Privium liquidators probe breaches amid $80m collapse

Liquidators of failed building giant Privium Homes have identified a number of possible breaches of the Corporations Act that may have contributed to the $80m collapse of the firm.

Liquidators of Queensland building giant Privium Homes have identified a number of possible breaches of the Corporations Act that may have contributed to the $80m collapse of the firm.

In a report released to creditors, FTI Consulting said there are questions as to whether the director Rob Harder and former directors failed to act in good faith, failed to exercise a reasonable degree of diligence and made improper use of their positions to gain an advantage.

FTI Consulting said the rising cost of construction due to higher labour and materials cost due to the Covid-19 pandemic had hit Privium’s profit margin.

At the same time large dividend payments to related parties had depleted available cash which might have otherwise afforded a buffer from deteriorating trading conditions.

One of Australia’s most active residential builders Privium Group paid out $22m in dividends, despite posting a $28m loss in the 2019/20 financial year.

Privium’s collapse has left hundreds of unfinished houses across the country, with FTI saying the group had been trading insolvent since at least August.

The FTI report identifies one $20m dividend paid out in 2020 during the height of the Covid-19 pandemic to a company called The Promise, of which Mr Harder is the sole shareholder and his wife Rachel the director. Mr Harder is a senior member of Hillsong Church.

“The director appeared to have caused the companies to enter into unusual transactions with related entities in which he was also a director of, or which his immediate family were office holders of, which on the face of it do not appear to have been commercial,” FTI said in its report.

“However, further investigations in this regard will be required to confirm this suspicion.”

The report outlines a complex corporate structure within the Privium Group that included use of special purpose vehicles (SPVs) to fund construction of homes.

Rob Harder started on the tools as a carpenter. Picture: NIGEL HALLETT

The SPV‘s were used to secure funding based on land and property being developed, with an arm’s length contract created between the SPV and Privium for the purpose of constructing homes. This resulted in numerous intercompany loans totalling more than $140m.

FTI said that given the size and complexity of the Privium Group, the extent of its intercompany dealings, and “the numerous allegations we have received” it would seek a public examination of Mr Harder and other Privium executives to seek evidence in relation to a potential recovery of assets

FTI had identified a potential claim for insolvent trading in the order of approximately $2.5 million. “At this time, it is unclear as to the capacity of the Director and former directors to meet a successful insolvent trading claim,“ said FTI Consulting.

FTI has revealed Mr Harder owns four properties with a combined value over $1m while former director Neil Wormwell owns a property worth $2.8m. Neither Mr Harder or Mr Wormwell responded to a request for comment.