Northshore in trouble???

[davidej]

Sadly not. under English Law, except for real property i.e. land and trusts, property passes at the point of agreement not when payment is made. This means that when supplier x delivers the product s/he no longer owns, s/he has no right to recover. This is the reason why the sites of bankrupt builder/ developers are usually secured and have on-site security; to prevent the removal of materials delivered and even installed. It is a brutal business!

Isn't this the reason that most companies supply under a 'retention of title' - the so-called "Romalpa" - clause?

 

[sailorman]

I wonder who this belongs to:
http://www.southerly.com/news/new-southerly-535-launching-in-summer-2013.html

It's off to the States. (Well would have been.)

I bet the bloke who bought the Gunfleet 58/01, is now very pleased with his choice

 

[Oscarpop]

I will put money on the chances of them opening up again within 3 months.

they have 7 boats in build. they can only have about 10 in build at any time because of space, so they are at 70% capacity.

so the order book is good, they invested stupid amounts in equipment at the factory last year and were very keen to show off their amazing 5 axis milling machine when i toured there.

Surely if they were bereft of funds they would scale back spending

 

[Whitelighter]

I bet the bloke who bought the Gunfleet 58/01, is now very pleased with his choice

So you keep saying.

In fact this is the fourth thread now - any interest to declare?

I really like the Gunfleet - saw the 58 at dusseldorf and it was very modern and lovely.

 

[sailorman]

So you keep saying.

In fact this is the fourth thread now - any interest to declare?

I really like the Gunfleet - saw the 58 at dusseldorf and it was very modern and lovely.

No interest at all apart from a very new local builder & a team that "know boats"

 

[Koeketiene]

As Solent Boy says customers of boats in build will have BMF contracts which give them title for boats in build. However, they will still have the problem of getting them finished. I expect the administrator will be working with these customers to see if they can finish the boats if it helps realise some of the assets in the company. It is unlikely that brokerage customers will lose as their funds (which will be deposits or any final payments in process) will be protected in a client account. Hopefully those who have their boats placed there on brokerage as part payment on their new boat will have kept title to their boat.

BMF contracts aren't worth the paper they are written on.
When Peters Opal went tits up (and lets not forget: B Peters was chairman of the BMF at the time) people with boats in build with Bavaria still lost out.

As for client accounts... we know that Peters Opal did not really treat them as such.

The BMF is there first and foremost to look after the interest of its members, not the interests of the clients of its members.

 

[sailorman]

BMF contracts aren't worth the paper they are written on.
When Peters Opal went tits up (and lets not forget: B Peters was chairman of the BMF at the time) people with boats in build with Bavaria still lost out.

As for client accounts... we know that Peters Opal did not really treat them as such.

The BMF is there first and foremost to look after the interest of its members, not the interests of the clients of its members.

Dont forget those poor souls who were shafted by the Rampart fiasco. These were just folk like most of us here, spending a very large proportion of their wealth to fund their boats

 

[Ex-SolentBoy]

BMF contracts aren't worth the paper they are written on.
When Peters Opal went tits up (and lets not forget: B Peters was chairman of the BMF at the time) people with boats in build with Bavaria still lost out.

As for client accounts... we know that Peters Opal did not really treat them as such.

The BMF is there first and foremost to look after the interest of its members, not the interests of the clients of its members.

That is a very different sort of thing, as they were not contracts direct with a builder.

I too have no idea as to what the structure of the company is.

However, this sort of thing is just common sense, and is not bad ethics. There is no sound reason for having the appreciating assets like land and buildings in the same legal entity. Boatbuilding is a different business to property development and it is perfectly sound business practice for a builder to rent the facility from another company, whether under similar ownership or not.

What we all need to understand is that boat builders use our own money, not theirs, to build our boats. The BMF contract is very good in this respect and in my view the owners of boats in build are most likely fine, albeit inconvenienced.

As to the comment about Oyster, I think that is completely different. For the vast majority of its operating life I think all their boatbuilding was subcontracted, so they are hardly comparable. They are a very successful marketing business. That's not the same as a successful boat builder.

Just a guess, but I wouldn't mind getting that the losses on the recent restructuring of the Oyster businesses probably exceed the total losses of all other UK boatbuilders put together.

 

[Kurrawong_Kid]

That is a very different sort of thing, as they were not contracts direct with a builder.

I too have no idea as to what the structure of the company is.

However, this sort of thing is just common sense, and is not bad ethics. There is no sound reason for having the appreciating assets like land and buildings in the same legal entity. Boatbuilding is a different business to property development and it is perfectly sound business practice for a builder to rent the facility from another company, whether under similar ownership or not.

What we all need to understand is that boat builders use our own money, not theirs, to build our boats. The BMF contract is very good in this respect and in my view the owners of boats in build are most likely fine, albeit inconvenienced.

As to the comment about Oyster, I think that is completely different. For the vast majority of its operating life I think all their boatbuilding was subcontracted, so they are hardly comparable. They are a very successful marketing business. That's not the same as a successful boat builder.

Just a guess, but I wouldn't mind getting that the losses on the recent restructuring of the Oyster businesses probably exceed the total losses of all other UK boatbuilders put together.

I understand Oyster as an operating company has been profitable throughout. It was servicing the debt of the private equity company that bought out the original owner that forced that private equity company to sell on at a huge loss! Just as happened with Bavaria.

 

[fastjedi]

Correct! Where the builder is running out of cash all the bought in parts are purchased last moment

which means
- The value of the hull is nowhere near the stage payments under the BMF contract
- In most cases an unfinished hull isn't an asset .... its a liability

With the benefit of hindsight I should have admitted defeat, cut and run at the earliest possible moment.

Unfortunately, my dreams clouded my business judgement (The thought of my hull being completed and sailed by someone else filled me with horror)

 

[Tranona]

BMF contracts aren't worth the paper they are written on.
When Peters Opal went tits up (and lets not forget: B Peters was chairman of the BMF at the time) people with boats in build with Bavaria still lost out.

As for client accounts... we know that Peters Opal did not really treat them as such.

The BMF is there first and foremost to look after the interest of its members, not the interests of the clients of its members.

It would be really helpful if you stuck to the facts. The Peters situation was completely different. The boats were not covered by a BMF new build contract as the boats are built in Germany and sold to the dealer in a straightforward commercial contract. The eventual buyer has no contract with the builder, but with the dealer.

You will note I specifically referred to brokerage boats when talking about client accounts. No brokerage client lost money in Peters. Those clients who did were new boat customers where Peters had promised to hold deposits and stage payments in a client account and failed to do it correctly. Clearly not satisfactory but it is important (as the judgement in the High Court stressed) to be clear about the distinction.

The unknown in Southerly will be (as I suggested) whether there are any boats that they have agreed to take in part exchange against new builds. The normal procedure is to have these on brokerage in the expectation that they will be sold before the new boat is complete and the proceeds credited against payment for the new boat. If they fail to sell, the builder takes ownership in part payment of the new boat. It is important that the brokerage contract is kept separate from any boatbuilding activities and that title stays with the owner until either it is sold or he gets his new boat. All funds related to the brokerage boats would then be in a client account and not available to the builder.

Whether this creates any problems will depend on the stage of the complex transaction when the clock stops and the administrator takes over. I can imagine situations where there may be a dispute over ownership, but that is the sort of issue the administrator will have to deal with. Given the small number of boats in build at any one time the chances of there being such incomplete transactions are very small, but not impossible.

As I said in my original post, the big negative in these situations is the potential difficulty of getting boats completed even if the legal title is clear in the BMF contract. The owners in the Sadler/Rampart collapse will tell you all about that. The first task of the administrator is to see what can be preserved of the business and completing boats is likely to be high on the list of priorities.

 

[Twister_Ken]

"What we all need to understand is that boat builders use our own money, not theirs, to build our boats."

True for new boats from the existing range. But not for models under development where the first few sold can't hope to recover the development cost. Northshore has had a policy of moving relentlessly up-market, developing bigger & bigger boats. Latest, I think, was 57' with a 63' under development.

Easy to imagine that creating boats like that could swallow up £millions, before a penny comes in from an actual sale. And even if successfully developed, the sales volume of boats of that size will be small, making amortising development costs difficult in the short or medium term.

As an aside, the Southerly website is still up and - arguably - touting for business. Is this not 'trading while insolvent' or do different rules apply when an insolvency practitioner has the key to the factory gate?

 

[Oscarpop]

I
The unknown in Southerly will be (as I suggested) whether there are any boats that they have agreed to take in part exchange against new builds. The normal procedure is to have these on brokerage in the expectation that they will be sold before the new boat is complete and the proceeds credited against payment for the new boat. If they fail to sell, the builder takes ownership in part payment of the new boat. It is important that the brokerage contract is kept separate from any boatbuilding activities and that title stays with the owner until either it is sold or he gets his new boat. All funds related to the brokerage boats would then be in a client account and not available to the builder.

.

We traded our old boat when we bought through Northshore.

They offloaded it to Opal marine in about two days.

To the best of my knowledge we were told that they only rarely accepted part exchange.

I also think that with the bun fight that ensued during our trade in, they probably would think twice about doing it again.

 

[rwoofer]

It would be really helpful if you stuck to the facts. The Peters situation was completely different. The boats were not covered by a BMF new build contract as the boats are built in Germany and sold to the dealer in a straightforward commercial contract. The eventual buyer has no contract with the builder, but with the dealer.

You will note I specifically referred to brokerage boats when talking about client accounts. No brokerage client lost money in Peters. Those clients who did were new boat customers where Peters had promised to hold deposits and stage payments in a client account and failed to do it correctly. Clearly not satisfactory but it is important (as the judgement in the High Court stressed) to be clear about the distinction.

.

Have to say I can't see where what you say differs from what OR4571 says.

Client accounts are only as safe as how the company manages them. In the case of BA Peters, they were using money from client accounts to help elsewhere in the business. In your words they used the Client Accounts incorrectly, which to a customer is just the same as Client Accounts not being worth a thing. Any company can be guilty of managing client accounts incorrectly, therefore you are saying the same thing.

Having been burnt already by a boat company going under, I still have no idea (short of escrow) how I would make a future new purchase.

 

[Twister_Ken]

"Having been burnt already by a boat company going under, I still have no idea (short of escrow) how I would make a future new purchase."

Made mine by paying for a bank guarantee* from the builder's bank. If the bank thinks the business is financially sound, the premium will be small. If it's worried about the builder, the premium will be substantial.

*If the builder failed to deliver a completed boat, the bank would have refunded the monies I'd paid to the builder. It's a better option than ending-up with title to a part-built boat stored on IP-controlled premises, and no sensible way of completing it.

Re brokerage boats, when the boats are on the premises what has happened in the past is that the IP requires steep sums for 'storage' and exorbitant sums for arranging relaunch so that the owner can take the boat away.

 

[Deleted member 36384]

On a topical note can one buy insurance to cover losses if a company goes bankrupt without delivery of goods after payment has been made?

Okay - Twister_Ken posted the above/below while I was typing my question.

.... paying for a bank guarantee* from the builder's bank. If the bank thinks the business is financially sound, the premium will be small. If it's worried about the builder, the premium will be substantial.

*If the builder failed to deliver a completed boat, the bank would have refunded the monies I'd paid to the builder. It's a better option than ending-up with title to a part-built boat stored on IP-controlled premises, and no sensible way of completing it.....

 

[Tranona]

Have to say I can't see where what you say differs from what OR4571 says.

Client accounts are only as safe as how the company manages them. In the case of BA Peters, they were using money from client accounts to help elsewhere in the business. In your words they used the Client Accounts incorrectly, which to a customer is just the same as Client Accounts not being worth a thing. Any company can be guilty of managing client accounts incorrectly, therefore you are saying the same thing.

Having been burnt already by a boat company going under, I still have no idea (short of escrow) how I would make a future new purchase.

The difference is subtle but crucial as I was trying to point out. Even before Opal/Peters there were generally no issues related to brokerage client accounts, in that there seems to be no cases of them being abused to the extent that clients lost money. The problem with Peters is that they started to mix new boat business with brokerage. They were under pressure to provide more security for deposits so agreed to keep them in the brokerage client account. However they failed to do it correctly by not paying straight into the account, but first paying into a general account and then transferring into the client account. This is insufficient to create the trust on which a client account relies. This is all explained in the court judgement.

Since then such practices (including other potential pitfalls) have been expressly banned from client accounts. You will find clear guidance from BMF and ABYA on the format of client accounts which their members are required to follow. If they have been followed, then the Peters situation will not arise.

It is important to understand these differences (and the nature of BMF new build contracts) when you are buying and selling. Equally to understand that the situation may well have been different in the past and not necessarily indicative of what happens now. It is also clear that problems of this nature are not unique to buying and selling boats, but will always exist in some way as the numerous disputes that arise in other commercial activities illustrate.

 

[doris]

"Having been burnt already by a boat company going under, I still have no idea (short of escrow) how I would make a future new purchase."

Made mine by paying for a bank guarantee* from the builder's bank. If the bank thinks the business is financially sound, the premium will be small. If it's worried about the builder, the premium will be substantial.

*If the builder failed to deliver a completed boat, the bank would have refunded the monies I'd paid to the builder. It's a better option than ending-up with title to a part-built boat stored on IP-controlled premises, and no sensible way of completing it.

Re brokerage boats, when the boats are on the premises what has happened in the past is that the IP requires steep sums for 'storage' and exorbitant sums for arranging relaunch so that the owner can take the boat away.

Gosh Ken.
Having the entire thread I was amazed that no one had mentioned a bank guarantee. Was about to jump in when up you popped.
I tried to buy a new boat from a builder in the west country but their hostility to bank guarantees etc put me off completely. For anyone to buy a new boat without a 100% guarantee in, IMHO, complete madness. You either want a completed boat or your money back, end of. If the builders bank won't supply a guarantee then walk away.
I had a long chat with Lady Sue, of Berthon fame, about how this recession was going to change the way one buys large ticket items such as boats. Sadly it was very difficult to see a way forward under current legislation. It's too easy for directors to take the p*ss and walk away. Politicos can't be bothered to address the problem. All insolvency rules need to be addressed. Forget the 'let's encourage the entrepreneur', time to think of all the burnt creditors.

 

[Twister_Ken]

Another problem is that the IP industry seems, mainly, to be concerned with feathering its own nest. It may be that there are ethical IPs out there but I've not heard of any. In the several insolvencies I've been on the wrong side of, the final outcome has always been no funds left for creditors, once the IP's expenses have been met.

 

[rwoofer]

If they have been followed, then the Peters situation will not arise.

That is the flaw in the subtle difference. My experience of companies in trouble is that most will attempt anything that is not outright illegal. Therefore client accounts aren't enough.

Seems like Twister Ken has the answer - a bank guarantee. Of course that means customers are likely to walk a way from builders who are struggling because the guarantee cost will be too high - only increasing the pace of the companies demise.

Like many others I think the boating industry really needs to properly sort out this boat buying mess. Savvy buyers are being turned away from sales and others are getting caught out.