Melbourne building company collapses owing $2.3m, questions around $2.5m transfers

As much as $2.5 million might have been transferred out of the business in the months leading up to its collapse, according to liquidators.

The boss of a collapsed building company may have transferred $2.5 million to its boss as a “director’s loan” in the months before the business went bust, according to the liquidator left to wade through the mess.

That figure is more than the total money owed to creditors.

Victorian construction firm Area Projects Pty Ltd went bust last year after being in business for almost three decades specialising in new homes, townhouses and renovations.

Headquartered in the Melbourne suburb of Mulgrave, Area Projects had 15 employees at its peak but hadn’t been trading for several years. Brett Mcgauchie was its sole director.

Customers had been trying to get out of their contracts as projects stalled, calling the situation “horrendous”, but they didn’t know the full extent of the problems until a liquidator’s report, lodged with the corporate watchdog ASIC, laid it all bare.

John Morgan of insolvency firm BCR Advisory, the appointed liquidator, wrote in his report that Area Projects is believed to owe at least $2.3 million to creditors.

He was able to track down one bank account that belonged to the company, and all that was left was an overdrawn amount of $20.

Do you know more or have a similar story? Get in touch | [e-mail]

This is Brett Mcgauchie at one of the construction sites.

MORE: Sign RBA is creating ticking time bomb

The liquidator wrote there was a clear “relationship” between the director, Brett Mcgauchie, and Area Projects, when he went through the company’s records.

“The director and the company regularly transferred funds to each other,” the liquidator’s report noted.

Financial records indicated that Mr Mcgauchie had taken out money from the company as a director’s loan “with a payable balance” of $595,843 at the time of its collapse.

But the liquidation report claims the construction firm’s books and records had not been “accurately maintained” and were therefore not reliable.

When the liquidator dug more, he wrote he discovered a “pattern” where customer deposits would be “immediately” transferred out of the business as soon as they were received, to a number of other bank accounts.

This went on in the last 18 months preceding the collapse of Area Projects, with the transfers totalling $2.545 million.

The millions of dollars worth of withdrawals lacked a detailed description, he said, and were sent on to bank accounts “presumably under the control” of Mr Mcgauchie.

“Further investigations are warranted to establish the nature of these payments and whether the director benefited from them,” the liquidator said.

“Due to the limited financial information being provided, I have not yet established whether any amount was paid on the director’s behalf or for his own benefit,” he noted later in the report.

News.com.au has called, texted and left voicemails for Mr Mcgauchie. The most recent text was not able to be delivered.

Area Projects had been in business since 1995.

MORE: Huge prediction for Aussie house prices

Before the liquidator took over, $21,000 worth of assets was sold to an unrelated company.

However, he doesn’t know what happened to this money, which could have been paid to creditors of Area Projects.

“Sale proceeds were deposited into the company’s bank account,” the report noted. “I have traced the funds which appear to have been transferred into another account without a detailed description.”

Although Mr Mcgauchie currently owns no property, the liquidator noted he might have transferred a property in the Melbourne suburb of Camberwell to someone else.

“It is possible that this property may have been the director’s property until 22 September 2023. My investigation into this property dealing is ongoing,” the report stated.

Property records show that this home was transferred for zero dollars just a few months before Area Project’s collapse.

The home is listed as being worth around $1.7 million, according to estimates.

Out of the $2.3 million debt the company owes, unsecured creditors are owed about half of that, at $1.477 million.

The Australian Taxation Office is the largest creditor, left $715,609 out of pocket.

The liquidator said he believes the company was trading insolvent for at least three and a half years, adding it hadn’t been a sustainable business since June 2020.

Mr Mcgauchie could be hit with an insolvent trading claim for as much as $742,000, the report noted.

In conversation with news.com.au, the liquidator, Mr Morgan, said he had so far found his dealings difficult with the company’s director.

“It’s easy to bat us off. He keeps giving us answers but we don’t like the answers,” he said.

He vowed that “the investigation is far from over”.

Homeowners devastated

More than a year since the report, homeowners owed money are still in limbo, with several still engaged in court hearings trying to find a way to recoup their losses.

One customer news.com.au spoke to on the condition of anonymity said they had signed a contract with Mr Mcgauchie in 2018 and they are still hundreds of thousands out of pocket over the ordeal.

“He walked away into the sunset,” this homeowner told news.com.au. “You can see all the carnage. It’s horrendous.”

On the since deleted website of Area Projects, Mr Mcgauchie described himself as a “‘frustrated Richmond supporter” and a “passionate family man”.

“The whole process, from concept to completion, for families can be long and stressful and the build is just one part of the complete process for families,” the website also said, now somewhat ironically.

“For that reason, Brett strives to be involved in his part of project (sic). He tries hard to make his part as stress free as possible by working closely with clients to ensure they get exactly what they want.”

[e-mail]

Originally published as Melbourne building company collapses owing $2.3m, questions around $2.5m transfers