Failed builder Watersun Homes could have been trading insolvent for more than a year before its collapse, accepting money from customers while contractors complained about unpaid bills worth tens of thousands of dollars, according to the company's administrators.
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Pregnant woman Ebony Murner and her fiance Matthew Filmer face financial stress and an unfinished house after their builder Watersun Homes was placed in voluntary administration. Courtesy Seven News, as reported March 1.
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Watersun Homes goes into administration
Pregnant woman Ebony Murner and her fiance Matthew Filmer face financial stress and an unfinished house after their builder Watersun Homes was placed in voluntary administration. Courtesy Seven News, as reported March 1.
More than 800 creditors claim they have been left out of pocket by the shock collapse and liquidation of the Victorian arm of Watersun Homes, WSH Group.
Many suppliers, tradespeople and home buyers say they are now fighting for their own financial survival, after an investigation by administrators revealed it was "highly unlikely" much of the estimated $20 million debt would be recovered.
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It comes amid reports "several threats" have been levelled at the company's directors Gary John Caulfield and Tanya Lewis, who have been unreachable for days.
The pair failed to front a creditors meeting last month, saying "due to the several threats we have received we felt it would be better that this statement be read out at the meeting rather than attending in person".
Do you know more about this story? Email journalist Aisha Dow here.
The directors have blamed the failure of the company on a decision to aggressively expand into regional Victoria, and an unexpected $4 million loss on a townhouse project in Bundoora.
But, according to a report obtained by Fairfax Media, administrators found there were other factors at play – including poor management of the business that resulted in delays in completing homes and many reports of defects on Watersun building sites.
This issue of poor workmanship is so significant, administrators expect creditors can only claim a fraction of the approximately $1.89 million owed by Watersun customers.
"We envisage that there will be many home owners who will claim that works undertaken by the company were defective," the administrators' report said.
Permeable concrete company WaterPave Australia is among a huge line-up of contractors who were not paid for the work they completed for Watersun in 2016.
WaterPave owner Martin Cook said Watersun had originally pushed for his Croydon-based company to start work on a $102,000 car park contract without any upfront payment, but he refused.
"If I didn't do that, we would have been gone," Mr Cook said.
He said Watersun paid $50,000 during construction, but once the work was finished, ignored the final $52,000 invoice.
Mr Cook said he had previously been in touch with Watersun director Gary Caulfield.
"Leading up to Christmas he'd take my call, but after Christmas he wouldn't take my call," Mr Cook said.
"I knew there was something amiss.
"I would ring head office and they would tell me they were waiting on the release of the funds and always giving excuses."
He was not alone in his frustration. Watersun's records reveal they started receiving creditor demands from as early as June 2016, when the company agreed to go on a payment plan to pay a $1.7-million debt to the Australian Tax Office.
A real estate agent who emailed through multiple bills in September wrote "Gary I am disappointed that it has got to this situation considering the working relationship I thought we had over the last 10 years or so".
Last-ditch attempts to sell the business from December 2016 failed, while Mr Caulfield personally sourced $3 million to funnel into WSH Group, records released to creditors reveal.
The administrators have concluded WSH Group may have been trading insolvent from at least December 31, 2015, "and as such directors may be liable for debts incurred after this date".
Director of liquidator Rodgers Reidy Melbourne, Mathew Gollant, said investigations continued into when exactly the company became insolvent, but the preliminary indications were "that it was probably 12-months ago".
Mr Gollant said he could not yet speculate how much, if any, of the debt could be recovered – but first priority would be given to 90 former Watersun employees.
"We need over a million dollars to satisfy those claims, the question is going to be what's left after that and it's too early to say at this stage," he said.
A former Watersun sales consultant said he only found the company was in dire financial strife when he turned up to work in February and was told by a co-worker he no longer had a job.
"From the first day I was there I thought it was strange the way they ran things, because there was absolutely no training," he said.
The former employee said he was also owed "tens of thousands" of dollars.
Watersun Homes went into administration on February 28.