A creditors' report has found several potential breaches of the Corporations Act by the company director behind the defect-plagued Esque apartments.
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It was recently revealed that the M and A Group, the developer of the Esque building in Franklin, had gone into administration owing a combined $40 million in secured and unsecured debts.
In a creditors’ report from January obtained by Fairfax, administrator Deloitte said M and A Group director Andy Chen appeared to have acted recklessly in the running of the company.
“From our investigations, it appears that the director has possibly contravened Sections 180, 181, 182 and 184 of [the Corporations Act] by not acting with the standard of care and diligence required or in good faith by using his position and information," the report read.
"In addition, it appears that his actions were reckless and he failed to exercise his duties in the best interest of the company."
Deloitte also criticised the M and A Group's record keeping.
"We note that we have been provided access to the company's management accounting file maintained through [accounting software] Xero.
"However, this file appears incomplete and unreconciled.
"It is our preliminary opinion the books and records have not been maintained in accordance with Section 286 of the [Corporations Act] as no financial statements or income tax returns were prepared for the company."
The Independent Property Group, which sold apartments inside the building, said in April that investigations were still being carried out to determine the extent of defects within the 90-unit development.
A defects report obtained late last year showed the Esque building has been plagued with leaking toilets, faulty air conditioning and cracks in the walls and ceilings, among other defects.
Deloitte — appointed as the administrator of the M and A Group — said in February the company owed about $22 million in secured debts and about another $20 million to unsecured creditors.
A bad investment in Halcyon Rise Pty Ltd, a related entity involved in a failed Sydney property deal, was the main reason behind the collapse of the M and A Group, Deloitte said.
Documents filed with the Australian Securities and Investments Commission showed 97 unsecured creditors were owned an estimated $21,763,694.
This included $113,000 for facade work on the development, $18,000 for shower screens and wardrobes, $38,000 for roofing, and $200,000 for electrical work.
The Gungahlin project had been plagued by a number of issues in 2017, including wrong colour schemes in some apartments and incorrectly sized whitegoods.
In June last year, residents were shocked when they were told to pay $563 for an electricity meter before moving into their units. The developer changed tack a week later, offering to pay for the meters to compensate for the bungled colour schemes.
Deloitte administrator David Mansfield has said the matter was complex and investigations were ongoing.
"Our investigations to date indicate that funds to be recovered from the Esque units will not be sufficient to meet the outstanding secured debts, and as a result, a dividend return to unsecured creditors unfortunately appears unlikely," he said.
"We are in the process of convening a meeting of creditors, where we will be recommending that the company be placed in liquidation."
The M and A Group was approached for comment.