A company with less than $4000 in the bank and owned by a Canberra developer has been forced into liquidation by the ACT Supreme Court after it failed to pay a more than $2 million debt to its builder.
Canberra building company Bloc and developer Crafted Capitol Pty Ltd have been engaged in a lengthy legal battle over payment for construction work on a 14-storey luxury residential block in Civic.
The battle dated back to August last year and related to construction work at Crafted's Capitol Residences development on London Circuit.
The developer was ordered to pay Bloc more than $2.3 million by an independent adjudicator appointed under ACT security of payment laws.
The money remained unpaid and consequently the Supreme Court ordered that Capitol be wound up in insolvency.
Through several hearings the court heard that Capitol had no other assets than a bank account with $3346.
However, another company owned by the same directors, Crafted Central Pty Ltd, had more than $7 million in assets.
This included a bank account with $1.74 million, a contract worth $1.35 million that was due to settle and three units at the Capitol Residences with a value of almost $4 million.
Bloc sought the order for Crafted Capitol Pty Ltd to be wound up in insolvency in March due to the fact it was "no more than a bank account controlled by Central, used to pass through funds for the development and shield the remaining assets in the development from Bloc".
Capitol argued that it was not insolvent, it said it had "an entitlement to claim against Central under the contract".
Bloc also sought that the assets of Central be frozen so it could not be disposed of before a liquidator could bring proceedings to secure them.
Capitol made a last-minute offer to Bloc. The offer was that Capitol not be wound up in insolvency and that Central on behalf of Capitol would pay Bloc $1.595 million - the amount that Capitol had determined was due under the security of payment act in July.
Capitol then said it would pay the remaining $820,000 to the court, which would be paid out during the final determination of the liabilities of Capitol and Bloc.
But this offer was dismissed by the court, and Capitol was wound up in insolvency on April 29 and the assets of Central were frozen for 28 days.
"The last-minute proposed of undertakings by Central... does not provide a sufficient discretionary reason to decline to make the order winding up Capitol," the judgment said.
During the court proceedings Bloc halted maintenance works at the apartments, with director Andrew Redwin telling residents the company had continued to work "as long as possible at our own cost".
Bloc has since resumed maintenance works at the complex following the Supreme Court's decision.
The case had prompted renewed calls for the ACT government to accelerate the introduction of its proposed developer licensing scheme.
ACT Sustainable Building Minister Rebecca Vassarotti said work on the scheme was in the "policy and regulatory analysis phase" but did not provide a timeline for its introduction.
"The government wants to make sure that all parties involved in the development and construction of buildings are accountable for their role," she said.
"We want to make sure that practitioners with a poor track record in the sector are held accountable for their actions and that the community have information about the parties involved in developments.
"Not only does it help the community, it also helps the majority in the building industry who are committed to quality and accountability in their profession."
Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content: