Company Boss Owes $5.7 Million To Sell His Homes

The president of a collapsed construction company will likely have to sell all of his seven properties in order to get money back to repay the company’s debts.

Even then, most creditors are expected to receive only between 1.7 and 5.7 cents for every dollar they owe.

NSW-based home builder Willoughby Homes went into voluntary board earlier this month, but was not liquidated during a trial on Wednesday afternoon.

Gyprocking firm Regno Trades filed suit against Willoughby Homes in early July over an unpaid debt of $184,000, and three supporting creditors also joined the case: H&R Interiors owed $73,925, an ex-employee was $53,000 in unpaid wages and Finese Electrical and Air Conditioning, due $4531.

That means under the proposal, in the worst case scenario, Regno Trades will receive about $3200 – which is 1.7c in the dollar.

Two working days before the first liquidation session, Willoughby Homes appointed David Mansfield and Jason Tracy of Deloitte’s turnaround and restructuring division as volunteer directors. They successfully argued for the case to be postponed until August 31. The case was adjourned again on Wednesday to give creditors a chance to vote on what to do next.

The collapse of Willoughby Homes comes after conducted a comprehensive investigation and determined that the company has been out of action for some time, with construction sites that have been shut down for as long as a year, the company’s home insurance not being reinstated, staff not get paid and finally all his offices are emptied and phone lines go straight to voicemail.

The construction company’s demise has impacted 57 clients with homes in various stages of completion, as well as other creditors owed a total of $5.7 million, according to the trustees’ report.

Willoughby Homes director of the same name Steve Willoughby has filed a Deed Of Company Arrangement (DOCA) proposing to sell seven of his properties and one RV trailer.

This would give the company $1.3 million in assets to distribute to creditors.

In an earlier statement to, Mr Willoughby said: “While I am under no obligation to do so, I am proposing creditors to sell properties that I have owned for over 10 years.

“The economic climate has not been good for anyone.”

Without bringing up the director’s personal belongings, Willoughby Homes would have had only $14,000 in the bank to distribute it to all its creditors.

Willoughby’s seven properties were from Lethbridge Park, Narara, Earlville, Griffith, Hebersham, Kenthurst and Harden, with values ​​ranging from $220,000 to $2 million.

Kenthurst’s property is the most valuable, but half of it is owned by Mr. Willoughby’s wife, Rochelle, and much of it was bought on loan.

However, once secured creditors’ claims are withdrawn from those funds, unsecured creditors are left with only $818,000. The administrators have also already earned $250,000 in fees.

They estimate that creditors had between $409,063 and $654,501 of those assets.

During Wednesday afternoon’s court hearing, QC Hugh Smith, who represents the trustees, acknowledged that 1.7 cents and 5.7 cents for 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 5 September.

Administrators also found that Willoughby Homes had been trading insolvent for 18 months, taking deposits from 41 customers, even though they didn’t have the insurance to do so.

“It appears that Willoughby Homes has been insolvent as of at least April 21, 2021,” the manager’s report said.

April 21 was the day state insurer iCare refused to renew insurance for Willoughby Homes, meaning the builder couldn’t begin construction projects costing more than $20,000 because it would be uninsured.

“Our investigations to date have identified 41 creditors with a total of $709,578 who have paid deposits to the companies to build their properties,” the report added.

“We are not aware of any of these deposits backed by the HBCF (Home Building Compensation Fund).”

A previous lawsuit deemed that Willoughby Homes had been “hopelessly insolvent” and that the company had “failed so miserably”.

Willoughby blamed the lack of insurance as one of the main reasons for his company’s collapse, as well as Covid-induced lockdowns, difficult market conditions and rising material and labor costs.

In good news, some customers will get most of their money back for the deposits they paid.

The administrators said they would try to give the 41 depositors – those customers who have made a down payment but are not insured – “a priority” and that they would refund “100 cents in the dollar”.

However, Attorney Rodney Kent, who represented another creditor, Kamaljit Pawar, said it was unfair to everyone else who owed money.

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

Peter Fary, acting for Regno Trades and three supporting creditors, agreed.

“The priority here is very extraordinary, on one side you have 100c in the dollar,” and on the other side is 1.7c in the dollar, Mr. Fary said.

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