The director of a collapsed construction company will probably have to sell his seven properties to recover the funds to pay off the company’s debts.
But even then, most creditors are expected to receive between 1.7 cents and 5.7 cents for every dollar they are owed.
New South Wales-based residential builder Willoughby Homes entered voluntary administration earlier this month but was saved from being put into liquidation in a court case on Wednesday afternoon.
Scam company Regno Trades began closing proceedings against Willoughby Homes in early July over an unpaid debt of $184,000, and three supportive creditors have also joined the case: H & R Interiors, which owed $73,925, a former employee who owed $53,000 in unpaid wages and Finese Electrical and Air Conditioning, owes $4,531.
That means that under the proposal, in the worst case, Regno Trades will receive around $3200, which is 1.7c per dollar.
Two business days before the initial liquidation hearing, Willoughby Homes named David Mansfield and Jason Tracy of Deloitte’s recovery and restructuring department as volunteer administrators. They successfully argued for the case to be adjourned until August 31. It was then postponed again on Wednesday to give creditors a chance to vote on what to do next.
The collapse of Willoughby Homes comes after news.com.au carried out an extensive investigation and found that the business has been out of business for some time, with construction sites stalled for a year, home building insurance from the business not being restored, staff not being paid, and eventually all of their offices being cleared out and phone lines going straight to voice mail.
The disappearance of the construction company has affected 57 clients with homes in various stages of completion, as well as other creditors who are cumulatively owed $5.7 million, according to the administrators’ report.
The director of Willoughby Homes, the eponymous Steve Willoughby, has filed a Deed of Company Agreement (DOCA) proposing to sell seven of his properties and one mobile home.
This would give the company $1.3 million in assets to distribute to creditors.
In an earlier statement to news.com.au, Mr Willoughby said: “While I am under no obligation to do so, I propose to creditors to sell properties that I have owned for over 10 years.
“The economic climate has not been good for anyone.”
Without presenting the principal’s personal properties, Willoughby Homes would have only had $14,000 in the bank to distribute among all of its creditors.
Mr. Willoughby’s seven properties were from Lethbridge Park, Narara, Earlville, Griffith, Hebersham, Kenthurst and Harden, valued between $220,000 and $2 million.
The Kenthurst estate is the most valuable, but half belongs to Mr Willoughby’s wife, Rochelle, and a large part was purchased through a loan.
However, once secured creditors’ claims are withdrawn from those funds, unsecured creditors are left with only $818,000. The administrators have already accumulated $250,000 in fees.
They estimated that creditors kept between $409,063 and $654,501 of those assets.
At the court hearing on Wednesday afternoon, QC Hugh Smith, representing the trustees, acknowledged that 1.7 cents and 5.7 cents on the dollar is “a small amount”, but added that it was “better than nothing”.
The proposal will be put to a vote next week, on September 5.
The administrators also found that Willoughby Homes had been insolvent for 18 months and had taken deposits from 41 customers even though they did not have the insurance to do so.
“It appears that Willoughby Homes may have been insolvent since at least April 21, 2021,” the administrator’s report stated.
April 21 was the day state insurer iCare refused to renew Willoughby Homes’ insurance, meaning the builder couldn’t start construction projects costing more than $20,000 because it would be uninsured.
“Our investigations to date have identified 41 creditors totaling $709,578 who have paid deposits to companies to build their properties,” the report adds.
“We are not aware of any of these deposits being covered by the HBCF (Home Builders Compensation Fund).”
An earlier court case found that Willoughby Homes had been “hopelessly insolvent” and that the company had “failed so miserably”.
Willoughby blamed failure to obtain insurance as one of the main reasons for his company’s collapse, as well as Covid-induced closures, harsh market conditions and rising material and labor costs.
In a twist of good news, some customers will receive most of their money back for the deposits they paid.
Administrators said they would try to give the 41 deposit holders, those customers who paid a deposit but are uninsured, “a priority” and that they would be “refunded 100 cents on the dollar.”
However, attorney Rodney Kent, who represented another creditor, Kamaljit Pawar, said it was unfair that everyone else owed money.
“My client is as vulnerable as any other, all of their businesses are also at risk of going under if they don’t get paid,” Kent said earlier this month.
Peter Fary, representing Regno Trades and three supporting creditors, agreed.
“The priority here is pretty extraordinary, on one side you have 100 cents on the dollar,” and on the other side it’s 1.7 cents on the dollar, Fary said.