VAC Group directors file for bankruptcy in wake of $40m collapse

The latest report into the liquidation of a company with sites across Queensland, Victoria and South Australia has revealed some creditors can expect to receive up to 19 cents in the dollar while others will walk away with nothing.

Directors of the VAC Group Benjamin Costello, Neil Costello and Jack Beach.

The directors behind the collapsed VAC Group company have all filed for bankruptcy following the firm’s $40 million-plus liquidation, and trade suppliers can expect to receive no money back.

The Gold Coast-based firm entered voluntary administration on December 4. 2022, putting 167 employees out of jobs, and was then later moved into liquidation on January 19, 2023.

The company specialised in vacuum hydrogen-excavation, waste and treatment services and had sites in Yatala, Rockhampton (Gracemere) and Gladstone in Queensland, Lonsdale and Wingfield in South Australia and Dandenong and Thomastown in Victoria.

Staff at Vac Group Gracemere were given redundancy notices on December 5 as the company has entered voluntary administration.

A statutory report was filed to Australian Securities and Investments by liquidator Stephen Earel of Cor Cordis on April 17 for Vac Group Holdings Pty Ltd.

The report states two unsecured creditors make up 79 per cent of the total creditors, New York private investment firm Balbec owed $26,891,656 and $1,066,502 to the Australian Taxation Office.

The report states Balbec “is expected to suffer a significant shortfall following the realisation of assets subject to its security interests”.

Priority creditors are estimated to receive nil to 19 cents in the dollar and secured creditors are to be confirmed after the asset sales have completed.

Ordinary unsecured creditors are “unlikely to receive a dividend in the liquidation”, the report states.

Mr Earel alleges the company traded insolvent for almost a year, with the estimated date of insolvency January 1, 2022.

In his investigations in the past six months, Mr Earel states the potential claims for insolvent trading could be about $3,450,837 for the Group, however it is noted “this will likely change once the shortfall to the secured creditor is known”.

The accounts receivable balance for the company was reportedly $3,769,506 upon administration appointment.

As of February 28, $2,744,330 had been collected by EarlyPay, which was also owed money.

A final auction of plant and equipment was also expected to take place on April 18.

The directors, John Beach, Neil Costello (and secretary) and Benjamin Costello, each filed a debtors’ petition and were made bankrupt on March 8, 2023, four months after the company’s collapse.

Bill Karageozis of McLeods Accounting was appointed trustee of the respective estates.

The bankruptcy means the liquidator’s ability to claim for insolvent trading “is reduced to lodging a proof of debt in the respective bankrupt estates”.

Mr Earle’s report also alleges there may have been unfair preference payments of $1,753,298 to the ATO, Payroll Tax Victoria and Office of State Revenue QLD and NSW.

Cor Cordis is currently investigating payments made to 123 trade creditors totalling $2,086,370 to determine whether any are recoverable as unfair preference payments.

Mr Earle states their investigations indicate the directors have “breached their duties to act with care and diligence” under the Act.

The liquidator’s report states The Group had a Director and Officers insurance policy in place, which covered breach of director’s duties.

On June 30, 2020, the company had net tangible assets of $8,410,944, and as a “direct result of the directors’ actions, were reduced to nil December 2020”.

Demands were served on the directors and bankruptcy trustees for payment of the $8 million sum on April 6.

The insurer was also notified, and is yet to respond, however the policy limit is $5 million.

An uncommercial transaction of $260,000 is also alleged, paid to a related entity with no explanation in any of the records.

It is alleged the directors have breached their duties/contravened the Act in regards to duty to prevent insolvent trading (section 588G) and care and diligence (section 180).

The liquidators report states it is “in the process of finalising our report in accordance with Section 533 of the Act and lodging this with ASIC”.

It is estimated the liquidation could be completed by June 2024, due to the expected time to finalise investigation and recover claims.

Originally published as VAC Group directors file for bankruptcy in wake of $40m collapse