NSW Council Awards $400K in Contracts to Builder with Four Company Collapses in Five Years

When a NSW council awarded nearly half a million dollars in contracts to a builder with four company collapses in five years, it exposed a gap that exists across procurement teams nationwide: inadequate supplier financial due diligence.

The case of Anthony Falconer and his multiple failed civil construction companies isn’t just a cautionary tale. It’s a masterclass in recognising the warning signs that should trigger deeper investigation before a single dollar changes hands.

What Happened?

Between December 2023 and June 2024, the council engaged Hard Hat 1 Pty Ltd for two projects worth $428,000 combined. The company’s sole director, Anthony Falconer, had a concerning history that should have raised immediate questions:

• Four company collapses in five years
• More than $2 million in combined debts across failed businesses
• Recent discharge from bankruptcy (October 2022)
• The Australian Taxation Office as the largest creditor in multiple liquidations
• ASIC commissioning several confidential reports into the liquidated companies
• Multiple liquidators flagging potential insolvent trading and director offences

One contract commenced just two months after Falconer’s most recent company entered liquidation.

The council’s response? They were “unaware of any bankrupt or insolvency history” and only conducted “a company search against the ABR”.

The Red Flags Procurement Teams Must Know

Let’s break down the warning signs that appeared in this case. These are patterns that should trigger immediate additional scrutiny in any procurement process.

1. Recent Discharge from Bankruptcy

The Red Flag: A director assumes control of a company just six days after being released from bankruptcy.

Why It Matters: Bankruptcy doesn’t erase the behaviours or circumstances that led to financial failure. When someone emerges from bankruptcy and immediately takes on directorship, it raises questions about whether underlying financial management issues have been addressed.

What to Check:

• ASIC personal insolvency records for all directors
• How long since bankruptcy discharge
• The reasons behind the bankruptcy
• Whether similar business activities are being pursued

2. Family Member Musical Chairs

The Red Flag: Directorship transfers between family members, particularly when one family member has no industry experience.

Why It Matters: In this case, Falconer’s wife became director whilst he was bankrupt, despite having no knowledge of civil construction. He resumed directorship immediately after bankruptcy. This pattern can indicate someone attempting to maintain control whilst legally restricted from doing so.

What to Check:

• Recent director changes (particularly within the past 2-3 years)
• Relationships between current and former directors
• Industry experience of current directors
• Whether director changes align with bankruptcy periods or company failures

3. Pattern of Company Collapses

The Red Flag: Multiple companies directed by the same person entering liquidation over a short period.

Why It Matters: One company failure might be unfortunate. Multiple failures suggest systemic issues with financial management, business practices or both. In Falconer’s case, four companies collapsed between 2019 and 2023, each following similar patterns of ATO debts and unpaid superannuation.

What to Check:

• ASIC records for all current and former directorships
• Liquidation history of related entities
• Common patterns across failed companies (similar creditors, timeframes, circumstances)
• Whether new companies operate in the same industry as failed ones

4. Related Party Transactions Without Documentation

The Red Flag: Financial relationships between related companies without proper contracts or documentation.

Why It Matters: In this case, Hard Hat 2 provided labour hire services to Hard Hat 1, but the director couldn’t provide a copy of the contract between the two companies. Liquidators noted this appeared to be an “unprofitable agreement” and that Hard Hat 2 may have been trading insolvent for two years.

What to Check:

• Corporate structure and related entities
• Trading relationships between related companies
• Whether related party transactions are properly documented
• Financial flows between related entities

5. The Australian Taxation Office as Primary Creditor

The Red Flag: Liquidation reports showing substantial ATO debts, particularly unpaid superannuation.

Why It Matters: The ATO being the largest creditor signals cash flow problems and potential financial mismanagement. Unpaid superannuation is particularly concerning, as it represents money withheld from employees but never remitted. In Falconer’s case, multiple companies collapsed owing hundreds of thousands to the ATO, including unpaid superannuation dating back years.

What to Check:

• Tax compliance history
• Superannuation payment records
• Whether ATO debts feature in any previous insolvencies
• Payment plans or arrangements with the ATO

6. Liquidator Reports Flagging Potential Offences

The Red Flag: Liquidator reports suggesting possible insolvent trading, failure to keep financial records or other director offences.

Why It Matters: These findings come from qualified insolvency professionals examining the company’s affairs. When liquidators flag potential offences, it indicates serious concerns about how the business was managed. Multiple liquidators raised concerns across Falconer’s failed companies.

What to Check:

• Published liquidator reports on ASIC (available through company searches)
• Whether ASIC has commissioned supplementary (confidential) reports
• Common themes across multiple liquidation reports
• Whether any formal action has been taken by ASIC

7. Minimal Company Trading History

The Red Flag: A company bidding on significant contracts despite being newly incorporated or having limited trading history.

Why It Matters: Lack of trading history makes it impossible to assess financial stability, performance track record or capability. Hard Hat 1 was relatively new when it secured council contracts, and its director had multiple recent company failures.

What to Check:

• Company incorporation date
• Years of financial statements available
• Previous projects completed
• Industry references from arms-length parties

8. Geographic Spread of Creditors

The Red Flag: Creditors spanning vast geographic distances (in this case, Tasmania to far north Queensland).

Why It Matters: A wide geographic spread of creditors can indicate either rapid expansion without adequate financial controls or a pattern of moving between regions. It also makes recovery more difficult and increases the number of parties affected by failure.

What to Check:

• Location of previous projects
• Where the company typically operates
• Geographic distribution of creditors in any failed entities
• Whether there’s a pattern of moving to new regions after business failures

What Should the Council Have Done?

The council’s statement that they only conduct “more comprehensive searches” for contracts above $250,000 reveals a common misconception: that financial risk assessment should be based solely on contract value.

In reality, financial risk assessment should consider multiple factors:

• Contract value (yes, but not in isolation)
• Strategic importance of the work
• Supplier history and background
• Market conditions in the relevant sector
• Complexity of the work
• Timeline and cash flow implications

A proper assessment would have included:

1. Director and company searches: Beyond a basic ABN lookup, checking ASIC records for all directors’ personal insolvency history and their other current and former directorships.
   
2. Liquidation history: Reviewing published liquidator reports for any failed entities connected to the directors.
   
3. Financial statements: Requesting and analysing recent financial statements, not just for the tendering company but for any related entities.
   
4. Reference checks: Speaking with previous clients and subcontractors, particularly those involved in recent projects.
   
5. Related party analysis: Understanding the corporate structure and any trading relationships between connected entities.
   
6. Tax compliance verification: Confirming the company has no outstanding tax debts or payment arrangements with the ATO.

The Real Cost of Inadequate Due Diligence

This NSW council isn’t alone in this gap. Many organisations only discover a supplier’s troubled history after problems emerge. By then, the costs mount quickly:

• Project delays whilst finding replacement contractors
• Budget overruns from re-tendering and higher prices
• Reputational damage when ratepayers or stakeholders question procurement decisions
• Legal costs from disputes and claims
• Staff stress from managing crises
• Opportunity costs from delayed or cancelled projects
• Audit findings highlighting inadequate procurement processes

For the council, one contract began just two months after Falconer’s previous company collapsed. Had proper checks been in place, this contract would never have been awarded, and the risks could have been avoided entirely.

For the subcontractors and creditors left unpaid across Falconer’s failed companies, the impact was direct and financial. Nathan Hall, a Cairns-based contractor owed $73,000 by one of the failed companies, flew to NSW for work and wasn’t paid. “It’s absolutely ridiculous that somebody with his history can still have ongoing work, especially with the government,” he said.

Moving from Reactive to Proactive

This case demonstrates what happens when procurement teams rely on minimal checks and assume limited risk. But it also highlights how preventable these situations are.

The solution isn’t to make procurement more cumbersome. It’s to make it smarter. By understanding these red flags and building appropriate checks into your procurement process, you can:

• Identify high-risk suppliers before contract award
• Apply the right level of scrutiny based on actual risk factors
• Protect your organisation from project disruption
• Maintain confidence with stakeholders and ratepayers
• Create a defensible audit trail for procurement decisions

The question isn’t whether you can afford to conduct thorough supplier financial due diligence. It’s whether you can afford not to.

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Note: The case details in this article are drawn from publicly available information reported by the ABC. CreditSource was not involved in any aspect of the Central Coast Council procurement or the assessment of the companies mentioned.