When Bob Day sent his Home Australia Group into liquidation on October 17, there was just $1500 left in the bank account of its NSW subsidiary, Huxley Homes, which had debts of about $14.7 million.
But liquidators McGrathNicol also put the newly retired Family First politician on notice on Thursday. They will report to the corporate regulator if they find any evidence of insolvent trading or breaches of directors’ duties after Home Australia’s sudden collapse left more than 200 unfinished homes abandoned and at least $37.8 million owed to more than 500 customers, hundreds of trade suppliers and the NAB.
Joint liquidator Barry Kogan, a McGrathNicol partner, spelt out the dire financial position at a meeting of Huxley creditors, the first of a succession of such meetings over two days in five states.
Secured creditors, mainly NAB, are owed $11.4 million in NSW and $18.2 million nationally, but the group’s assets will not even cover those debts. Mr Kogan made it clear to unsecured creditors at the Sydney meeting that there would be nothing left for them.
Their only glimmer of hope was if evidence could be found of insolvent trading, breach of directors’ duties or unfair commercial practices, and if they could find money had been paid “upstream” in dividends to Home Australia’s owners.
“Sometimes the workers call me and threaten me: ‘If you don’t give us our money you’ll be sorry.’”
But Mr Kogan cautioned the liquidators would not even consider spending money “going down rabbit holes” unless they believed there was any prospect of recovering funds for creditors.
Huxley, he said, finished with a “book value” of $7.4 million but a “realisable value” of $200,000.
Financial records for Home Australia show it paid its owners, including Mr Day’s company B&B Day Pty Ltd, a dividend of $2.67 million in the 2012-13 financial year. In the same year, the company recorded a loss of $420,656 and the company’s own auditor warned its net current liabilities of more than $32 million presented a "material uncertainty which may cast significant doubt about the consolidated entity's ability to continue as a going concern".
Huxley Homes customers and creditors Sam and Steve Baker walked out of the meeting unsurprised but demanding answers from Mr Day, the sole director of Home Australia and its subsidiaries.
"It really does fall to him to answer all the tough questions about what he knew, when he knew it and what he did about it," Ms Baker told SBS.
She had asked the liquidators whether they would look into Day’s donations to his political party, Family First.
SBS sent questions to Mr Day but had not received a response.
Another unhappy creditor was David Tetteh, who told SBS Huxley owed him almost $25,000.
In his home country of Ghana, he was known affectionately as “King David”, but in Sydney he is a humble painter who regrets ever working for Huxley Homes.
He emerged almost speechless from the meeting.
“What can I say?” he said. “Why? How?”
Customers had moved into the homes he had painted, he said. They had paid Huxley, but Huxley had not paid him.
The previous day, on a job at Balgowlah, Mr Tetteh had told SBS he held out some hope of getting his money.
“I'm a father of four,” he said. “I have to feed my family, pay my mortgage … I have to pay my workers.
“Sometimes the workers call me and threaten me: ‘If you don’t give us our money you’ll be sorry.’”
Mr Tetteh and the other unsecured creditors around Australia are owed $19.6 million, according to figures supplied by Home Australia to the liquidators.
Huxley alone has more than 300 creditors. They include the building supplier Boral (owed almost $300,000), Australia Post ($41,000) and the Grey Army, which keeps seniors in work ($5200). There is an excavator owed $85,000 and a concreter owed $27,000. The list, in small print, fills four pages.
"King" David Tetteh, a painter owed almost $25,000 by the failed Huxley Homes. Source: SBS
“How can that be?” he asked, producing paper work showing Huxley owed him $24,793.07. "I have all the evidence."
Now the liquidators have told him the evidence will be of no use.
Xin Li and Bing Feng turned up as creditors, too. It was their only hope of recovering anything of the $25,000 deposit they had paid Huxley as a deposit on a home at Oran Park.
The company never turned a sod on the property. And it emerged yesterday that the couple are among 28 of Huxley’s 94 customers for whom the company did not take out home warranty insurance. It took their deposits and absorbed the money without securing that vital policy.
Most customers are at least covered by home warranty, protected for up to 20 per cent of the value of their projects.
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Mr Day resigned as a senator on Tuesday, finally accepting that a white-knight investor was not going to salvage the business. Mr Kogan confirmed to creditors that this potential investor did exist, but the money was never on the table.
Huxley, certainly, was not an attractive buy. Mr Kogan noted that it made $14.4 million in sales last financial year, but incurred $14.5 million in costs.
Among the creditors to hear this news was Graham Huxley, who founded Huxley Homes with his brother Bryan in 1968. They sold it to Mr Day in 2003. In the end, Mr Day said he paid too much for it and Huxley was the weak link that brought his five-state building business undone.
Last month the Huxley brothers were suing Mr Day in the Supreme Court for debts they claimed he still owed them from their sale.
Asked if he had come hoping to salvage anything, Mr Huxley said: “There’s nothing to be salvaged. It was a case of coming here to put the last nails in the lid of a coffin of something I started 48 years ago.”
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