Former senator Bob Day might have been targeted for extortion as he tried to save his Home Australia business, according to a liquidators' report, which offered creditors little comfort they would be repaid.
Mr Day first sought to discuss the troubled finances of his Home Australia business in late August, but the decision to liquidate the company was delayed by over a month as Mr Day negotiated, and signed a deal to sell, a 75 per cent stake to investor Goshen Capital Resources.
Creditors of the former senator's home building business in Melbourne on Thursday were told that while the deal gave the Philippines-based Goshen a liability of $15 million to Home Australia creditors, they were unlikely to see a cent of it.
"It's most likely that [Goshen] entered into these negotiations with a view to extorting money from the company in relation to transactions fees," McGrath Nicol liquidator Matt Caddy told creditors. "The company itself is a $100 company."
McGrath Nicol is attempting to contact Goshen to ask for the money, but has received no response.
The episode shows the desperation of the former senator to find a way to salvage the business which records show made a loss of $2.2 million in 2014, a loss of $4.9 million last year and would likely show - when the figures were finalised - "substantial losses" in 2016, Mr Caddy said.
At meetings in Melbourne and Sydney on Thursday, the liquidators confirmed that Home Australia's unsecured creditors - tradespeople, suppliers and home buyers - as predicted by The Australian Financial Review, would receive none of the $19 million collectively owed to them.
"The information available to us suggests unsecured creditors will not receive any money," Mr Caddy said in Melbourne. "That's a dire situation. It's going to be a situation where there won't be sufficient money through him personally or through his company to pay his debts."
Mr Caddy said it was likely some creditors would take legal action against Mr Day to recover debts over which he had made personal guarantees.
"I certainly expect it will occur," he said.
Mr Day resigned from the Senate earlier this week. His re-election on July 2 is allegedly invalid for separate reasons and has been referred to the High Court.
It was too early for the liquidators - appointed just over two weeks ago - to know whether the businesses had been trading while insolvent or whether Mr Day, the sole director, had breached any of his directors' duties, Mr Caddy said.
Key to that was to determine the date when the company had become insolvent, he said.
"What we need to do is investigate the conduct of the director in relation to incurring those debts without the ability to pay for them," he said. "We're interested to hear from any creditors if they have information in relation to practices of this company that were improper."
Mr Day first arranged a meeting with Mr Caddy on August 25 to talk about his financial problems, but that meeting was eventually postponed and the two men first met on September 9, creditors were told.
Mr Day then broke off the discussions to negotiate the deal with Goshen, but by 11 October he was back in contact to say he doubted Goshen's bona fides and indicated that the company would have to go into liquidation.
One person at the Melbourne meeting was home buyer Tony - he declined to publicly give his surname - who paid Mr Day's Ashford Homes a near-$13,000 deposit for a three-bedroom home on Friday 14 October, only to hear the business had been liquidated the following Monday.
He said the Victorian business of Home Australia had taken his deposit without having insurance - despite being required to under Victorian law - he would lose the money.
"It's going to set us back at least another 12 months," Tony said. "This is the first time in my life - I'm 48 - that I've actually rented."
Of the 94 buyers in NSW who were impacted, 28 however, were not insured. Home builders in NSW and Queensland are also required to have insurance before taking deposits.
"What we want to get out of it is a house, we want a house," Kerry McRae, a customer of Huxley Homes, the company's NSW business, said at the Sydney meeting. "We just have a frame with bricks on it… and we would be lucky to get a half of house."
Mr Caddy also said the potential 'white knight' buyer of the business Mr Day referred to earlier this week, before resigning from the senate, was a party who didn't initially grasp the implications of taking over a business with $35 million in debts but who, once that was clear, withdrew their interest.
"I didn't think they had a thorough understanding of the business," he said.
