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Melbourne construction company Blint Builders collapses owing $1m to 50 creditors

Melbourne construction company Blint Builders collapses owing $1m to 50 creditors

A Melbourne-based builder has collapsed with approximately $1 million in outstanding debt owed to 50 creditors, according to the liquidators.

The construction firm called Blint Builders went into voluntary liquidation after news.com.au revealed a number of homeowners were experiencing a “horrendous” amount of stress as they had poured hundreds of thousands of dollars into half finished homes that had sat untouched for months.

Cliff Sanderson from insolvency firm Dissolve has been appointed to handle Blint Builder’s liquidation.

He said Blint’s owner had told him that the company had “ceased to trade”.

“In our conversations with him, which are yet to be verified, he told us there are 50 creditors with approximately $1 million in debt and I expect that number to go up and the money will go up in excess of that,” he told news. com.au.

‘Horrifying strain’

Mr Sanderson said he was also told that “half a dozen” homeowners were impacted by Blint’s demise, but was waiting on more information to be supplied by the builder.

One family impacted are Dean and Nolle Fuller, who have five children between them, and have already shelled out $480,000 to Blint, since signing on in January.

The couple had demolished their existing home last November and had engaged Blint Builders to build two townhouses for $1.5 million, due to be delivered early next year.

No work has been done on the site since June and it has been broken into after construction stopped leaving it a “mess”, Mr Fuller said.

“In that time, we have had two lots of vandalizing and trespassing and damage caused to our property, which has been lodged with police,” Mr Fuller told news.com.au.

“We have had a truck back up and dump three to four square meters of rubble and waste material on the property and the truck also smashed the gates down.

“Recently someone turned up and stole the electrical meter box within the property.”

The project manager said the experience had caused an “unbelievable amount of stress and anxiety”.

Another family who are under “horrendous strain” are Tony and Jo Firman and their two children, who are building a home specially designed for her as she has multiple sclerosis.

The couple said they have paid $1.14 million so far to the builder and the house is at lock up stage but no work has happened since early June, according to Mr Firman.

“Even with the full insurance payout it might not be enough money. We skimped and saved and borrowed quite a substantial amount of money. We are worried we won’t make enough money to repay the loan and be able to live,” Mr Firman told news.com.au earlier this week.

Landlord owed $14k

Blint Builder’s office in the Melbourne suburb of Highett was also seized by the landlord.

Legal documents posted on the front door show the landlord has executed their right to re-entry, terminating the lease and demanding all property be removed and the keys be returned.

The legal notice also revealed that Blint Builders owe the landlord close to $14,000 in unpaid rent and rates.

Mr Sanderson said statistically it was rare for a dividend to be paid to unsecured creditors from a home builder as they “rarely have any assets”.

“Recently released ASIC corporate insolvency statistics reveal that the construction sector accounted for 28 per cent of all insolvencies for the June 2022 quarter,” he said.

“Construction is the largest sector in the statistics, second is accommodation and food with 16 per cent of the total, while 28 per cent is the highest ever percentage of total insolvencies for construction, equal with the December 2021 quarter.

“On average going back to 2013, construction makes up 19 per cent of total insolvencies.”

construction crisis

Overall, the construction industry has been plagued with a spate of collapses caused by a perfect storm of supply chain disruptions, skilled labor shortages, skyrocketing costs of materials and logistics, and extreme weather events.

Earlier this year, two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, went into liquidation.

Victorian construction companies have been particularly hard hit by the crisis.

Two building companies from Victoria were casualties of the crisis having gone into liquidation at the end of June, with one homeowner having forked out $300,000 for a now half-built house.

Then there have been smaller operators like Hotondo Homes Horsham, which was also based in Victoria and a franchisee of a national construction firm – which collapsed earlier this month affecting 11 homeowners with $1.2 million in outstanding debt.

It is the second Hotondo Homes franchisee to go under this year, with its Hobart branch collapsing in January owing $1.3 million to creditors, according to a report from liquidator Revive Financial.

Norris Construction Group, which was in Geelong, collapsed in March with $27 million in debt. It owes $3.2 million to around 140 staff that it is unlikely to be able to repay, according to the liquidator’s report.

Snowdon Developments was ordered into liquidation by the Supreme Court with 52 staff members, 550 homes and more than 250 creditors owed just under $18 million, although it was partially bought out less than 24 hours after going bust.

Others joined the list too including Inside Out Construction, Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.

The most recent collapse was NSW building company Willoughby Homes, which went into voluntary administration last week, leaving at least 30 homes in limbo.

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Collapsed building company Willoughby Homes taken to court to be liquidated

Collapsed building company Willoughby Homes taken to court to be liquidated

The stark reality of a building company’s collapse has been laid bare after the firm proposed that trade creditors would receive 10c back for every dollar they were owed.

On Wednesday afternoon, Sydney-based builder Willoughby Homes was brought to court with creditors calling for it to be put into liquidation because the business was “hopelessly insolvent”.

Gyprocking company Regno Trades initiated legal proceedings against Willoughby Homes early last month over an unpaid debt of $184,000.

That means if they followed through on Willoughby Homes’ proposal for receiving 10c in the dollar, Regno Trades would only recover $18,400 – leaving them $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 department as voluntary administrators, causing creditors to suggest this was an “11th hour” attempt to save the company.

Judicial Registrar Claire Gistham, of the Victorian Supreme Court, granted the administrators of Willoughby Homes an adjournment 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.

In the heated court case, representatives of creditors argued that the company had “failed so miserably” and should be wounded up immediately because there was “an overwhelming case for insolvency”.

During the hearing, it was also revealed that Willoughby Homes owed up to $4.4 million to homeowners, trade creditors and the tax office.

Despite that, the construction firm has “minimal assets” and only has $14,000 in liquid cash in its accounts at the moment.

It comes after an extensive news.com.au investigation over the last month found Willoughby Homes has been non-functional for some time, with debts to creditors going unpaid, build sites stalling for as long as a year, the company’s home building insurance not being reinstated and finally, all its offices being cleared out and phone lines going straight to voicemail.

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Regno Trades acted as the plaintiff while three supporting creditors also joined the case – H & R Interiors owed $73,925, an ex-employee owed $53,000 in unpaid wages and Finese Electrical and Air Conditioning, owed $4531.

Another creditor, Kamaljit Pawar, also joined the case. The Sydney man built a house with Willoughby Homes in 2014, which was left with significant defects and he has been fighting to have them fixed ever since.

There are 44 impacted homeowners, 16 of whom have houses at “varying stages of construction” while the other 28 customers have handed over deposits but no building has commenced.

There are also a number of creditors and employees impacted. It’s understood employees are owed $67,000 in unpaid superannuation and about $600,000 is owed to deposit holders. Over a million is owed to the Australian Taxation Office.

There was debate about how much the company actually owes in total, with administrators putting the figure at $2.3 million but Mr Pawar’s lawyer Rodney Kent said he’d reviewed documents and said it was higher.

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

Mr Kent also added that the owner of Willoughby Homes, Steve Willoughby, had four properties and possibly five, which could be sold to pay back debts.

SC Peter Fary, acting for the plaintiff and three supporting creditors, called for Willoughby Homes to be placed into liquidation because it had “failed so miserably”.

“This isn’t the first winding up application, in fact it’s not even the first winding up application this year,” he said.

“One has to ask why the director hasn’t caused the company to address its insolvency at an earlier point in time.”

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

“Is it seriously suggested that a company with no capital will continue building contracts in administration where it failed so miserably before?” I have asked the court.

“These matters go to another issue of commercial morality,” he added, urging the registrar to consider “Whether as a matter of commercial morality it’s appropriate for this company to continue in existence”.

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

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

Administrators called in at the ’11th hour’

The lawyers representing creditors were also critical of the last minute appointment of administrators, last Friday, when they said it appeared likely that the firm had been trading insolvent for months.

“This is an 11th hour appointment, the appointment of an administrator at the last minute should be treated with skepticism,” Mr Fary said.

“One can’t escape the conclusion of these facts that there is likely to be an insolvent trading claim of a significant magnitude.

“One can readily infer that insolvency was some time ago.”

Mr Kent agreed, adding: “This is so late in the day and so inappropriate… Deposit holders 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 11th hour appointment.

QC Hugh Smith, representing the administrators, argued, “We’ve all been involved in 11 hour appointments, this is not that.”

Administrators were appointed late on Friday, giving them two business days – Monday and Tuesday – to sort out the company’s finances.

“As such this is not an 11th hour appointment,” Mr Smith insisted.

In another twist, the administrators insisted that a category of creditors – the deposit holders – be paid back in full while all the other credits only received 10c in the dollar.

The Deloitte administrators held a meeting for deposit holders only on Monday ahead of the court hearing and claimed a vote was 100 per cent in favor of the resolution to keep the company in administration so that they would receive their promised funds.

However, register Gistham grilled the QC on how many people actually voted, which turned out to be only 15 people.

“The priority here is quite extraordinary, on the one hand you’ve got 100c in the dollar, and the other hand is 10c to the dollar,” Mr Fary said.

“My client is as vulnerable as anybody else, all of their businesses are at risk of going under as well if they’re not paid,” Mr Kent added.

Later on, in a conversation with news.com.au, Mr Kent added: “It’s disappointing that their first meeting only involved certain creditors and not all of the creditors. I’ve never seen this done before. My client didn’t even know that meeting was taking place.”

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

The registrar added the case until August 31.

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Geelong building company Norris Construction Group collapses owing $27m

Geelong building company Norris Construction Group collapses owing $27m

A collapsed Victorian construction company has $27 million in debt and owes $3.2 million to around 140 staff that it is unlikely to be able to repay, according to the liquidator’s report which revealed what went wrong.

The Geelong-based company called Norris Construction Group, which included seven associated companies, went under in March with KordaMentha appointed to handle the liquidation.

Its report, which was filed with the Australian Securities and Investments Commission, revealed the range of reasons for the company’s failure.

It included the “misprising of projects” and a “crisis of confidence” experienced by the business during lockdowns in Victoria between March and October 2020 resulting in projects being tendered at “very low prices”.

This resulted in “heavy losses” on a very large number of projects, the report to creditor’s said.

It also outlined “cultural issues amongst the executive team leading to staff losses and staff turnover” as well as hiring new staff on “high remuneration packages”.

The pandemic also contributed to the company’s demise, as well as “noncompliance” with lodging statements and returns with the ATO and unpaid taxes, alongside “insufficient working capital” to meet its short term obligations.

The company had completed work on the Manufutures hub at Deakin University and the Marngoneet and Chisholm Road prisons and worked across Melbourne and southwest Victoria.

Millions owed to employees

From the overall group, 235 former employees are owed $4 million in wages and entitlements but will have to rely on the federal government’s Fair Entitlements Guarantee (FEG) to get their money back.

However the scheme, which is available for employees of companies that become insolvent, caps back pay and does not pay superannuation.

Aside from the $3.2 million owed to employees of Norris Construction Group, there was between $187,000 and $277,000 owed to 235 staff from the overall group including wages, redundancy payouts and superannuation.

But KordaMentha partner Andrew Knight said four out of the five companies that employed staff had “insufficient” assets to pay back the money owed.

“We understand that for four of the five employing entities, FEG has processed and paid over 90 per cent of the employee claims,” he said.

“FEG is still working on claims in the fifth entity, Norris Construction Group, which are more complex due to the quantity of claims as well as the relevant Award which applies to these employees. We estimate the majority of these claims will be resolved and paid within the next month.

“Unfortunately, there are some entitlements that are not covered by FEG, for example superannuation and amounts in excess of caps, and payment of those are dependent on the outcome of the liquidations.”

While an auction of the company equipment and assets in May raised more than $17 million, and is expected to paid to Westpac, the bank will still suffer a “shortfall”, said Mr Knight as its owed $22 million.

The ATO also has an outstanding debt of $5 million, the report revealed.

However, the ATO debt was unlikely to be repaid, Mr Knight added.

“The amount due to the ATO is unsecured, and given the likely shortfall to the employees and the secured creditor, it’s unlikely unsecured creditors including the ATO will be paid a dividend,” he said.

The creditor’s report also flagged it was investigating any potential offenses of director’s duties including trading while insolvent.

construction crisis

Overall, the construction industry has been plagued with a spate of collapses caused by a perfect storm of supply chain disruptions, skilled labor shortages, skyrocketing costs of materials and logistics, and extreme weather events.

Earlier this year, two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, went into liquidation.

Victorian construction companies have been particularly sensitive to the crisis.

Two building companies from Victoria were casualties of the crisis having gone into liquidation at the end of June, with one homeowner having forked out $300,000 for a now half-built house.

Then there have been smaller operators like Hotondo Homes Horsham, which was also based in Victoria and a franchisee of a national construction firm – which collapsed earlier this month affecting 11 homeowners with $1.2 million in outstanding debt.

It is the second Hotondo Homes franchisee to go under this year, with its Hobart branch collapsing in January owing $1.3 million to creditors, according to a report from liquidator Revive Financial.

Snowdon Developments was ordered into liquidation by the Supreme Court with 52 staff members, 550 homes and more than 250 creditors owed just under $18 million, although it was partially bought out less than 24 hours after going bust.

Others joined the list too including Inside Out Construction, Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.

The most recent collapse was NSW building company Willoughby Homes, which went into voluntary administration last week, leaving at least 30 homes in limbo.

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