If you are owed money by a company or individual, our debt recovery lawyers Brisbane at Boss Lawyers can help you recover what is rightfully yours — from letters of demand to statutory demands, winding up applications, and judgment enforcement. Call Mark Harley on 1300 267 711.
The collapse of a major Queensland formwork company in recent weeks is a reminder that construction insolvency is not an abstract risk — it is a live, costly reality affecting subcontractors, suppliers, and head contractors right across the state.
A formwork company with work on Brisbane and Gold Coast high-rise projects was kicked off those sites after failing to pay its subcontractors. Six weeks later, it collapsed into liquidation. The story will be familiar to anyone who has worked in Queensland’s construction sector: a contractor falls behind on payments, subcontractors down tools, and then the domino effect begins.
If you are a subcontractor, supplier, or creditor caught in that chain, here is what you need to know — and what you need to do.
What Happens When a Construction Company Goes Into Liquidation?
When a company is placed into liquidation, an independent liquidator is appointed to:
- take control of the company’s assets
- investigate the company’s affairs and the conduct of its directors
- recover money for creditors through asset realisations and legal actions
- distribute any recovered funds to creditors in the order prescribed by law
For subcontractors and trade creditors, liquidation usually means bad news. Unsecured creditors — which is what most unpaid subcontractors are — sit near the bottom of the priority queue. In most construction insolvencies, unsecured creditors receive cents in the dollar, if anything at all.
That is the commercial reality. But there are legal tools that can improve your position — if you act quickly.
Your Rights as an Unpaid Creditor
1. Lodge a Proof of Debt
Once liquidation is underway, you will receive notice from the liquidator. You must lodge a formal proof of debt to participate in any dividend distribution. This is not automatic — if you do not lodge, you will not receive payment even if funds are recovered.
Get your invoices, contracts, delivery dockets, and payment records in order immediately.
2. Security of Payment — Act Before Liquidation
If the contractor was in financial distress but had not yet entered liquidation, the Building Industry Fairness (Security of Payment) Act 2017 (Qld) gave you powerful tools: payment claims, adjudication, and suspension rights.
Once liquidation begins, these rights become more complicated. The liquidator’s appointment triggers a moratorium on most enforcement action. Acting before liquidation is always better than acting after.
If you served a payment claim and obtained an adjudication determination, that determination becomes a court judgment — which may give you priority over other unsecured creditors in certain circumstances.
3. QBCC Home Warranty Insurance
If the collapse involves residential building work, the Queensland Building and Construction Commission (QBCC) Home Warranty Insurance scheme may provide some protection to homeowners. This does not generally help trade creditors, but it is worth understanding the landscape.
4. Retention Money — Where Is It?
Queensland’s project trust account regime was designed to protect retention money. Check whether retention funds were held in trust. If the head contractor failed to maintain a trust account as required, that is a separate legal issue — and potentially a claim against the director personally or the QBCC.
5. PPSR — Are You Registered?
If you supplied goods to the insolvent company, do you have a registered security interest under the Personal Property Securities Register (PPSR)? If yes, you may be able to recover the goods or have priority over other creditors. If you are not registered, you are an unsecured creditor.
Suppliers of plant, equipment, and materials should always register PPSR interests on construction projects.
Director Conduct — Potential Claims Against Individuals
Liquidation is not the end of the story. A liquidator has significant powers to investigate director conduct and recover funds.
Common claims in construction insolvencies include:
Insolvent trading (s 588G Corporations Act): If a director allowed the company to continue trading while insolvent, they can be personally liable for debts incurred during that period. Creditors can sometimes bring these claims directly against directors.
Unfair preference payments: If the company paid certain creditors (or related parties) preferentially in the six months before liquidation, the liquidator can claw those payments back.
Unreasonable director-related transactions (s 588FD): The Full Federal Court recently considered the scope of this provision in Yang v Wong [2026] FCAFC 39 — clarifying that payments must be traced directly “to” a close associate, not just through a corporate chain. This is a technically complex but powerful tool for liquidators.
Phoenix activity: Where a director has previously run a company into insolvency and then set up a new entity doing the same business, there are specific laws under the Corporations Act that may render the director personally liable and disqualified from managing corporations.
ASIC and the ATO both have active phoenix activity enforcement programs. Directors who engage in this conduct face disqualification, civil penalties, and potentially criminal prosecution.
What Head Contractors Should Do Right Now
If a subcontractor you engaged has entered liquidation mid-project:
- Document everything. Secure evidence of the subcontractor’s work completed, materials on site, and amounts outstanding in each direction.
- Assess your contractual rights. Your contract should include provisions for termination on insolvency. Check the termination mechanism and notice requirements.
- Notify your principal. If you are a head contractor, you have obligations to your principal. Get ahead of the situation before they hear about it elsewhere.
- Secure the site. Materials and plant on site may be subject to the liquidator’s claims. Do not remove materials without legal advice.
- Engage a specialist solicitor. Construction insolvency sits at the intersection of building law, insolvency law, and contract law. You need someone who knows all three.
A Pattern Repeating Across Queensland
The recent Queensland collapse is not an isolated incident. Construction insolvency rates in Queensland remain elevated, with high material costs, labour shortages, and fixed-price contracts squeezing margins across the sector.
Where a director of an insolvent company has previous insolvency history — a prior company in liquidation, ATO debts, or a history of director disqualifications — creditors and regulators pay close attention. ASIC’s 2026 enforcement priorities include continued scrutiny of phoenix activity, and the ATO is actively pursuing directors personally for unpaid PAYG, super, and GST through Director Penalty Notices.
The message is clear: if your company is struggling, seek advice early. The legal options available to a director who acts before insolvency (voluntary administration, small business restructuring, safe harbour protection) are far better than the options available after the company has collapsed.
Get Advice Now
Whether you are an unpaid subcontractor, a head contractor caught mid-project, or a creditor owed money by a collapsed Queensland builder, the time to act is now — not after the liquidator’s first report.
Boss Lawyers acts for creditors, liquidators, and directors in construction insolvency matters across Queensland. We know this territory.
Call Mark Harley on 1300 267 711 or contact us online for a confidential discussion.
Further Reading
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
If you are facing an insolvency issue as a director, creditor, or business owner, Boss Lawyers can help. We regularly act in insolvency matters across Brisbane and Queensland, including voluntary administration, liquidation, and director liability claims. Contact us on 1300 267 711.
If you need strategic legal advice on builder insolvency and construction disputes, contact the team at Boss Lawyers. Our construction lawyers Brisbane act for clients across Brisbane and Queensland. Call us on 1300 267 711 or use our online contact form to get started.
