Administrators for a building company that collapsed during construction of a Bokarina unit project have been knocked back in an application to pay themselves from the firm’s trust funds.
RSM Australian Partners Jonathon Colbran, Richard Stone and Mitchell Herrett had sought a Supreme Court direction to enable them access the trust funds of PBS Building (Qld) Pty Ltd to cover some of their remuneration, costs and expenses.
PBS Building (Qld) went into administration last year while building an apartment complex, The Curl, at Bokarina Beach and an RV park, Latitude, at Hervey Bay, and subsequently went into liquidation.
The company had taken over construction of The Curl after the original builder, BA Murphy, collapsed in 2021. The project has since been taken on by Hutchsinsons.
In information provided to the court, the Bokarina contract, which included homes, civil construction and streetscaping, was worth about $16.5 million and the Latitude contract about $41 million to PBS Building (Qld).
The information showed that a month after PBS Building (Qld) went into liquidation, it had $1985.11 in cash in the bank, $2516.35 in a Bokarina project trust account, $35,424.36 in a Latitude trust account and $352,920,59 in a retention trust account.
Mr Colban, Mr Stone and Mr Herrett claimed there could be insufficient funds to cover their work and submitted they might have to reconsider their involvement as administrators.
Their costs were $115,084.65 in legal fees, $41,687.39 in subcontractor communication costs and $32.245.50 in commission, correspondence and other fees incurred by Mr Herrett.
Under the Building Industry Fairness Act, a trustee can only withdraw money to pay beneficiary contractors, such as subcontractors, or others in a handful of limited circumstances, and subcontractor payments have priority.
The administrators contended the definition of a trustee was limited only to the contracting firm or its employees, and there was therefore no reason they could not recover remuneration from the trust accounts.
However, the Queensland Building and Construction Commission put forward that an administrator was a designated agent under the Corporations Act, and as a liquidator carried on the business of a firm as a trustee or agent.
The QBCC also pointed out that the BIF Act did not permit the withdrawal of funds from trust accounts to reimburse an administrator or liquidator.
Judge Susan Brown, in a decision published earlier this month, found the definition of trustee did not exclude administrators, and even if it did, the administrators could not recover their remuneration, costs and expenses from a trust because those would constitute a debt owed to a creditor of the trustee.
The judge found the BIF Act prevented a trustee from exercising their right to indemnity and that the court did not have the power to provide remuneration for a trustee.
A QBCC spokesperson said the judgement reaffirmed that amounts held in trust funds were for beneficiaries such as subcontractors.
“The QBCC is carefully considering the court’s judgment and will take it into account in performing the QBCC’s oversight functions over trust accounts,” they said.
“The court has confirmed that amounts held in project and retention trusts are preserved strictly for the benefit of beneficiaries to those trusts.”
Judge Brown gave the administrators and the QBCC a week to consider whether they wished to seek any other orders or declarations.
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