Administrator’s report reveals the downfall of building company Felmeri Homes

A report has been released outlining why building company Felmeri Homes was forced to enter voluntary administration earlier this year.

Failed Adelaide building firm Felmeri Group may have been trading insolvent since June last year, a new report says.

Administrator Leigh Prior of Agile Business Advisory has released a damning report explaining why the building company was placed under external administration in May with estimated debts up to $20m.

Mr Prior also outlined a range of possible offences which he believes warrant further investigation. These include:

FAILURE to exercise reasonable degree of care and diligence;

FAILURE to act in good faith;

MAKING improper use of position to gain advantage;

MAKING improper use of information to gain advantage;

RECKLESS or intentional dishonesty in failing to exercise duties in good faith;

FAILURE to keep proper accounting records;

FAILURE to assist administrator, deliver books and provide information;

BEING a director at the time when an insolvent company incurs a debt and there are reasonable grounds for suspecting the company to be insolvent;

BY false representation or other fraud, obtained on credit, any property that the company has not subsequently paid.

FRAUDULENTLY inducing a person to give credit to the company.

Noone associated with the company is currently facing any charges.

Mr Prior also outlined the circumstances and decisions, based on his investigations, he believed contributed to the company’s failure.

These included inadequate working capital, systems and experience to manage the significant growth in the size, complexity and quantity of projects.

He also cited: difficult trading conditions facing the building industry generally, including rising input costs, supply chain delays and shortage of trades; unprofitable fixed-price contracts; significant use of funds for non-business related purposes; poor strategic management of the business; and increasing liabilities and insufficient working capital to pay debts as and when they fell due.

“It is likely that the company was insolvent since at least 30 June 2022, and probably earlier,” he said.

“Accordingly, a liquidator would likely be able to pursue a claim against the directors of the company and its holding company, Marcalek, in relation to debts incurred by the Company whilst it was insolvent.”

Mr Prior has previously warned that Felmeri’s debts could rise from an original estimate of $10m to up to $20m as the fallout for customers left with unfinished homes is fully worked through with insurer QBE.

Issues with the company first came to light in May after dozens of people came forward claiming they had been left in the lurch by the local company.

Customers claimed they experienced a range of issues including construction delays and problems with their new homes.

Jessica Harrison signed a contract to have her first home built by Felmeri Homes in 2020 and claims to have lost tens of thousands of dollars because she hasn't been able to move in. Picture: Keryn Stevens

Unsecured creditors connected to the business may be eligible for between 0 and 22c in the dollar depending on liquidators recoveries and debtor and loan collections.

Daniel Scalzi, a victim of the collapsed building company, told 7News of his shock hearing the claims.

“That’s infuriating,” he said.

“That’s a lot of money that we worked hard for to put down and get this house.”

This comes as minutes from the first meeting of creditors were lodged with the corporate regulator by Mr Prior.

According to the list, Wallaroo Shores developer Monopoly Property Group has been left chasing more than $1.1m, while Discovery Parks is owned almost $875,000.

Julia Felmeri, the daughter and sister of the company’s directors, both named Frank, is listed as the largest creditor, with a claim of $1.6m.

Mr Prior also said up to 20 to 120 customers affected by the company’s collapse did not have the required building indemnity insurance, which builders are required to arrange before work commences on a project costing over $12,000.

Originally published as Administrator’s report reveals the downfall of building company Felmeri Homes