Michelle Coffey and her husband ask how people who close companies owing big debts can immediately start up new businesses. Photo / Alex Burton
Directors of a building company owing home-owners and tradies half a million dollars have started a new business months after their last one collapsed, infuriating their out-of-pocket customers.
Directors Oscar Brewer and Adam Hickson's deck and fence building business Crafted Decks and Fences went into liquidation in February.
So far 47 people and businesses have told liquidators investigating the company's finances they are owed about $520,000. No money has yet been paid back to them.
Brewer and Hickson are back trading again, having started two new building companies in April.
A recent advertisement by the pair's new OA Construction Group company sought to recruit builders to complete the $80,000 per month of deck and fence building work they had available.
However, for Aucklanders Craig and Sue Hancock, the ad feels like a slap in the face.
They said they lost $35,000 last year after paying Brewer and Hickson's former company for a deck around their swimming pool that was never completed.
Sue Hancock said she cannot understand how Brewer and Hickson are allowed to immediately start a new business in the same field without paying the debts of their previous company.
She believed the system was set up to allow people to voluntarily go into liquidation without penalty.
"There is something wrong with that picture - there is no justice," she said.
The business's collapse comes at a time when many building companies are doing it tough in what some pundits are calling a perfect storm of pressures.
They include rising building costs, difficulty accessing business loans and a shortage of materials.
That's led former customers to question how Brewer and Hickson will perform running another business in a new, tougher economic environment just two months after their last company failed.
Brewer earlier blamed high building costs and his own mistakes for Crafted Decks and Fences' collapse, telling the Herald in February he wanted to apologise to those who lost money.
He said Crafted Decks and Fences' troubles included having to refund customers after some of its sub-contracted builders did bad work and some of the mass-produced decks it ordered proved to be poor quality.
Rising timber costs then added further financial pressure, leading Brewer to chase ever more jobs in the hope he could turn his fortunes around, he said.
"We lost money and operated on the strategy that we could recoup our losses by getting more sales," he said.
However, Brewer now claims he's learned from his mistakes.
Crafted Decks and Fences previously handled about $500,000 in turnover each month and sub-contracted work to at least 10 different builders, he said.
By contrast, his new company is only accepting about $80,000 worth of jobs every month and using high quality sub-contractors, he said.
That made it easier to keep an eye on the work being done, he said.
"No one else will lose money, I'm certain," he said.
"We're doing things so safe now."
The Herald unsuccessfully attempted to contact Hickson for comment yesterday.
Brewer also claimed he started his new businesses mostly to pay back what he owes, saying he was trying to get back on his feet.
"It is awesome I am starting these new companies because how else are these people going to get paid," he says.
He discouraged the Herald from writing another article about him, saying it could reduce sales for his new company and therefore hurt his former customers by preventing him paying them back.
"It's important these people get paid back, it should be important to you too," he said.
However, Brewer admitted he had not yet made any repayments, claiming he needed more time to earn a "very high income" to be able to repay the debts.
Liquidator Keaton Pronk, from McDonald Vague: Insolvency Practitioners, said while 47 people had so far made claims against Crafted Decks and Fences, another nine creditors may also come forward with claims.
No repayments had so far been paid, with the liquidator still doing its investigations and their next report due out in August, Pronk said.
Hancock doesn't believe Brewer when he says he is starting his new company because he has her interests at heart.
By contrast, she worries that because Brewer and Hickson were not penalised for their last failed business, they could "go and do this again and again".
She paid Crafted Deck and Fences almost $35,000 last year for a new decking.
However, before the job was finished, the builders sub-contracted to do the work walked away, telling Hancock they hadn't received any payments from Crafted Decks and Fences.
That left Hancock's backyard a "hazardous" mess, with materials strewn everywhere.
She said she has subsequently had to find a new builder and pay them an extra $40,000 to do the decking, including re-levelling the site and putting new piles down due to the poor quality of the original job.
Peter Gardner, who owns Generation Builders, said he is also owed more than $30,000 after he did subcontract work for Crafted Decks and Fences but was never paid.
He said he last saw Brewer driving an upmarket Mercedes Benz in March, but that he had not been paid any money back or and neither Brewer or Hickson had contacted him to arrange a repayment plan.
Like Hancock, he worried that what happened to him could happen to other people.
Michelle Coffey also said she didn't trust the pair after paying their former business a $4500 deposit for a decking that was never started.
She ended up having to take out a loan to pay another builder an extra $6500 to build the deck for her.
"How can he just go on and do another business - I don't get it," she said of Brewer.
She asked what happened to his former company's debt and if it just gets "wiped off".
Jonathan Wood, senior property lawyer with Court One, said legally Brewer and Hickson are "perfectly entitled" to start their new businesses.
New Zealand law works on the doctrine corporate entities are separate legal personalities from their owners.
That means a business is legally responsible for all debts it incurs, with the owner's personal assets unable to be seized by people the company owes money.
This can encourage greater entrepreneurship in an economy by allowing people to risk starting a new business without the fear they could lose everything they own, like their houses.
However, there is one situation after liquidation in which a company's directors are not allowed to start a new company, Wood said.
That occurs when they put a business into liquidation and then "essentially have the same business being run by a new company", he said.
"It's called a phoenix company, and it is extraordinarily hard to prove," Wood said.
"There's only ever been two prosecutions of phoenix companies, and only one that's ever been successful that I know of."
In some other countries, directors are required to ensure their companies retain a certain amount of cash or other assets at all times to ensure that if the business does go under some money is left over to pay creditors.
However, that is not the case in New Zealand, Wood said.
Not only can it make businesses unproductive when they stockpile unused cash, but it would also take a lot of Government resources to go around checking every company is meeting the asset requirements, he said.
Wood said one protection consumers had at the moment was to check public records to see the past actions of company directors, in particular, looking whether they have been regularly putting businesses into liquidation.
However, Hancock hoped stiffer measures could be put in place.
She said she believed the system needed "an overhaul".
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