Subbies warned to do their research

Top Garden director Louis Wu cautions subbies to do their research before carrying out work after a developer he worked for went bust

The landscaper worked for Triple Connection, which went into insolvency owing Wu more than $100,000.

Top Garden was contracted to provide landscaping services at Jade Lake, a housing and visitor accommodation project in Queenstown. Despite two Building Disputes Tribunal decisions and two High Court orders, Triple Connection failed to pay Top Garden and building firm Concept Builders what they were owed.

“In Queenstown, after we left, they still spent like a year doing their projects. They must have been paying something to the subbies to keep the project going,” Wu said.

“You can’t trust anyone now.”

As Top Garden and Concept Builders were classed as unsecured creditors, they are unlikely to recover even their legal costs as Triple Connection is now in liquidation. As a result, Wu said Top Garden will stop work on a project right away if there’s even one missed progress payment.

Due diligence is vital

The case highlights the importance of subcontractors doing due diligence before taking on work. Obtaining credit reports can highlight potential issues such as payment defaults, which can give tradies an idea of payment performance.

Builtin’s Construction Risk Expert Ben Rickard said there are some products on the market, such as CheckMate by CreditWorks, which allows subbies to pay a small fee for a one-off credit check to be carried out.

“Both consumers and businesses can also be checked via credit agencies like Centrix, Equifax or Illion,” he added.

A credit check would likely highlight potential red flags, which subbies could investigate further before deciding whether to continue with the work or not.

Additionally, the update of the Construction Contracts Act 2002 means that well-written construction documentation can stop developers from refusing to pay the whole invoice because it is disputing part of it.

For example, $20,000 from a $150,000 invoice could be under dispute, but the developer would still have to pay $130,000.

Terms of trade should also be reviewed to include clauses such as the ability to add legal and collection costs to a job. Larger deposits can also be a way to make sure materials, at least, are covered before a job commences. Another option subbies can use to protect themselves is trade credit insurance.

Survival tools

Commenting on Top Garden’s situation on LinkedIn, Kirsty Merriman – a property developer and consultant who describes herself as an ‘advocate for fair practices in development’ – said: “It’s tough to see good contractors who do quality work end up in these situations saying that he can’t trust anyone now.

“The reality is harsh but true – in today’s climate tight contracts, clear payment terms, and proper due diligence aren’t just good business practice… they’re survival tools.”

Rickard agreed with Merriman on the subject of contracts, and said they were an essential tool for builders conducting any sized job.

“Legally, only contracts over $30,000 must have a written contract. However, to provide the best protection in the event of a dispute, you must have a contract. If the customer won’t sign a contract that should be a huge red flag!

“Make this a ‘must do’ before buying any materials or proceeding with any work on site.”

Rickard has also authored a separate article for Under Construction, where he goes into more detail about how subbies can protect themselves from non-payers. Click here to read it in full.