Melbourne building company Elite New Homes enters administration owing millions

The Ravenhall-based builder has entered administration, leaving behind a trail of unfinished homes and debts totalling over $2m to unsecured creditors.

A Melbourne builder has gone bust, leaving a number of homes unfinished. Picture: Elite New Homes LinkedIn

A Melbourne builder has gone bust, leaving a number of homes unfinished and owing over $2m to unsecured creditors.

Ravenhall-based company Elite Home Constructions and Developments, which traded as Elite New Homes and Clearview Elite Homes, entered administration last month.

Administrator Andrew MacNeill of SMB Advisory, who was appointed on June 26, said the company did not hold “sufficient funds and other liquid assets” to continue trading during the voluntary administration period, resulting in the temporary stand-down of all six employees.

The value of the workers’ accrued and outstanding entitlements is yet to be confirmed.

Mr MacNeill said the company had 23 projects underway at the time of its collapse, five of which were still at the initial deposit stage.

He said the director of the company advised that he intended to recapitalise the business through a rescue deal to creditors – funded by the sale of two properties – with the “underlying intention of completing the projects”.

Unsecured creditor claims exceeded $2m, Mr MacNeill said, but several claims were “contingent in nature and relate(d) to liquidated and/or unliquidated damages”.

Unsecured creditor claims exceeded $2m. Picture: Elite New Homes LinkedIn

There are an additional 14 creditors with security interests – creditors that have a legal claim over certain assets of the company as collateral for the money they’re owed.

“Since issuing initial correspondence to these parties, three have discharged their registrations, and one creditor has advised of a debt owed totalling $6088,” he said.

“Additionally, NAB and Westpac hold General Security Agreements. There is no outstanding debt owing to Westpac.”

The administrator said the assets of the company consisted of cash at bank amounting to $1572, related-party debt owed to the company totalling $811,000 and miscellaneous stock of fixtures and fittings.

At the first meeting of creditors, one homeowner asked Mr MacNeill if they could engage a new builder to finish their home, while another sought advice after claiming they had incurred additional costs due to defective works.

“The chairperson explained that at the second meeting, creditors can resolve to accept the proposed (deal to creditors) or resolve for the company to be placed into liquidation, or that the company is handed back to the director,” minutes of the meeting read.

“On the question of his rights to exit their current building contracts, he advised that this is subject to the terms of their respective contract and that clients should seek independent advice in this regard.”

One homeowner claimed they were issued a certificate of completion despite their build still being at the lockup stage, while another questioned how to retrieve items delivered to the company’s premises.

There are an additional 14 creditors with security interests. Picture: Dan Peled

Another creditor questioned the absence of listed material assets, claiming that she had seen cars, phones, and other equipment.

“The chairperson advised that the cars are owned by a related-entity and used by the company subject to a lease agreement, he also explained that phones are likely to have no recoverable value in a liquidation,” the minutes read.

One creditor reported an ongoing case with the builder in the Victorian Civil and Administrative Tribunal, which was put on hold when the administration began.

The administrator also said that the director may be personally liable to the Australian Tax Office “as a result of director penalties being imposed” and confirmed that there had been complaints made against the business to the Victorian Building Authority (VBA).

“A contingent creditor, commented that there have been multiple complaints against the company to the VBA,” the minutes read.

“The chairperson noted same and advised that it could be a catalyst for bringing an end to a (deal to creditors), and this would need to be investigated.

“The chairperson advised that he was unable to comment on the degree of any personal exposure of the director, however he advised that the director would be personally liable for any personal guarantees provided and a potential insolvent trading claim if the company enters liquidation.”

News Corp is not suggesting the company was trading while insolvent.

The administrator also said that the director may be personally liable to the Australian Tax Office.

The builder, which was registered in 2005, was previously fined $5000 by the VBA, which is now part of the Building and Plumbing Commission (BPC), for failing to fix a defective item at a site in Altona in December last year.

At this stage, Mr MacNeill was unable to determine a likely return to creditors.

“He explained that a (deal to creditors) scenario often presents a better outcome for creditors in contrast to a liquidation, and that this was subject to further investigations being conducted and that a detailed analysis would be provided in the forthcoming report to creditors,” the minutes read.

Mr MacNeill said he was currently liaising with relevant authorities in order for the company to seek necessary approvals to continue operating, subject to a deal being accepted by creditors.

He said as a result of the administration, homeowners should now be able to make a warranty insurance claim for works conducted up to the date of his appointment.

The BPC regulates building and plumbing practitioners, provides a free dispute resolution service and manages domestic building insurance (DBI).

The Victorian Managed Insurance Authority used to manage (DBI) policies in Victoria, but the BPC took over those responsibilities as of July 1 this year.

Elite New Homes could not be contacted for comment.

Originally published as Melbourne building company Elite New Homes enters administration owing millions