Melbourne builder probed over $1.5m in cash withdrawals and transfers before collapse

A liquidator picking through the financial wreckage of Melbourne construction company Varaich Homes has raised questions about more than $1.5m in cash transfers and withdrawals in the year leading up to its collapse.

A defunct Melbourne construction company is being probed for $1.5m in cash transfers and withdrawals. Picture: Supplied

A defunct Melbourne construction company is being probed for $1.5m in cash transfers and withdrawals in the year leading up to its collapse, with the liquidator asking the corporate cop for assistance.

Harcon Property Group, which also traded as Varaich Homes, collapsed late last year, leaving an estimated 21 homes across the state incomplete.

Appointed liquidator Jason Tang of KPT Restructuring, who is picking through the company’s financial wreckage, said he was also probing a construction contract held with a related entity, Sumer Developments.

“My investigations of the company’s bank statement identified several transactions totalling $1,519,616 which require further investigation,” he said in a new report lodged with the Australian Securities and Investments Commission.

“The payments comprise cash transfers and withdrawals during the period from 1 July 2023 to the date of my appointment.

“My investigations also identified a construction contract held with the related entity, Sumer Developments Pty Ltd.

“Further investigations are required to determine the commerciality of this related party contract.”

Harcon Property Group, which also traded as Varaich Homes, collapsed late last year. Picture: Supplied

Mr Tang said he had written to director Jaspreet Singh Varaich requesting an explanation for both matters, but was yet to receive a response.

“As outlined throughout this report, the director has failed to respond to several of my inquiries,” he said.

“Accordingly, I applied to ASIC for external administration assistance and am presently awaiting a response.”

Varaich Homes, which operated out of Epping in Melbourne’s north, went bust owing a total of $3,132,755 to 51 unsecured creditors, it can also be revealed.

This included cabinet maker King Kitchen ($128,000), truss manufacturer Truss Onsa ($92,000) and builders Crown Constructions ($65,000) and Wallan Construction ($55,000).

The Australian Taxation Office was also listed as being owed $825,000.

Four secured creditors were owed $120,887 and three employees were owed $40,257, including $19,903 in wages and $12,350 in superannuation.

Varaich Homes went bust owing a total of $3,132,755 to 51 unsecured creditors. Picture: Supplied

Mr Tang said the company may have traded while insolvent for more than a year before it collapsed.

“My preliminary view is that the company was likely insolvent as at 30 June 2023 and remained insolvent at all times to the date of appointment on 23 October 2024,” he said.

While Mr Tang said a potential claim for insolvent trading could total $2.8m, he said Mr Varaich doesn’t appear to have any assets to pay off such a claim.

“The director has provided us with a statement of their personal assets and liabilities indicating a net asset shortfall,” he said.

“Searches confirm the director (does) not own any real property in Victoria.”

Mr Tang said Mr Varaich attributed the company’s failure to inadequate cashflow and a high price of materials and subcontractors.

But Mr Tang said poor strategic management of business, high cash use and trading losses also contributed to its downfall.

Devastated customer Tony Varghese said he had “given up hope”.

Mr Varghese has so far paid $455,000 for his house with Varaich Homes.

He said the company had recently requested $125,000 upfront for the fixing stage, but had not commenced any works to do with this part of the construction.

Devastated customer Tony Varghese said he has ‘given up hope’. Picture: Supplied

“I got a quote the other day of more than $500,000 just to complete the job and fix all of the defects,” he told the Herald Sun.

“We’re still waiting on our claim for insurance. I have a lot of uncertainty of how we’re going to complete this home.

“We have been living in this stress for the past few years, it’s starting to feel like a hopeless situation.”

Mr Varghese said his aircon units had recently been ripped off and taken from his half built home, which he assumed were from suppliers who were owed money.

He said there was “no justice” for homeowners of collapsed builders.

“This is happening again and again and the government isn’t doing anything about it,” he said.

“Even if I spend money to go to court, I’ll be in even more debt. I feel completely powerless.”

Varaich Homes was contacted for comment.