Woodhead liquidation – many questions and few answers from GHD

9 April 2014 – GHD announced its acquisition of Woodhead a day after ASIC appointed administrators for the award-winning international architecture practice, The Fifth Estate has discovered. Sydney Firm HLB Mann Judd was appointed as the administrators for Woodhead on 2 April, with the first creditor meeting set for 14 April in Sydney. GHD made the formal media announcement about the takeover of Woodhead on 3 April, and ASIC published the insolvency notice on 4 April.

Questions remain unanswered about the number of redundancies, or the reasons for the sudden collapse in Woodhead’s financial affairs. GHD was asked for comment, including how the situation came about, whether it was in any way related to the takeover, what the implications would be for current Woodhead projects involving a competing engineering firm, and to confirm how many staff would be made redundant and whether they would be paid appropriate and legal entitlements.

GHD provided the following statement from Phil Duthie, GHD’s general manager Australia and New Zealand in response:

“GHD has acquired the Woodhead brand and has been able to offer employment for the majority of its people. All Woodhead clients have been invited to continue with GHD,” he stated.

“Our company is a leader in the property and buildings market, with capabilities spanning architecture, engineering, planning, design and other disciplines. With the majority of Woodhead people joining GHD, we have strengthened our position as an integrated architectural and engineering design firm.”

The questions on numbers of redundancies, payment of entitlements and GHD’s awareness of or involvement in the liquidation remained unanswered, as does the question of implications for projects where a competing engineering firm had been given the consulting role.

A source within Woodhead said that the majority of staff have been transferred across to a newly-named GHD-Woodhead architecture division of the multinational engineering firm, and “most” of the practice’s current projects also novated across to GHD, with a continuation of personnel on those projects planned.

“We are continuing to work on our current projects with the support of our current clients,” the source said.

These current projects include the Minda urban development project in South Australia, the new Australian Taxation Office in Wollongong, and the new underground bus station for the Perth City Link project, with Woodhead the design lead in the City Busport Alliance team, which also comprises Brookfield Multiplex and BG&E.

Projects on which design and construction had been completed, which are therefore in the defects liability stage, remain under contract to Woodhead, the source said.

The Australian Financial Review reported on April 4 that administrators HB Mann Judd said GHD did not make a complete buyout of the Woodhead business (as the GHD media announcement, quoted below, infers), instead taking over the “majority of the staff and forward contracts”, leaving insufficient residual business and assets for the firm to pay the entitlements of “20-odd” staff not absorbed into GHD.

The AFR article goes on to state: “While not unheard of in professional services, it is unusual for takeover deals to transfer the majority of assets out and leave the body of the target firm unable to operate.

“A letter sent by the administrator terminating Woodhead employees tells them there is no certainty whether they will receive their outstanding entitlements such as wages, superannuation, holiday pay and long service leave.

“’At this stage, claims are frozen until surplus funds become available,’ the letter dated Wednesday says.”

Adelaide’s InDaily reported that the firm’s Adelaide office shut its doors the same day the takeover by GHD was publicly announced, with valuers from Gray’s Onsite Auction House onsite Friday 5 April valuing the remaining furniture and fittings.

Woodhead was originally founded in Adelaide in 1927 and had grown into a practice providing architecture, interiors and masterplanning services from offices in Adelaide, Brisbane, Perth, Sydney, Melbourne and Singapore.

In the GHD media release on 3 April, Paul Morris, GHD’s global market leader – property and buildings, said, “This [takeover] follows over a decade of close collaboration between GHD and Woodhead, built on the common values of teamwork, respect and integrity. It strengthens our ability to continue to deliver innovative and valuable solutions for our clients, particularly in the Transport, Defence, Workplace and Health sectors.

“The integration of people from Woodhead reinforces GHD’s position as a world-leading architectural and engineering integrated design practice. We will shortly blend teams in various offices across Australia.”

According to Phil Duthie, GHD’s general manager for Australia and New Zealand, “This union is a key development in our targeted property and buildings growth strategy. It combines the significant design experience and skills of both firms in architecture, interior design and master planning services, while drawing on our global network of engineers, scientists, environmental consultants, project managers and economists. We are delighted to welcome Woodhead people to the GHD family.”

Angelo Di Marco, managing director of Woodhead, said, “The union reinforces a shared vision that design is a collaborative and integrated process, at its heart. It enriches the firm’s long history in the delivery of complex global projects.”

GHD is still operating under a World Bank procurement blacklisting, which is due to expire in June 2014. The 12-month ban on GHD procuring any contract for a World Bank-funded project was imposed as a result of the company being found culpable for a number of fraudulent activities during the post-tsunami Indonesian reconstruction effort. These included submitting fraudulent expense claims, failure to disclose the payment of “marketing fees” to wholly-owned subsidiaries who acted as sub-contractors to GHD and submitting fraudulent documentation.