Builder Prominence Homes Melbourne probed for trading while insolvent in $1m collapse

Prominence Homes Melbourne, which formerly traded as Stroud Homes Melbourne Outer North East, collapsed owing creditors upwards of $1m and may have traded while insolvent for more than two years.

A Melbourne builder that collapsed owing creditors upwards of $1m may have traded while insolvent for more than two years. Picture: Yelp

A Melbourne builder that collapsed owing creditors upwards of $1m may have traded while insolvent for more than two years before it called in liquidators.

Prominence Homes Melbourne, which formerly traded as Stroud Homes Melbourne Outer North East, collapsed owing 93 unsecured creditors a total of $1,194,788, a new report lodged with the Australian Securities and Investments Commission reveals.

The business, located in Heidelberg Heights, was a franchisee in the Stroud Homes building group but left in September 2024. It was placed into liquidation in October.

Among the largest unsecured creditors were Stroud Homes Marketing Fund ($165,297), business loan company Prospa Advance ($120,000), credit and payment platform provider Shift Financial ($53,864) and kitchen supply store JNA Kitchens ($56,207).

The Commonwealth Bank of Australia (CBA) is also listed as an unsecured creditor owed $100,386.

Appointed liquidator Paul Allen of PKF Melbourne said the company had two bank accounts with the CBA which were overdrawn.

“One of the bank accounts was overdrawn by $100,124 and was not secured against any company assets. It was however, secured by a personal guarantee by the director,” he said.

Three employees are owed $74,500 in unpaid wages, superannuation and annual leave.

The business, located in Heidelberg Heights, was a franchisee in the Stroud Homes building group. Picture: Yelp

Mr Allen said three building contracts were underway “at various stages of completion” at the time of the company’s collapse.

“The contracts with each of (the) three homeowners were disclaimed and the homeowners were notified accordingly,” he said.

“Given the significant works remaining on each project, it is unlikely that any amounts will be recovered from these projects.”

Mr Allen said it appeared the company had traded while insolvent – meaning the business took on new debts knowing it couldn’t pay them back – since “at least” June 2022.

A Stroud Homes spokesperson said the group didn’t have access to information on franchise suppliers and trades.

“Due to legal constraints, we rely on the information provided by our franchises and do not have direct access to franchise accounts and operations,” they said.

“It appears that on this occasion, the information provided to us by the franchise did not reflect reality.

“As a result, Stroud Homes was not aware of the actual state of their business until the liquidation was announced and further information was made available publicly.”

They said they were “disappointed” to learn one of their former franchises appeared to have not fulfilled their agreements with suppliers.

“While Stroud Homes and its franchises are separate legal entities, with franchises licensed to trade as a Stroud Homes builder, we endeavour to support customers from across the group, particularly in instances where further communication is required.

“Stroud Homes prides itself on high standards of conduct amongst franchises and employees, and this is not representative of behaviour we consider appropriate or aligned with our company values.”

Mr Allen said it appeared the company had traded while insolvent since “at least” June 2022. Picture: iStock

Mr Allen said the estimated amount of assets recoverable in the liquidation, potentially available to pay a dividend to creditors, totalled just $65,000.

He warned creditors a claim against the director for insolvent trading may not be commercially viable.

“It is also understood that the director may have considerable personal exposure following the liquidation of the company and his financial position may be impecunious,” he said.

Mr Allen said the director was reportedly owed money from two clients totalling $193,219 for works completed.

“The larger client had the matter referred to solicitors and VCAT over various disputes, damages claims and other matters,” he said.

“That client provided details of their claims and estimated the costs to rectify and claims under the contract were far greater than the debt claim by the company.

“The smaller client provided evidence of incomplete works and other issues with their build to which the costs to rectify were greater than the claim.

“It does not appear that any amounts owing from debtors are recoverable in the liquidation.”

Prominence Homes, which was established in 2018, experienced cashflow issues due to increased materials and labour costs in the lead up to its collapse, the liquidator reported.

“The director took out several short-term cash flow loans which were personally guaranteed in an attempt to save the company, however, the decision was made that the company had insufficient cashflow to meet its ongoing obligations and the director had no alternative other than to place the company into liquidation,” he said.

Stroud Homes is a group of licensed and local builders across Victoria, Queensland, New South Wales, Tasmania and New Zealand.

Originally published as Builder Prominence Homes Melbourne probed for trading while insolvent in $1m collapse