Ralan Group ran two books ahead of collapse

Apartment developer Ralan had been insolvent since 2014 and was running two sets of books in the lead-up to its recent collapse.

Ralan Group founder William O’Dwyer Picture: Jerad Williams

Failed apartment developer Ralan Group had been insolvent since 2014 and was running two sets of books in the lead-up to its recent collapse with debts of more than $500m, according to the administrators.

Ralan’s funders — including major banks such as Westpac, NAB and St George, along with mezzanine financiers such as Balmain and Wingate — were shown one set of books alleging buyer deposits were being held in its trust account. In reality, apartment buyers’ deposits were being used to fund Ralan’s development activities in NSW and Queensland, according to the report prepared by voluntary administrator Grant Thornton.

“The administrator’s report discloses that Ralan was keeping falsified trust account records and showing them to lenders,” said Sydney solicitor Matthew Bransgrove, whose firm Bransgroves Lawyers was once retained by Ralan to advise on how to raise money through an Australian ­Financial Services Licence.

“While it seems astonishing that Westpac and its solicitors would take trust account ledgers prepared in-house at face value, it may explain how Westpac was unaware of the release of purchaser’s deposits, and therefore the illegal debenture scheme.”

Mr Bransgrove said the Grant Thornton report into Ralan’s collapse raised serious questions about how much Ralan’s mezzanine funder, Wingate, knew.

“According to the report the collapse of the group’s builders cost it in excess of $60m. According to the report Ralan was working on five projects at the time, all of which were closed down by the unions, all of which Wingate provided mezzanine finance for,” Mr Bransgrove said.

“When you marry this to the administrator’s opinion that the Ralan Group was insolvent from and as a result of the 2014 collapse of its builder, it seems clear Wingate would have had to have suffered losses at that time.

“When you then consider that Wingate continued to fund Ralan thereafter, it suggests that they ­either forgave the debt or were made whole from some other source other than their security.”

Bransgroves Lawyers is acting for 458 Ralan victims who have instructed the firm to put together a brief of evidence for a class ­action against Wingate.

Mr Bransgrove added that Wingate needed to explain how it considered Ralan was solvent after the 2014 collapse of its builder, Steve Nolan Constructions, and where it believed the necessary funds were coming from when it knew the financial circumstances of all the Ralan Group’s developments on an individual basis.

“It seems that unless Ralan founder William O’Dwyer told them he had a rich uncle who had recently died, or some other contrivance, which they genuinely believed him, they were being wilfully blind to what was going on,” Mr Bransgrove said.

In a statement, Wingate said it had not suffered any losses from Ralan’s collapse. A Wingate spokesman said Ralan was regarded by lenders, builders, purchasers and investors as a strong counter party with a positive track record.

“The Ralan issues with its former builder is a matter for Ralan, but we can confirm that as a ­secured lender to Ralan, Wingate suffered no loss, nor did we forgive the debt,” Wingate said.

“Ralan provided Wingate with financial documentation that demonstrated solvency. We understand that the many other lenders with Ralan were provided the same. Wingate was advised by Ralan that funds required were available from a combination of existing Ralan cash balances and sales of residual apartments from prior developments that Ralan was holding at the time.”

The report also reveals apartment purchasers were given the opportunity to release their apartment deposit in exchange for earning a 15-20 per cent capitalised interest investment that was to be deducted from the amount owing on the apartment at the time of settlement.

The report found that the buyers, mostly mainland Chinese-born, were also paying deposits on apartments of 10 per cent, reaping the 15-20 per cent interest rates, and rescinding their contract before completion at no penalty.

The report alleged the decision by Ralan’s builder to increase the cost of building a second apartment tower by an extra $95m and a third Gold Coast tower by $100m had partially led to Ralan’s collapse. It said the Ralan business model was undercapitalised with limited equity that replicated a partial Ponzi scheme. At least 15 of Ralan’s developments were loss-making.

Grant Thornton said poor management and the direction of certain business units had not helped.