10 Sep 2014

Sub-contractors welcome protections

7:58 am on 10 September 2014

Sub-contractors have welcomed law changes which will better protect their wages.

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Photo: PHOTO NZ

The changes to the Construction Contracts Act were announced by Housing Minister and National's building and construction spokesperson Nick Smith on Tuesday.

They follow the collapse of the construction company Mainzeal last year which resulted in up to $90 million in claims by unsecured creditors.

Subcontractors such as electricians, plumbers, painters, plasterers and tilers lost $18 million in wages, when Mainzeal went into liquidation.

Housing Minister Nick Smith.

Housing Minister Nick Smith. Photo: RNZ / Diego Opatowski

Nick Smith said in future the developer or main contractor will have a legal duty to hold the money needed to pay sub contractors.

A Christchurch sub-contractor said the changes could help him recover more than $300,000 he is owed.

South Island Shotcrete was owed more than $250,000 by Mainzeal and is now battling to recover more than $300,000 from another company.

Shotcrete Managing Director Doug Haselden said his company now faces another situation like Mainzeal.

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Photo: PHOTO NZ

"It's $370,000 one company owes me. It is a massive job in Christchurch, it is very very well known and it's been on the news a lot with a big launching. They've only got a month or so, a couple of months left to go before they have to open and if they don't pay me basically they're not going to open."

Doug Haselden said he welcomes the law changes.

"It's going to make a big difference, it's going to get the white collar crime out of construction. It's going to keep people honest, get rid of the cowboys."

Builders working on the roof of a house.

Photo: PHOTO NZ

Peter Diver Plumbing was another company which suffered following the Mainzeal collapse.

A director, Jane Diver, said the company lost hundreds of thousands of dollars, but borrowing money from the bank meant it didn't have to close its doors.

She said the changes will give confidence and peace of mind to sub-contracting companies.

"In the past you could be doing work for companies and with Mainzeal you didn't know, you had no idea that what was going to happen happened, so it could happen to any company at any time. It certainly helps us take on more projects with more peace of mind."

Carpark ripped up

Director of Complete Siteworks Pera Te Amo, ripped up a Christchurch supermarket car park in April, after he wasn't paid for his work.

He won the court battle with construction company, Watts and Hughes, but is still waiting for the $300,000 the court ruled he is owed.

Mr Te Amo said he doesn't regret his actions.

"I don't want sub-contractors to get the wrong idea that if you're in a dispute you should rip the walls down, or rip up a car park. What I did was fairly extreme and to some degree maybe I shouldn't have done it but unfortunately we'd been arguing for so long and nothing was getting done and it was heading down that track."

President of Civil Contractors New Zealand, Dave Connell

President of Civil Contractors New Zealand, Dave Connell Photo: Connell Contractors

President of Civil Contractors New Zealand, Dave Connell, said all sub-contractors will welcome the news which is a step in the right direction to protecting people's money.

"The retentions are quite often the profit in the business. I know in our business it's the money we put aside for income tax, for provisional tax. It's just a bloody disaster when for one reason or another it's not paid. It is not capital for the client to use."

Dave Connell said he would like to see the Government take an extra step and protect people's money from receivers.

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