Subcontractors miss out on Ebert money
Subcontractors working for collapsed builder Ebert Construction will receive about half of the total $9.3 million stated in the company’s accounts for subcontractor retentions – but are unlikely to receive any money owed for work carried out.
Retentions are when the head contractor or client holds back about 5 per cent of what subcontractors are owed, to ensure they complete any outstanding work before it is paid.
Only about half the $9.3m had been required to be held under the provisions of new legislation brought in from April 2017 for retentions to be held ‘‘in trust’’.
Receiver PwC sought direction from the High Court at Wellington about how the available $3.6m in retentions money should be paid out to 131 eligible subcontractors.
Thirty subcontractors will miss out because their retentions were not correctly accounted for in the weeks before the collapse.
PwC’s next report is due soon and will focus on the amount being recovered for all creditors.
‘‘There is likely to be a significant shortfall
... Other than any payment they may receive from the retention account, the subcontractors are unlikely to receive any other payments,’’ Justice Peter Churchman said in his ruling.
Separate to the retentions, unsecured trade creditors were owed $25m.
About $2.2m in retentions has been paid out to the subcontractors, with the balance of the $3.6m held to ensure any defects in current projects are fixed.
Although the new legislation required companies to keep retentions in trust, this did not mean the money had to be held in cash, as long as it was entered into the accounts of a company as a liability or was represented by assets, Justice Churchman said.
However, in Ebert’s case the $3.6m had been put aside in a bank account and was the company’s sole cash asset and available for distribution.
Taslo, a creditor that was owed $500,000, told the court that it wanted fees to the receivers capped at $150,000.
Justice Churchman said instead that the receivers should submit their costs to the court for final approval.
The secured creditors were Bank of New Zealand, which was owed $6m, and Ebert shareholder and director Kelvin Hale, who was owed $3.5m. They were first in line for any recovered money.
Until its collapse Ebert had 15 projects under way, a staff of 100, forecast turnover of $171m, and 151 subcontractors.