Subbies caught in Diploma Group chaos

The Weekend West, September 10, 2016:

British migrants Matt Duckett and David Shavrin started their landscape construction company three years ago, growing the business to the point where it has 12 employees.

Now they are struggling to make ends meet. The owners of iDigWA claim that is because embattled builder-developer Diploma Group owes them about $100,000, including interest, for unpaid work.

“It gets very stressful when you can’t meet your debts,” Mr Duckett said. “The business is living month to month, claim by claim.”

The 39-year-old father of one said they had been forced to move premises and the partners’ salaries had been halved. He had borrowed $50,000 to meet the business’ commitments.

“I’m sick of getting screamed at by creditors. There’s not a lot I can do. I’m on payment plans with all these creditors.”

Mr Duckett is one of dozens of subcontractors and suppliers doing it tough because of what industry insiders are calling a rogue builder.

Estimates of what Diploma owes them vary from $10 million to $20 million. Summonses against Diploma demanding payment totalled about $2 million by the beginning of this month. Individual claims range from tens of thousands of dollars to, in one case, $2.8 million.

Executive chairman Nick Di Latte yesterday said subsidiaries Diploma Constructions (WA) and DGX Construction had “contractual disputes with a number of subcontractors which are subject to ongoing legal proceedings and the company does not intend to comment further on those proceedings at this stage”.

Mr Di Latte said in a statement to the Australian Securities Exchange the companies did not want to debate the disputed issues by responding to articles inThe West Australian generated by one or more of those subcontractors.

The company’s problems don’t end with the payment claims. In late July it was thrown off a prime western suburbs project. And the company is under investigation by the Building Commission. Diploma’s woes appear to date from the beginning of the year, although some creditors are still chasing payment claims from projects of previous years. The listed company reported in February a $575,000 profit for the first half.

Its cash balance at December 31 was an improved $8.3 million.

But last week Diploma suspended trading in its shares, warning it would be two months to report full-year figures.

The builder’s contract was terminated at the Perry Lakes residential project over allegations it was not paying subcontractors, who were no longer turning up for work.

The builder and developer TRG Properties are in dispute over claims by Diploma for $1.2 million in payments.

The builder’s own Quest Adelaide Terrace project in East Perth is behind its flagged July completion schedule. Diploma in April announced a $42 million sale of the building to an unidentified buyer that would settle after practical completion.

Mr Di Latte said practical completion was expected this month, with the sale to be completed in October.

In May Diploma said the sale would retire project debt of $24 million and return substantial cash and equity. Observers express doubts about how much of those funds will be made available to subcontractors.

There are claims of slowdowns at other Diploma projects, including another Quest project in Midland. Little work has been observed in recent weeks on surf lifesaving facilities in Yanchep under a contract with the City of Wanneroo.

Building Commissioner Peter Gow said the commission was investigating Diploma Construction (WA) “and assessing the available information to determine its performance and viability as a registered building contractor”. Other Diploma entities, including DGX Construction, were being assessed.

One explanation offered by an outsider for the group’s difficulties is a lack of or delay in new projects.

On top of payment disputes, staff have been made redundant and DGX Construction’s Leederville office closed.

The 40-year-old company founded by Mr Di Latte’s father Dominic is about 50 per cent owned by family members.

Numerous opponents of the company question its solvency but Mr Di Latte has emphatically denied such claims.

Yesterday he said development approval had been received for a $180 million East Perth commercial project.

Subcontractors at the Empire West development in Perry Lakes have been re-engaged by the new builder TRG appointed.

“In a few months time, if we can finish paying off all this debt … we can start again,” Mr Duckett said.