Insolvency specialists are suing directors of a large failed Waikato building business for failing to retain or hold back money to settle accounts with subcontractors.
Waterstone’s Adam Botterill and Damien Grant are liquidating the Stanley group of companies that went under in 2019 and where creditors are claiming $17.95m.
They are planning court action against directors.
“We have filed legal proceedings against the directors of the company in relation to breaches of duties associated with their failure to hold retentions pursuant to the Construction Contracts Act,” said today’s report into the Stanley group of companies.
They listed recent actions they had taken as including “filing legal proceedings against the directors of the companies for failing to keep retentions”.
Former Stanley chief executive Kevin Stanley, Craig Davison and Robert Marshall are directors of Stanley Group, in liquidation and receivership. Stanley’s grandfather started the business nearly a century ago.
The Stanley directors were today reluctant to speak about the matter but are understood to have engaged legal counsel and to be planning to strenuously defend their actions when they were in charge of the group of companies: Stanley Group, Stanley Construction, Stanley Construction (Auckland), Stanley Ecobuild and Stanley Modular.
Retention money is an amount held back by a builder or head contractor but owed to those who have done work, usually subcontractors.
Under the terms of the Construction Contracts Act, builders must keep that money in their accounts. It’s usually a percentage of the amount payable to subcontractors, perhaps 10 per cent of the total value of a contract.
Subcontractors don’t get full payment until the main or head contractor is satisfied with the work done.
Builders are required by law to put that money aside if there are disputes over work with their suppliers. But if a builder goes under and is found not to have kept retentions, insolvency specialists would question that.
One expert said builders put retentions into a separate bank account and have a separate line on the balance sheet to say how much is kept. It should not be not mingled with any other money, he said.
A builder keeping retentions will have money on hand, meaning there could be more to pay creditors if something goes wrong.
In late 2019, the Matamata-based Stanley group of companies was voted into liquidation by its shareholders. About 120 staff were laid off, with early estimates of $5 million to $10m owing to creditors.
Today’s report listed claims of $17.95m: $6.2m demanded by creditors of Stanley Group,$6m claimed by Stanley Construction’s creditors, $5.1m claimed against Stanley Construction (Auckland), $338,000 against Stanley Modular and $2200 against Stanley Ecobuild.
Liquidators said it was unclear whether there would be any further money paid after preferential distributions went to the staff and a secured creditor which was not named.
Matters outstanding were listed as investigations into the companies’ affairs, litigation against the directors and finalisation of the liquidation.
“The liquidators are continuing their investigation into the affairs of the wider group of companies and attending to current legal proceedings. Because of this, the liquidator is unable to provide a timeframe for the conclusion of the liquidation,” today’s report said.
The business which went under were several entities including Tallwood Holdings, a prefabrication unit.
Stanley had been working on Housing NZ and private developments. Its website also listed work on Chateau Tongariro, Ocean Shores Retirement Village, Delegat’s head office and work for Cooper and Company.
Stanley Group also went into receivership in September 2020.
RNZ reported on a creditors’ meeting of the group three years ago. Up to 100 people claiming money gathered at the Matamata Racing Club where a visibly emotional Kevin Stanley read a short statement alongside fellow director Craig Davison.
“As a director, a CEO, and barer of the Stanley name, I take full responsibility for what’s happened and has drawn us all here today,” RNZ reported in 2019.
“The harm has been far-reaching and we’ve let down over 100 staff, our local and national supply network, our subcontracted partners, the community of Matamata, the New Zealand construction industry, and our families. May I extend on behalf of Craig and I my sincere apologies to you all.”
After just over two minutes there were no angry outbursts, only a probing shout of “what did you hope to achieve by saying that?” which was quickly shut down by liquidator Damien Grant as the two directors left the room.
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