Evictions, prized permits and a bitter dispute.
A successful construction company owning property holdings, with a surplus of assets over $1.5 million has been wound up for a measly $6K thanks to the shareholder-directors being embroiled in dispute.
Worrells Melbourne were appointed by the court from actions brought by a trade creditor. At the time the company owed development land with permits adding substantial value to the land and were expiring in the next two months. Our challenge was to deal with a list of unconventional property tenancies and acquisitions, while exhausting all avenues to extend the prized development permits to sell the land at an optimal price. The test, however, was dealing with the directors.
Even after our appointment, the directors continued their bitter dispute finding every reason to disagree with one another, and us as liquidators, over every detail despite they were the ones who had everything to gain from the realisation of the surplus assets.
Property Woe #1
Prior to our appointment, the company acted as a property developer and sold a unit without a deposit, and allowed the purchaser to move-in prior to settlement. It was no surprise to us that when we attended settlement, the purchaser told us he didn’t have the money to settle. We then faced the issues of not only terminating the contract, but also taking the action required to obtain vacant possession, so that we could re-sell the unit.
Property Woe #2
The company had allowed another unit in the same development to be occupied rent free, and without a lease in place. Our persuasive skills failed us on this occasion when we were unable to convince the tenant to leave voluntarily and we had to take proceedings to have the tenant physically removed by the Sheriff.
These expensive and time consuming transactions meant that the liquidator had to be involved in every single realisation of assets.
The ultimate result to date (it is still ongoing) is the legal and liquidator’s costs exceed $150,000 that both shareholders could have benefited from, making it an expensive lesson to say the least. Goes to show, when you let emotions get in the way of good, and sensible commercial business dealings, it can be a very expensive option to settle the dispute.
Clearly a good functioning partnership works extremely well for all parties, whereas a dysfunctional partnership can become a financial disaster.