Regrettably, increasing numbers of business insolvencies across the board are a fact of life in Australia. Every insolvency administration or liquidation has its own back story and sometimes it can be a chain reaction or ricochet from someone else going broke. Even priority creditors like employees can be left waiting for months or years for restitution.
Paid for but cut out of delivery - a Zund G3 L2500 like the one still owed to Fireworks Digital
The media is replete with stories of property and construction companies going broke; falling into administration or being liquidated with little return to creditors. Since mid-2021, an average of two builders a day have gone bust (source: ASIC). A chain of causation often ensues – taking down sub-contractors and tradies, owed money and whose own tools of trade are often on-site. Scenes of tradies scrambling to get their tools back from a locked site are not uncommon.
Of course, the ultimate victims are the home buyers who have paid deposits and staged payments only to be left with an unfinished home with possible defects. There are schemes to recover from such heartbreaking scenarios and all homebuyers should get a copy of the builder’s insurance certificate before handing over a cent.
In any insolvency, there is a toll on the company directors and shareholders, staff made redundant and creditors large and small – and flow-on effects that seldom make news.Employees can be left waiting for months or years for their entitlements but mortgages, grocery bills and school fees still need to be paid.
But, what about the effects of insolvencies in the printing and signage industry?
When the fireworks don't ignite
Take the case of Stephen Boyd of Fireworks Digital of Loganholme, Queensland as an example:
He says: “On a personal level it has put a financial strain on us. It's also something that keeps you awake at night not knowing about the uncertainty of it all. It’s a bit like having a fraud committed against us but the perpetrator is not held responsible.”
What Mr Boyd is referring to is his October 2023 handing over of $137,500 as a prepayment for a refurbished Zünd CAD cutter through the local authorised dealer. Not only this, but the purchase was through finance, and he is responsible for monthly repayments – for nothing as he never received the machine.
He did not hand over the money haphazardly, he followed careful protocols having paid a $5,000 deposit in May 2023 to secure the machine, which was to be traded in by a NSW printer who was buying a new one (also not received). When the delay became concerning, he threatened to cancel the order but says he was assured of a 6 month extended warranty, $2,500 stock credit and $5,000 spare parts and labour.
Then, on October 30th after more delay, Fireworks Digital received an email from the vendor stating:
“The second-hand Zund G3 L-2500 machine will be due for delivery next week.
Payment terms on this deal is paid in full before delivery. Could you please ask the financier to send the payment for funds in full of $137,500 inc. GST…”
He never received the machine, was fobbed off with excuses and then the vendor entered administration on January 19th 2024.
Mr Boyd continues: “ I still don't know if I am going to be locked into a finance deal for the next 60 months or not. Then we will still have to go and buy an alternative cutter so that makes it an expensive machine!
“We had plans to update other plant also and purchase a new ute all of which has been shelved due to the situation. The deposit was paid to Starleaton and we made our first two payments to the finance company, but have no machine.
“We were also told to go out and buy a new compressor and air dryer for the Zünd and run new 3 phase electrical feeds to suit it. All in all, around another $40K including legal fees we have incurred.
Mental stress and strain
“The mental stress and strain is in not knowing if or what is going to happen in the future. It's been a massive distraction, going back over old emails and putting together a timeline of events as it spans back to the end of April last year. Me and my wife have made several visits to lawyers in the City. It's something that you think about daily and never goes away. I see concern from the staff too as they must wonder how it will affect the business and myself in the future?
“Our deposit was paid in May, so there has been a lot of administrative time spent following this up, outsourcing product we should have been producing in house, dropping off and picking up from contractors etc.”
Mr Boyd concludes: “We feel we have been lied to and question if they knew they could not deliver the machine ‘next week’ when they demanded the $137,500.”
Still no printer for Allpride
On February 21st, we reported on another prepayment - $44,000 – by Allpride Signs of Newcastle, NSW, just 7 days prior to the announcement of Starleaton’s administration. https://www.wideformatonline.com/news/wide-format-news/13257-newcastle-sign-business-80k-out-of-pocket-7-days-before-starleaton-administration.html
This was for an Epson SC 108000 64” printer. Since this report, the owner Jamie Power was contacted by Starleaton personnel saying that a demonstration unit ex-Melbourne would be made available. “Still no printer and the $44k was paid in one lump sum,” says owner Jamie Power.
Several industry suppliers offered to load or even gift traded-in printers but Jamie has a couple in reserve “This experience won’t put us out of business but we still want what we paid for,” he says.
Such losses as these have varying degrees of impact on small businesses. It is unlike a normal credit situation, when a business fails to pay invoices and then falls into administration. These businesses advanced full payment in good faith, for equipment that was promised imminently, but were let down badly.
Neither Cathro Partners nor Starleaton directors have responded to repeated requests for clarification as to the likelihood of these, and at least 3 other contracts of sale being fulfilled. One, for a large sign and service company involves the sum of $316,000 according to a Cathro statutory report, and is subject to litigation, as are others.
