LAST year when I asked NAB Special Banking Services head Geoff Green why the bank had assured me it did not recommend business advisor Mawson to the struggling Walton Construction when emails clearly showed me it had, he answered a mistake had been made.
It had also been a mistake the bank failed for five months to retrieve vehicles which it financed for Walton but were passed onto phoenix company Peloton which took over Walton's assets, projects, premises and staff when the company went into receivership in October 2013. By that stage the last of NAB's $20million exposure to Walton had been retrieved by the bank.
Subcontractors and other creditors were left owed around $80million. A subsequent public inquiry saw, under oath, Walton sole director Craig Walton and a plethora of accountants, business advisors and bank officials show a common inability to remember events in which they were intricately involved. At one point this collective amnesia left Mr Walton even unable to recall who his accountant was at the time he was presumably losing everything.
There has also been a Senate Inquiry into construction industry insolvency which heard evidence in five states and looked closely at circumstances around the Walton collapse before last December handing down 44 recommendations to improve subcontractor security of payment.
In this 2016 federal election campaign Labor, the Greens, the Nick Xenophon Team and Queensland Senator Glenn Lazarus have all committed to national security of payment legislation for subcontractors.
The Coalition won't respond to the seven-month-old report unless it is re-elected to government. Meanwhile it continues to sell itself as the champion of small business, 200,000 of whom employ two million Australians working in the construction sector and do 85% of the work.
The sector represents one quarter of all Australian small business. Yet the Coalition's focus remains solely on the unions and the creation of an Australian Building and Construction Commission.
Union practices may be a problem in the sector but they aren't what keep small business people on the Coast and across Australia awake at night.
Labor announced yesterday if elected it will support national security of payment legislation and trial project bank accounts to stop principal contractors using as cashflow money paid by a client for work done and material supplied to their project.
The Australian Securities and Investment Commission told the senate inquiry there was an emerging business model which saw companies obtain pre-insolvency advice on how to restructure their business to be able to avoid paying creditors in the period leading up to administration. The advice was often provided by former insolvency practitioners previously suspended from practice for misconduct.
The Senate found the current legal framework inadequate to deal with phoenixing. It said the industry was being beset by a growing culture where some company directors considered compliance with the Corporations law optional, "because the consequences of non-compliance are so mild and the likelihood that unlawful conduct will be detected is so low".
In the case of Walton there is clear evidence the bank, the company's accountants, Mr Walton himself and ultimately Mawsons and Deloitte were all well aware of the builder's difficulties many months before it folded. It continued to trade, however, until the bank retrieved its exposure and Walton's assets were transferred to the phoenix company first known as Peloton but then Tantallon which also later went into liquidation.
Those left holding Walton's debts, people who also lost their businesses, their homes and in cases their families, were apparently expendable. One witness to the Senate inquiry likened the culture to a battlefield, where subcontractors get mowed down and fresh bodies are just poured in.
The construction industry accounts for between 8-10% of GDP and around the same proportion of total employment but is also responsible for between 20-25% of all insolvencies.
Walton Queensland was a tenant of Altum, a fundraising arm of the LNP, who it paid more than $430,000 in rent in the year it collapsed and more than $1million between 2009 and 2013.
Again emails show that while subbies were left holding air Altum managed to retrieve what it was owed including that demanded by the lease penalty clauses.
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