies in 2013.

The latest in a series of construction industry collapses totalling billions of dollars has renewed calls for improved national security of payment legislation to protect subcontractors.

South Australian Senator Nick Xenophon has tied his support for the Australian Building and Construction Commission, which was passed by the House of Representatives this week, to the delivery of payment security for the industry.

The Turnbull Government is still to respond to the findings of the 2015 Senate joint-party report into construction insolvency which totals $3 billion a year including $680 for each of the past three years owed the ATO.

The report recommended project trusts to isolate money from clients to the work it was meant to pay.

Evidence given by ASIC to the inquiry suggested an emerging business model of planned insolvency.

Les Williams, head of the Subcontractors Alliance formed after the Walton collapse, has renewed calls for construction trusts to be introduced as the centre piece of security of payment legislation.

"The Prime Minister is talking about the rule of law with unions and I can't argue with that,'' Mr Williams said.

"But there should be a rule of law for everyone in the construction industry.''

He said project bank accounts operated by third parties would deliver payment security before anything and "take a lot out of the game".

"If everyone played by the rules, you wouldn't need a referee," Mr Williams said.

"But that doesn't happen".

Like Walton, the financial position of the Home Australia Group went downhill rapidly over the past two to three years of its life.

Mr Williams said the reason for decline was either poor business practice or potentially asset stripping.

As was the case with the Walton collapse Senator Day has blamed his non-performing NSW division for dragging down the finances of the group.

In an email to Home Australia staff informing them the company would be liquidated, Senator Day expressed sorrow for the pain and suffering that would be caused.

"While four members of the group all posted a profit in 2015/16, problems and losses associated with Huxley Homes ... has seriously undermined the group's balance sheet and ability to continue trading," the email stated.

Similarly Walton's NSW division's poor performance was blamed for putting pressure on Walton Queensland eventually leading to subcontractors who worked on the Nambour Coles project losing $3million for work done and materials supplied.

Mr Williams said in both company collapses payments to subcontractors and suppliers became problematic in the months leading up to default.

Walton Construction sole director Craig Walton and Senator Day also both claimed to have been let down by a White Knight investor.

In the case of Walton it was the late builder Frank Pellicano who was alleged not to have followed through with a deal.

Before his death Mr Pellicano denied any commitment.

Senator Day said he had looked to the sale of 75% of his business to Philippine company Goshen Capital Resources and that those funds would have provided the liquidity for it to trade out of difficulties with forward orders of more than $100 million.

That deal also didn't eventuate.

In 2013 an independent auditor's report found Home Australia Group's liabilities exceeded its assets by $31million. In the same year Deloittes, which had been engaged by NAB to assess Walton's financial state, found the company had negligible tangible assets and was using subcontractor retentions to fund the business.

And finally the NAB was a significant secured creditor to both businesses with more than $24million in exposure to Home Group Australia and was able to retrieve $20million owed by Walton in the months leading up to its demise in October, 2013.

Topics:  nick xenophon payment legislation senator bob day subcontractors subcontractors alliance walton collapse

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