Bradford Insulation - Aussie corporate acts unethically.
In May of 2009, the government announced its intention to assist the economy grow out of the recession, and help improve Kiwis' health at the same time, by increasing the subsidies available to homeowners to insulate and heat their homes. Appropriate products were assessed by the government's agency, Energywise (part of EECA), and approved for use.
The vast bulk of the New Zealand insulation market is shared by two iconic Kiwi companies - Fletcher, through its ownership of the immortal Pink Batts, and Autex Industries through its range of innovative Kiwi products. A bit player is the Australian giant CSR, whose brands include Monier Bricks, Viridian Glass and Bradford Insulation.
Bradford Insulation is managed in New Zealand by an Australian woman, Wendy Robinson.
Meandering along as a bit-played in the industry wasn't enough for the Aussie corporate and the "Warm Up New Zealand" scheme seemed a god-sent opportunity for Bradford to expand its the market, using an association with another Aussie company, the DIY retailer Bunnings, in much the same way as Fletcher's do with Kiwi DIY competitor, Carter's, where the retailer sells the service which is then completed by Tasman franchises.
The idea was that Bunnings would advertise the subsidy scheme through print and television, passing those people interested on to Bradford who would then arrange the installation through a team of installers nationwide. Bradford became immersed in the idea and was working with Contact Energy to market the service to Contact's customers as well. A marketing program with Contact was set to begin in October.
Since Bradford Insulation did not have an installation network, it was decided to build one through sub-contracting the work to independent insulation installers throughout NZ. The deal was made to be highly attractive to installers, all of which were small, private companies.
Bradford accordingly made its application to EECA to be approved as a delivery partner for the scheme and approval was confidently awaited by Bradford's employees.
Unfortunately, they were so confident in their success that they committed a serious error of judgement - they assumed that the proposal would be approved. After all, if Carter's and Tasman/Fletcher were advertising flat-out on TV, surely there was room for Bradford to join the party?
Like the farm girl who counted her chickens before her eggs hatched, incubation had not yet been completed and a surprise lay in store.
Armed with the assumption that Bradford Insulation would become an approved partner - and having a temporary approval until 30/9/09, by which time the final approval would be in place, if forthcoming - Bradford's staff made PowerPoint and print presentations to installation companies around the country. The premise was quite simple; Bradford would obtain the leads, through advertising in partnership with both Bunnings and Contact, pass them on to the installer who would then quote, complete and audit the jobs. Bradford would then take care of all of the work in obtaining rebates from EECA, thus releasing installers from two of the largest administrative components of the process: obtaining sales and dealing with Quango administration.
The proposal was presented as a fait accompli, even going to the extent of Bradford signing a contract with the installers who took the offer up clearly stating as its opening line: "Bradford has recently been approved as an EECA partner." There is no mention anywhere in a 60-page contract that approval was not actually in place at the time the contracts were signed in August 2009.
The installers who had signed up proceeded to start work on the leads given by Bradford, and it was soon found that the marketplace was ripe for the subsidy and people signed up to the deal readily. One of the companies which signed up to the contract with Bradford was Insulate Now Ltd, a company which had been set up to apply for EECA approval itself.
Insulate Now had been set up by a recruitment firm, Charman Consulting Ltd, as it was felt that that company's expertise in putting together labour and installation teams was ideally suited to the business. Aside from set-up costs and time completing the application to EECA, Insulate Now had had minimal money spent on it, being a shell company ready to go when/if approval was granted.
Alan Charman, of Insulate Now, was asked to attend Bradford's offices where the proposal was put to him that Insulate Now could become a Bradford installer under Bradford's [non-existent] licence. The contract offered by Bradford was so attractive that the decision was made to start the business up and vehicle leases were organised, staff hired, tools and safety clothing bought along with orders of stationery, signage and other sundry bits and pieces which setting up a business creates. As the sole beneficiary of work through Bradford, many leads were referred to Insulate Now and over 20 houses were organised for installation.
Then, on 23rd of September, Bradford phoned the manager of Insulate Now Ltd to advise that Bradford had been turned down as an EECA partner and that no further work would be forthcoming. Also, work planned had to be completed by 31 October 2009 or the EECA subsidy would not be available. As Insulate Now was unable to obtain floor insulation during this time period, the work was unable to be completed and Insulate Now advised its customers accordingly that they would not be able to fulfil the work quoted.
Alan Charman quickly arranged a meeting with Bradford executives to find out how a publicly-listed Australian corporate had signed a contract which stated that an approval was in place when that was not true in any way at all. "How is it possible that you did not tell me that the approval was only temporary?" was the paramount question, along with, "What do you intend to do to remedy the situation?".
In both cases, the answers were simple - first, Bradford had assumed they would be approved, and second, hard luck. Bradford did make an offer to assist with marketing insulation services by granting advertising assistance of up to $250. Given that trying to sell a service without a subsidy of 30% available through other installers looked like an impossible task, the option did not appear to have any merit whatsoever and Bradford were asked to compensate Insulate Now to the tune of $30-40,000, money which had been spent employing, paying and training staff along with the physical expenditure noted above.
Still Bradford refused to accept responsibility, taking a "that's business" approach to the outcome and not being at any stage interested in talking about refunding costs incurred on the basis of a false statement by Bradford.
Having taken legal opinion that Bradford were not acting within the bounds of allowable business practice, Alan Charman decided to take legal action through the Disputes Tribunal. While the maximum claim through the tribunal is limited to $15,000, it was felt that at least use of the Disputes Tribunal would allow for an early decision and would remove up-front lawyers' fees which would be difficult to pay as the company group had been left severely compromised from a cashflow perspective as a result of the business closure. The Charman companies had, in fact, been so seriously compromised that Mr & Mrs Charman, the owners, resorted to withdrawing funds from their children's savings accounts to enable temp staff to be paid their wages. Accordingly, speed was a desired outcome and the Tribunal hearing was set for 18/11/09.
Bradford's evidence at the hearing amounted to a belief that installation companies should have known that their approval was not in place, despite a contract signed in mid-August which stated it had already been approved.
The Tribunal rightly refused to accept this stance and ordered a judgement of $15,000 to Insulate Now on the basis that Bradford was liable under Section 6 of the Contractual Remedies Act that a misrepresentation had been made by them which resulted in another party losing money.
The order was made for payment within seven days of the date of judgement, being 4/12/09.
Even then, in spite of a court judgement, staff at Bradford were obstinate in their refusal to pay the money, culminating in an e mail sent by their NZ general manager on 15/12/09 which stated; "Obviously the postal service is much slower into Highbrook Park." in an effort to claim that they hadn't received mail from the court despite Bradford's premises being less than 500m from the main South Auckland mail Centre.
Only a return e mail to that advising that the Charmans would immediately proceed to application of a Distress Warrant if the money was not received immediately shifted the Bradford executive from their arrogant complacency.
How is it possible that a gigantic corporate lacks checks and balances in their system which allows this kind of corporate misadventure to happen?
And how many other companies have been left out of pocket by signing up to Bradford's incorrect contract? If you are involved with a company which has lost money, please contact the writer so I can forward a copy of the District Court Judgement for your use.
Copyright © Alan Charman