Victorian plumbing company collapses into liquidation owing $12m as questions raised over actions by director

All 70 employees lost their jobs as the company went into liquidation after the director paid himself a handsome salary in the months leading up to the collapse.

EXCLUSIVE

All 70 employees at a plumbing firm have lost their jobs on the spot due to the company going into liquidation after the director paid himself a handsome salary in the months leading up to the collapse.

News.com.au can reveal that on March 27, C & S Plumbing Pty Ltd went bust and all its staff were immediately let go.

Simon Nelson of insolvency firm BPS Recovery and Reconstruction is the appointed liquidator of the Victorian business.

C & S Plumbing Pty Ltd had offices in Benalla in northeastern Victoria and also in Melbourne, primarily carrying out commercial plumbing works since 2015. At its peak it had 100 employees but this had dwindled down to 70 by the time of it shutting down.

Documents that Mr Nelson submitted to ASIC and obtained by news.com.au show that C & S Plumbing had racked up substantial debts of $12.2 million with more than 100 creditors.

Of that, $1.9 million is owed to 76 employees for unpaid wages, superannuation and retrenchment. A further $3.7 million is owed to the Australian Taxation Office.

The liquidator’s statutory report includes allegations that in the months before C & S Plumbing’s demise, the sole director, Shane Arnold, increased his salary and also sold the firm’s assets to another company a family member was involved with, while getting the existing plumbing business to complete work for this other company.

The liquidator has flagged that there are “possible recovery actions” for creditors by pursuing Mr Arnold personally, with allegations of uncommercial transactions.

Mr Arnold has indicated he plans to declare bankruptcy, according to the report lodged with the corporate regulator.

Shane Arnold was the director of C & S Plumbing and paid himself a six figure sum in the last four months of the company’s operation.

C & S Plumbing first went into administration in February before going to liquidation in March, after creditors took the company to court over unpaid debts. The plumber was unable to pay all of them.

But from late November until the liquidator’s appointment four months later, Mr Arnold “began to receive significantly increased wages”, according to the report.

“This was by way of cashing out outstanding annual leave and RDO balance.

“A review of the pay slips of Mr Arnold … indicate (s) that Mr Arnold received the gross amount of approximately $101,000” in that period of time, the report added.

“These payments would appear to be voidable transactions that are recoverable in the liquidation.”

The report also noted that C & S employees worked 261 hours at a subdivision in a block of land for a company called Arnold Land Development. A family member of Mr Arnold is the director of this company.

According to the liquidator, $456,665 worth of work was carried out at the subdivision, both from hours worked and materials used, though this was never paid to C & S Plumbing.

The liquidator’s office issued a demand for the money to be paid back, but as at the date of the report, lodged in May, had not received a response.

Plant and equipment was also sold to Arnold Land Development, which the liquidator said constituted a “voidable transaction” – which means it was sold for less than it should have been due to the circumstances and can therefore be seized by the liquidator.

News.com.au understands Mr Arnold’s plumbing VBA licence was renewed last month and will be valid until July next year.

News.com.au contacted Mr Arnold for comment.

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The liquidator plans to pursue Shane Arnold personally.

Shane Arnold was the sole director of C & S Plumbing.

Additionally, the liquidator said there were “significant errors” in C & S Plumbing’s financial statements.

The company appears to have “recorded the lease payments to the various financiers of the motor vehicles and machinery as loans to the shareholder. These payments should not be recorded in the shareholders loan account,” the liquidator noted.

“There also appears to be other payments that should not be included in the shareholders loan account such as payments to the company’s credit card.”

Mr Arnold personally guaranteed a number of debts owed to unsecured creditors of the company.

“I intend to issue a demand to Mr Arnold for the loan account regardless of his intentions to become bankrupt,” the liquidator added.

There were a number of reasons for the company’s inability to keep functioning.

Mr Arnold said a builder reportedly refused to pay a $1 million debt, and the Covid-19 pandemic and rising costs also had an impact on its viability.

The liquidator said the business also had inadequate cash flow and was undercapitalised, as well as growing too rapidly.

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When the liquidator took over C & S Plumbing’s bank accounts, there was $0.0 left.

“I have not recovered any funds from the company’s bank accounts,” he warned in a report to creditors.

Unsecured creditors are not expected a dividend while secured and priority creditors are expected to receive between 50c and 100c for every dollar they are owed.

C & S Plumbing’s collapse passed mostly under the radar, but came to light in the wake of news.com.au revealing two other major Victorian plumbers had gone into liquidation earlier this year amid an industry-wide crisis.

CDC Plumbing and Drainage collapsed in February owing $7 million to creditors while Richstone Group liquidated in June with total debts of $22 million.

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Originally published as Victorian plumbing company collapses into liquidation owing $12m as questions raised over actions by director