Parmesh Chandra is at risk of losing his business and his home after AH Construction Services, a firm that hadn’t paid GST for six years, went bust.
He said it owed him $11,000.
His experience reflects the cascade affect that failures can have, as liquidations often leave tradespeople and smaller operators with little or no payout.
Chandra started his company, ASP Trucking, in October last year, investing in a truck capable of carrying 44 tonnes.
The company’s second job was for AH Construction Services, which was put into voluntary administration after it emerged it had failed to pay GST for six years.
“It’s a bit tough to come back, but I’m trying my best, it’s getting harder,” Chandra said.
Bryan Williams is handling the liquidation of A H Construction Services Ltd, and said any dividend was unlikely for unsecured creditors, unless a windfall appeared that had not yet been identified, which was unlikely.
He said ASP Trucking Limited was recognised as being owed $8405, but no claim had yet been received.
Chandra said he would be submitting the claim this weekend, and the current amount missed another job he had done for AH Construction.
Chandra, who is 54, has been driving trucks for most of his working life and said he felt AH Construction’s director, Ajay Singh, had been misleading workers.
”My business was very new, and he said ‘if you work with me, I will pay you’, but he went into liquidation,” Chandra said.
Chandra is struggling to find a full-time contract in an industry where activity is slowing, and company failures are increasing.
He said he was working day-to-day, and often only found out if he had a job on the evening before it was happening.
“In this situation, I can lose my house, because it’s hard to maintain the mortgage,” he said.
Chandra’s home loan interest rate re-fixes in July, and will increase significantly, He said he would contact his bank next week to discuss options, because he doubted he would be able to keep up with higher interest repayments.
He bought his home in Papatoetoe roughly two years ago, when the market was running red-hot and prices were high.
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Parmesh Chandra is at risk of losing his business and his home.
Williams recently sold off 350 of the firm’s vehicles and pieces of equipment in an attempt to recoup some money to repay creditors.
The first liquidator’s report into the company suggested the huge sell-off raised a little over $8 million on the day, with an expected additional $2.38m to come from later sales.
Despite this, the report noted the company was unlikely to be able to repay any of its unsecured creditors, many of them in the trades.
Money from the large sell-off was enough to pay back secured creditors, and also almost enough to pay back the majority of preferred creditors, which included $5.3m owed in GST, more than $2.5m in PAYE tax, and $32,000 owed in holiday pay to employees.
AH Construction Services owed about $7m to unsecured creditors, $2.9m of which was owed predominately to tradespeople.
Stuff
Damien Grant says there is no need for more protection for small trades.
Law firm director Brent Norling said contruction company failures were on the rise, resulting in the amount of work coming from the sector rising from roughly 25% pre-Covid to about 70% today.
He said there was often a delay in the dominoes falling.
”For example with Mainzeal and Ebert Construction, where there are large companies that fail, it might take a year or two before the subcontractors ultimately go into liquidation themselves, because they do the next job to pay for the last job, and it kind of continues.”
Norling said Inland Revenue had also previously been asked to delay some enforcement action, but that grace period had now ended. ”Now we see IRD stepping up enforcement.”
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Parmesh Chandra in front of the truck he bought to start his own business.
Waterstone Insolvency principal Damian Grant said there was no need for new or added protections for small trades in insolvencies, and that such protections were infeasible.
He said added protections would increase the cost of employing smaller tradespeople, which would make them more expensive, and less attractive to work with.
Grant said tradies would price jobs with the expectation of making a profit, and would price-in the small chance of a company going bust.
“You always know there’s a risk you won’t get paid, and the vast majority of time you do get paid.”
He said small operators were sophisticated enough to factor the risk into pricing.
There was a ripple effect from developers going bust, but Grant said the ones that really suffered were those that did most of their business with the defunct company.
“If you have one client and that client goes, then you’re in big trouble, but usually you’ve got 20 clients and no one client is more than 10-15% of your revenue,” he said.
He said smaller operators were also more at risk if they had expanded during the good times, and now had a larger team that they had to keep operational during a market slowdown.
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