Subbies wear ‘all the risks’

New Zealand was a subbies’ paradise until Rogernomics swept away the law that made sure they were paid.

Ten companies associated with Waikato-based Stanley Group and Auckland’s Tallwood were liquidated on September 5 leaving sub-contractors on its Housing New Zealand projects in Auckland, Hamilton and Whaka¯ tane, facing losses of about $5 million.

Numerous out-of-pocket subbies, including plumbers, sparkies and labour hire companies, have spoken to Stuff about their fury at being left as unsecured creditors despite all the work they have done.

In the New Zealand construction industry the big developers ‘‘pass the risk down to the guys least able to take it’’, said construction industry veteran Albert Smith speaking from the United States, where subbies get a lot more protection than their Kiwi counterparts.

Smith is part-owner of the Smithbridge group of companies, including Auckland Cranes, and brother to National Party MP Nick Smith.

He is calling for a return of the law that once let sub-contractors put a lien on the properties they worked, which then could not be sold until they were paid.

The Wages Protection and Contractors’ Liens Act was repealed in 1987 during the Rogernomics era.

‘‘The major problem for New Zealand is that there is currently no recourse for the contractor to the real property to secure debts for construction work,’’ Smith told a recent meeting of the New Zealand Construction Industry Strategy Group.

Bringing back the liens act would eliminate the unfair wealth redistribution created by the regular business failures of the bad contractors and developers, Smith said, and produce a moral shakeup of the construction industry.

His idea appears to be gaining political support, with Auckland mayoral candidate John Tamihere saying he if won office, he would advocate for the act to be reinstated by Parliament to protect subbies. ‘‘They lose their houses. They lose their relationships. The big guy never does.’’

The repeal of the liens act had benefited the big end of the construction industry, said Smith, but it had led to sub-contractors, including Smithbridge, writing off large losses from time to time.

Giving subbies their power back would cause a redistribution of risk, and the owners of the land and buildings would be incentivised to ensure that subbies were paid by the main contractor they hired to build for them.

Some Stanley Group subbies have been building a legal fighting fund to investigate whether they have legal claims against directors.

Minister for Building and Construction Jenny Salesa said: ‘‘This Government is working together with construction industry leaders to transform the building sector through the Construction Sector Accord. This accord is working to meet the key challenges the sector is facing, including poor risk management and a culture of shifting risk.’’