Creditors reveal pain of Pivotal Homes collapse as builder’s pricey marketing strategy revealed

Liquidators of failed builder Pivotal Homes have revealed the company was paying millions in commissions to win new work – even as the company logged consecutive losses. DETAILS

Lucrative deals with property marketers, aimed at pulling in more clients, have been named a key factor in the demise of Gold Coast builder Pivotal Homes, which collapsed in May owing more than $6m.

Worrells liquidator Chris Cook said marketers for Pivotal owed the failed company $2.9m, but had only repaid $30,000.

As director Michael Irwin drove around in the company’s Ferrari, Pivotal was paying marketing agents to encourage scores of new clients to sign contracts for new builds – more than 100 of which would never be completed by the builder.

Liquidators found even when income and costs decreased during the pandemic, the amounts Pivotal paid to marketers continued to blow out.

In November 2020 alone, the liquidator found marketing fees increased from $86,920 to $452,375, and had risen further to $931,872 in August 2021.

“While this strategy appears to have been successful in generating income, the loss position of the company worsens over the same period,” the report said.

The company traded at “consistent losses” since November 2020.

Pivotal Homes Managing Director Michael Irwin and Lawyer Derek Cronin. Picture: Richard Gosling

Pivotal had 103 houses under construction, in various stages from slab pours to turnkey, and 177 homes waiting on council approval, when it collapsed.

Mr Cook’s report said there were 169 unsecured creditors who were owed $6.17m between them.

The debt is likely to rise, liquidators said, as the QBCC had yet to lodge its costs for paying out homeowners under its Home Warranty Insurance Scheme.

Among the unsecured creditors is a Coomera cabinet-making business, which is owed more than $70,000.

The owner, who did not want to be named, said it had been a huge blow.

“Anything like that amount has a huge impact, it means $72,000 of bills we’re not able to pay ourselves and we have to get that out of our own savings,” she said.

“I’m not holding my breath that we’ll see a cent of its back, we basically have to write it off as a bad debt.

“We are a family business and employ about 20 people who support their families, so we have wages to pay.

“More than one of those (unpaid builder debts) in a financial year can do a lot of damage.”

There are 169 unsecured Pivotal Homes creditors, ranging from small family businesses to large companies.

The liquidator’s report comes as the former Pivotal Homes headquarters is set to be auctioned, with no proceeds to go to creditors.

The offices are owned by a company in which all shares were, until recently, held by Mr Irwin.

The shares were transferred to a third company, solely held by Courtney Irwin, on August 5.

The report also revealed Mr Irwin had paid liquidators $220,000 under a deed of covenant, which he'd signed to meet financial requirements of Pivotal’s building licence.

Liquidators initially hoped the covenant would pay up to $550,000 amid uncertainty over the status of the QBCC licence when the company failed.

Mr Irwin has emerged as the second largest unsecured creditor of the company, claiming he’s owed $417,670 in entitlements.

The former company car driven by the director, a Ferrari purchased for $410,000 in 2018, was sold for $480,000 three months before the liquidation.

Pivotal Homes Managing Director Michael Irwin Picture: Richard Gosling

All sale proceeds had been returned to the company, the liquidator said.

The liquidators anticipate their costs and fees for administering the case will be $475,000-$650,000.

The liquidator will submit a confidential report to ASIC to address any suspected breaches of the Corporations Act, or other offences by the director that may be identified during the liquidation.