Collapsed construction company Willoughby Homes taken to court to be liquidated


The grim reality of a construction company’s collapse has come to light after the company proposed that trade creditors would be refunded 10 cents for every dollar they owed.

On Wednesday afternoon, Sydney-based builder Willoughby Homes was taken to court with creditors demanding it be liquidated because the company was “hopelessly insolvent”.

Gyprocking firm Regno Trades started legal action against Willoughby Homes early last month over an unpaid debt of $184,000.

That means if they went through with Willoughby Homes’ proposal to receive 10c in the dollar, Regno Trades would get back only $18,400 – leaving them with $166,000 out of pocket.

Two business days before the hearing, Willoughby Homes appointed David Mansfield and Jason Tracy of Deloitte’s turnaround and restructuring division as voluntary administrators, leading creditors to suggest that this was an “11th hour” attempt to save the company.

Court Clerk Claire Gistham, of the Victorian Supreme Court, has granted Willoughby Homes administrators a reprieve until the end of the month to come up with an official Deed of Company Arrangement (DOCA), which is essentially a plan for creditors to get their money back. get back.

In the heated lawsuit, creditor representatives argued that the company had “failed so miserably” and needed immediate liquidation because there was “an overwhelming case for insolvency”.

It was also revealed during the hearing that Willoughby Homes owes up to $4.4 million to homeowners, trade creditors and the IRS.

Despite this, the construction company has “minimal assets” and currently has only $14,000 in cash in its accounts.

It comes after an extensive investigation by news.com.au over the past month revealed Willoughby Homes has been down for some time, with debts to creditors going unpaid, building sites stalling for as long as a year, the company’s home insurance not working. are restored and finally all offices are evacuated and the phone lines go straight to voicemail.

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Regno Trades acted as plaintiff while three supporting creditors also joined the case – H&R Interiors owed $73,925, a former employee owed $53,000 in unpaid wages, and Finese Electrical and Air Conditioning owed $4,531.

Another creditor, Kamaljit Pawar, also joined the case. The Sydney man built a house with Willoughby Homes in 2014, which had significant flaws and has fought to get them repaired ever since.

There are 44 affected homeowners, 16 of whom are in “different construction phases” while the other 28 customers have handed over deposits, but no construction has started yet.

A number of creditors and employees were also affected. Obviously, employees owe $67,000 in unpaid pension and about $600,000 to depositors. More than a million is owed to the Australian tax authorities.

There was debate about how much the company owes in total, with administrators estimating the amount at $2.3 million, but Mr Pawar’s attorney Rodney Kent said he had reviewed documents and said it was higher.

“There are significant defaults” amounting to $4.5 million, he said.

Mr Kent also added that Willoughby Homes owner Steve Willoughby owned four properties and possibly five that could be sold to repay debts.

SC Peter Fary, acting for the plaintiff and three supporting creditors, called for the liquidation of Willoughby Homes for having “failed so miserably”.

“This is not the first termination request, in fact it is not even the first termination request this year,” he said.

“You have to wonder why the CEO didn’t get the company to deal with its bankruptcy sooner.”

He said it made no sense for the company to remain in administration because Willoughby Homes was unable to carry out construction work.

“Is it seriously suggested that a company with no capital continues to build contracts in the administration where it previously failed so miserably?” he asked the court.

“These cases go into another matter of commercial morality,” he added, urging the registrar to consider “whether as a matter of commercial morality it is appropriate that this company continue to exist.”

Mr Fary said Willoughby Homes had “minimal assets and significant liabilities”.

At the hearing, it was stated that Willoughby Homes had only $14,000 in cash, as well as some motor vehicles, property, and equipment it could sell to repay debts.

Administrators called at the ’11 o’clock’

Creditors’ lawyers were also critical of the last-minute appointment of administrators last Friday, saying it seemed likely the company had been insolvent for months.

“This is an 11am appointment, the appointment of a manager at the last minute should be treated with skepticism,” said Mr Fary.

“You cannot escape the conclusion of these facts that there is likely to be an insolvent trade receivable of a significant size.

“One can easily conclude that the insolvency happened some time ago.”

Mr Kent agreed, adding: “This is so late in the day and so inappropriate… Depositors have lost their money in circumstances where signing contracts was totally illegal.”

However, the administrator’s legal team argued that it was far from an 11 o’clock appointment.

QC Hugh Smith, who represents the trustees, argued: “We’ve all been involved in 11am appointments, this is not.”

The administrators were appointed late on Friday, giving them two working days – Monday and Tuesday – to get the company’s finances in order.

“As such, this is not an 11 o’clock appointment,” insisted Mr. Smith.

In another twist, the trustees insisted that one class of creditors – the depositors – be repaid in full, while all other credits received only 10c in the dollar.

Deloitte’s trustees held a meeting for depositors only Monday prior to the court hearing, claiming 100 percent had voted for the resolution to keep the company in administration so that they would receive their promised money.

However, Registrar Gistham asked the QC how many people actually voted, which turned out to be just 15 people.

“The priority here is very extraordinary, on one side you have 100c in the dollar and on the other side is 10c in the dollar,” Mr. Fary said.

“My client is as vulnerable as anyone else, all their businesses are also at risk of bankruptcy if they are not paid,” added Mr Kent.

Later, in a conversation with news.com.au, Mr. Admits: “It is disappointing that their first meeting involved only certain creditors and not all creditors. I’ve never seen this happen before. My client didn’t even know that meeting was happening.”

After opposition, the administrator’s attorney indicated they would reconsider whether 10c in the dollar was appropriate compared to 100c in the dollar for depositors.

The court has adjourned the case to August 31.

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