A trustee is investigating a family-owned construction company that collapsed after company funds were used to purchase a series of residential properties in which family members held interests, while the owners say they were left with incomplete homes. and defective.
That’s according to a liquidator’s report filed with the Australian Securities and Investments Commission (ASIC) last week on collapsed Victorian residential builder Brurob Nominees Pty Ltd, also known as Langford Jones Homes.
This company built houses along Melbourne Harbor and the southeastern suburbs, as well as on the Bass Coast, but went into liquidation at the end of June due to $23 million. Its collapse affected 66 homes and more than 400 creditors, the liquidators said.
The latest liquidator’s report revealed that certain members of the Langford-Jones family acquired interests in residential properties in the years before the company’s demise.
Appointed liquidators Richard Stone and Jonathon Colbran of RSM Australia Partners filed a legal brief on Friday that was obtained by news.com.au.
The report indicated that money was taken from the construction company to finance the purchase of three properties and a loan, for a total of $2,044 million. Several other properties are also under investigation, according to the trustee’s report.
Two of the properties were purchased by a company controlled by members of the Langford Jones family, Bruce and Sam, the father and son duo who acted as directors of Langford Jones Homes at various times. Another company run by Bruce borrowed money that was recorded as an “investment” and not a loan in the construction company’s accounts.
In another case, the company and the partner of Sam Langford-Jones purchased a property using a loan from the company.
The liquidators have demanded that the loans be repaid to compensate the creditors, but Bruce, Sam and Sam’s partner claim that the company also owes them money after investing millions.
While it is not unusual for family businesses to spend funds on other family businesses, the liquidators said they were investigating whether there had been any breaches of directors’ duties at this particular company by its current director, Bruce, and its former director. , Sam.
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The liquidators wrote: “Our initial assessment is that there are indicators that the director and former director may have breached section 180 of the (Companies) Act.”
The company’s sole current director, Bruce Langford-Jones, told news.com.au the family had invested $14 million in the now-defunct business, including all personal property, and was “devastated” by the collapse. of the company and facing bankruptcy.
Sam was contacted for comment.
Company accounts show that more than $1 million was transferred from Langford Jones Homes to an entity known as BRSP.
According to the trustee’s report, BRSP is controlled by Bruce Langford-Jones and his son Sam.
“BRSP’s repayable loan was first recorded in 2018 and its balance has varied since then,” the report states.
Some of the money was invested in a property in the eastern Melbourne suburb of Brighton, where the lot was subdivided into two separate properties and sold.
Several members of the Langford-Jones family and company also purchased another property in Brighton using those funds.
All three properties were partially owned by Andrew Leigh Langford-Jones, Nicole Maree Langford-Jones, Sam Langford-Jones and BRSP.
When the business went into liquidation, the business accounts showed that there was an outstanding loan of $257,021.40.
The liquidators have issued a demand for the $257,000 to be returned.
“We have not received a formal response to our demand, however, the directors informed us that BRSP does not have sufficient resources to pay the loan,” they said.
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Another property was bought in Brighton in December 2017, and the liquidators are now demanding $1.7m back.
Langford Jones Homes and a woman named Sian Elizabeth O’Farrell jointly purchased the property for $2.17 million.
“We understand that Ms. O’Farrell is an associate of Sam Langford-Jones,” the liquidators wrote.
The property was subdivided, one given to Langford Jones Homes and the other to Mrs O’Farrell.
Ms. O’Farrell’s property was sold before the liquidators were appointed for $2.67 million to an unrelated party. The settlement was on September 2 of this year.
“We also issue Mrs. O’Farrell with a demand for payment of the investment of $1,701,854.39,” the liquidators wrote.
The report indicates that Langford Jones Homes does not believe that Ms. O’Farrell owes the company any money, and if she does, she should be compensated with amounts advanced by the Langford-Jones family to the company. Ms. O’Farrell is expected to claim that Langford Jones Homes owes her $800,000.
Another loan has also come under scrutiny from a related company.
A loan of $87,564.82 was given to an entity called Flip. The liquidators noted: “Flip is a company controlled by Bruce Langford-Jones.”
They added: “Flip’s repayable loan was recorded in the management accounts in July 2021 as an investment in Flip rather than a loan.”
Once again, a refund demand has been issued.
News.com.au has contacted Sam Langford-Jones and attempted to contact his partner Sian Elizabeth O’Farrell for comment.
Several other properties located in Inverloch, a seaside town along the Bass Coast, are also under investigation.
News.com.au spoke to a contractor who was working on a house in Inverloch.
The contractor, Brody*, runs a small business with three other employees and claims Langford Jones Homes owes him $150,000 after spending his own money to purchase materials.
“I don’t really have any money, I have to borrow money from my father,” the 49-year-old told news.com.au.
It was the lump sum of his life savings and he kept working on the Langford Jones Homes projects in the hope that they would eventually pay him.
But it was finally enough.
“You are building it (the house) with my money,” he said. “That was the last straw.”
He stopped working for them soon after, but says he has yet to recover what is owed to him.
Liquidators are investigating several Inverloch properties after a series of requests from creditors.
“Creditors have also contacted our office and raised inquiries about the company’s construction and dealings with various properties at Inverloch in Victoria,” the liquidators wrote.
“Our investigations regarding these properties and the Company’s dealings in connection with them are ongoing and all material developments will be reported to creditors.”
Liquidators said it appeared Langford Jones Homes had been insolvent since “at least” June of last year.
The company failed for a number of reasons, including the impact the Covid-19 pandemic had on supply chains, a cyber attack that wiped $2 million off the balance sheet, a legal proceeding with a disgruntled customer that cost $825,000, and capital from insufficient work, according to the report.
The liquidators are still investigating whether there have been breaches of the director’s duties.
“Related party deals are not uncommon in the context of family businesses,” they wrote.
“However, when a company goes bankrupt, it is necessary to consider whether these dealings were appropriate in the circumstances and, more importantly, whether creditors and the company suffered any harm as a result of dealings between the company and related parties.” .
Investigations continue into whether there were voidable transactions, which is when money was transferred to a related party while the company was insolvent, or whether it was detrimental to the company to take the money out for its own purposes.
News.com.au previously spoke to several affected owners and employees, including Donna Taylor, a mail carrier on Phillip Island, south of Melbourne, who says she has potentially been left $180,000 out of pocket for the whole ordeal.
Ms. Taylor, 53, signed with Langford Jones in 2020 and is down to a frame after a year and a half into her $365,000 build.
He shelled out $155,000 in progress payments before Langford Jones Homes went bankrupt.
Now the would-be homeowner is concerned that her frame may need to be demolished entirely as it has been uncovered for four months during heavy rains and some of the wood has turned black.
Unfortunately, Victoria’s national building insurance only pays up to 20 percent of the building contract price.
“The builder’s insurance will only cover me for $70,000,” Ms. Taylor said.
“I already have a builder’s quote (and I’m going to) pay $180,000 out of pocket.
“I had $210,000 left to complete the house. It now costs something like $460,000 to complete.”
David Drummond and his wife, of nearly 60, said they are “devastated” and that the company’s liquidation “will be a huge financial loss for us.”
“We will sell and move on and not proceed with construction with anyone else. This has also destroyed our plans for a seaside retirement,” he told news.com.au.
*Name withheld for privacy reasons