What Are The Next Steps In The Pindan Insolvency?

Building and Construction and Dispute Resolution Special Counsel, Daniel Morris, and Director, Murray Thornhill provide their insight into Pindan Constructions’ insolvency and the potential next steps.

What happens after a major construction company becomes insolvent, and what are the implications for subcontractors, creditors, and ongoing projects?

Following Pindan Constructions’ insolvency, the administrators’ primary challenge is to complete as many unfinished projects as possible while maximising returns to creditors, including hundreds of unpaid subcontractors. The process is likely to involve complex issues relating to creditor priorities, partially completed contracts, project financing, and the transfer of existing contracts to new builders. Delays can have significant financial consequences for project owners, investors, purchasers, and subcontractors throughout the construction supply chain. Businesses affected by the insolvency should obtain prompt legal and accounting advice to understand their rights and minimise potential losses.

WHAT ARE THE NEXT STEPS IN THE PINDAN INSOLVENCY?

Pindan Constructions’ insolvency has left major construction works unfinished and about 500 subcontractors owed payment for work they have done across Pindan’s 68 pending projects.

Pindan’s external administrators, EY, are left with the task of finding a way to get as many projects finished and subcontractors paid as possible. And they will need to move quickly because unfinished building sites cost money just to maintain.

If those works were financed as is typical, the owners will keep on losing money by servicing loans and diluting their capital investment.

It is even worse for those who have made time-sensitive commitments to customers or investors. Consider, for example, off-the-plan apartment buyers who have planned to move in or rent out their new apartment by a certain date. Other kinds of projects will have similar problems with clients left in limbo. Disappointed investors will inevitably lose money and may even have their own legal claim down the line. The ripple effect in any large insolvency is always painful.

Labour has been paid for up front in the form of wages. Materials will have either been supplied COD or on credit, creating a double-bind for subcontractors who are not entitled to get paid for those prepaid supplies until they reach the next project milestone.

Expect legal problems around the ranking of Pindan’s many creditors, both secured and unsecured. Working out what payments ought to be made for partially completed fixed price work also creates a raft of legal problems.

One way forward may be to find new subcontractors prepared to take on Pindan’s contracts quickly (the technical term is to novate those contracts). At least they might then keep the subcontractors on site, paid and working towards completion of as many unfinished works as possible. Given WA’s labour shortage, though, this may present a particular challenge for EY.

HOW CAN HHG LEGAL GROUP HELP?

If you are a subcontractor, creditor or similarly linked to Pindan, you should seek legal and accounting advice about the potential impacts on your business.

Our team are highly skilled and experienced in advising on all aspects of civil and construction, insolvency and debt recovery. Contact us today if you need advice or representation in this area.

* The information provided in this website serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable legal team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.