Sydney builder enters liquidation owing $845k, ASX-listed company caught up in collapse

The director of a failed building company has not been contactable for months, all while the liquidator claims she pocketed $861k.

The director of a failed building company has not been contactable for months, all while the liquidator claims she pocketed $861,000 of the business’s funds prior to its collapse.

News.com.au can reveal that in May, Sydney-based Workspace One Pty Ltd went into liquidation with liabilities of $845,000.

The construction firm specialised in refurbishing office spaces and had big deals in place, including what news.com.au understands was a multi-million dollar contract with ASX-listed fashion company City Chic, which was left with an “incomplete” renovation.

In a twist, the liquidator claims the sole director, Kathryn Arnold, appears to have transferred more than the entire amount the company owes to its 17 creditors into a personal bank account, according to a statutory report lodged with the corporate regulator. Ms Arnold admitted to news.com.au she transferred money to a personal account to pay and reimburse herself for business costs and did not dispute the amount.

“I have identified 193 payments for amounts totalling $861,040.79 made to a bank account ... (which) I have determined the payments were most likely made to a bank account in the name of the director,” the appointed liquidator, Liam Bailey of O’Brien Palmer Insolvency and Business Advisory, wrote.

The same report also alleged there was a possibility Ms Arnold’s husband Mike was operating as a “shadow director” as he was “intimately involved” with Workspace One and the former carpenter has been an undischarged bankrupt since 2014 which prohibits him from directing his own company. Ms Arnold denied her husband was a shadow director.

Jackson*, a trade creditor owed $120,000, was furious when he learnt the extent of the company’s financial affairs.

Losing “$120,000 hurts like hell,” he told news.com.au. “I was looking at retiring in the next few years, now I’ve got to work a lot harder” for more years to come.

Kathryn Arnold has been accused of transferring $861,000 of company funds into her own bank account.

Kathryn Arnold’s husband Mike is an undischarged bankrupt prohibited from being a company director.

More than half a year since the company went bust, the liquidator, Mr Bailey, has not been able to get key information from the company’s director, Ms Arnold. It’s understood she no longer lives in Sydney.

“My investigation into the affairs of the company have been frustrated by the failure of the director to comply with her obligations to complete a ROCAP and provide me with the books and records of the company,” Mr Bailey wrote.

In conversation with news.com.au, Mr Bailey said he had enlisted ASIC’s help.

“We have sought the assistance of ASIC in obtaining the compliance of the director,” he said.

ASIC has filed civil offence proceedings against Ms Arnold and is seeking to prosecute her for what it alleges is her failure to comply with her duties as a company director.

She is due in court on January 16.

These cases often end up with the defendant facing fines and a good behaviour bond. It’s unclear if she will attend the case.

She has not been charged with any criminal wrongdoing and no action has been taken against her husband Mr Arnold.

In a statement to news.com.au, Ms Arnold claimed her business failed because of Covid-19 restrictions and a dispute with a contractor which created high legal costs and turned other tradies against her.

She denied that her husband was a shadow director and said such suggestions amounted to gender assumptions.

“Unfortunately there are not many women in the construction industry and many of the trades and even clients failed to acknowledge me as the director of the business or take my position seriously,” she said.

“Whilst the project manager is indeed my husband, his role was to manage the day to day operations of the project and he acted only in this capacity.”

In regards to the allegations of transferring money into her own account, Ms Arnold said: “Generally speaking and simply put, I drew wages, director’s fees and reimbursement for extensive costs put through my personal credit card over the lifetime of the business.”

She did not respond to news.com.au’s questions about her alleged failure to comply with the liquidator’s investigations.

Mr Arnold was contacted for comment.

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Jackson is $120,000 out of pocket over the debacle.

Workspace One went bust in May.

During Mr Bailey’s investigation, he said Workspace One’s books and records had been so “poorly maintained” that there were 1,851 unreconciled transactions dating back to the company’s very beginning in what he called “abysmal”.

Mr Bailey added: “I have been approached by several parties advising they are creditors in respect of damages claims for building defects and they are still in the process of quantifying their claim,” he said.

As a result, he expects the total amount of debt the company has to be higher than its current $845,000 liability.

There was just $23.19 left in Workspace One’s bank account when Mr Bailey took over.

Mr Bailey said signs pointed to the fact the construction firm was trading insolvent from June 2021, even though the company was only launched six months earlier.

“The director may be liable for the amount of $339,328.68 for allowing the company to trade whilst insolvent,” he noted.

“I intend on issuing a demand to the director shortly noting that she appears to have taken substantial benefit from the business with disregard for the company’s creditors and it is likely that creditors would benefit from the appointment of a trustee in bankruptcy in examining her financial affairs.”

Mr Bailey also noted that her husband Mike Arnold has been bankrupt for nearly 10 years because he has failed to file a Statement of Affairs, and can only be released from bankruptcy if he does so.

News.com.au contacted Mr Arnold’s bankruptcy trustee, Andrew Barnden of insolvency firm Rogers Reidy, for comment.

City Chic was one of the projects left incomplete.

Creditors want answers.

‘He was the man, everything was him’

Months after Workspace One went bust, creditors are growing restless.

Jackson has been in business for more than 30 years and said he had never been stung like this before.

With only a handful of employees, and running a small business of his own, he said the $120,000 that was never paid back to him had an impact on his business but luckily he built in “contingencies”.

The trade supplier had previously done a small job with Mr Arnold and Workspace One and was fully paid.

He was happy to do a larger job with them — namely, the multimillion dollar refurbishment of ASX-listed City Chic’s office in the Sydney suburb of Alexandria.

The entire time he contracted for Workspace One, he reported to Mr Arnold and thought he was the boss.

Only at the very end, did he say the company’s director, Kathryn Arnold, came onto the scene.

“It doesn’t pass the pub test,” Jackson said.

“I never met her. He (Mike Arnold) was basically project manager, he was running all the trades, he was basically the man, everything was him.

“She (Kathryn Arnold) only came into the picture towards the end when everyone started to get really angry.

“The job came to a complete and utter stop.”

Another creditor who did not want to be named said that they believed City Chic paid a large portion of construction costs to Workspace One up front even though a lot of this work was never completed.

It’s also understood parts of City Chic’s office is boarded up and not able to be used.

In a statement to news.com.au, a City Chic spokesperson said “City Chic terminated its agreement with Workspace One due to lack of delivery and has been in discussions with the liquidator.

“Having been selected via a competitive process, their conduct was extremely disappointing as the renovations were left incomplete.”

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Originally published as Sydney builder enters liquidation owing $845k, ASX-listed company caught up in collapse