Walton Construction Pty Ltd (In Liquidation) (Receivers & Managers Appointed) ACN: 060 900 218 Joint and Several Liquidators' Annual Report to Creditors 6 February 2015 Michael Gerard Mccann Joint and Several Liquidator Graham Robert Killer Joint and Several Liquidator Andrew Stewart Reed Hewitt Joint and Several Liquidator 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015
Contents Section Page 1. Overview 3 2. Conduct of Liquidation 5 3. Outstanding Acts and Dealings 10 4. Summary Receipts and Payments 12 5. Estimated Completion Date 14 Appendices Page A. Declaration of Independence, Relevant Relationships and Indemnities 17 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 2
Section 1 Overview 01. Overview 02. Conduct of Liquidation 03. Outstanding Acts and Dealings 04. Summary Receipts and Payments 05. Estimated Completion Date 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 3
Overview Overview Overview Pursuant to an Order of the Federal Court of Australia made on 29 July 2014 Messrs Andrew Stewart Reed Hewitt, Graham Killer, and I were appointed Joint and Several Liquidators of Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) ('the Company'). We advise that Messrs Stirling Horne, Jason Stone and Glenn Franklin of PKF Lawler ('the Previous Liquidators') are no longer acting in the capacity as the Company's Liquidators. The purpose of this report is to provide creditors with an account of the Liquidators' acts, dealings and the conduct of the Winding Up during the preceding year. 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 4
Section 2 Conduct of Liquidation 01. Overview 02. Conduct of Liquidation 03. Outstanding Acts and Dealings 04. Summary Receipts and Payments 05. Estimated Completion Date 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015
Conduct of Liquidation Conduct of Liquidation Books and Records Since our appointment, we have been liaising with the Previous Liquidators in order to obtain the Company s books and records which include, but not limited to; Physical records (total of c.250 boxes for Walton Construction (Qld) Pty Ltd ("WCQ") and c.1,500 boxes for the Company); Electronic records and computer servers; and The Previous Liquidators working files and electronic records. The Liquidators access to the Company records has been restricted due to the following: Protracted delivery of all electronic workpapers and files by the Previous Liquidators. The Company s server not being operational. The server was sold to Tantallon Pty Ltd ( Tantallon ) prior to the Administrators appointment and is currently in the possession of Tantallon s Liquidators, Jirsch Sutherland. Jirsch Sutherland have estimated the cost of repairing the server to be c.$15k. Lack of funds to pay costs involved in collecting and relocating the physical records from the Previous Liquidators and storing at our facilities. The image originally taken of the Company s outlook server is incomplete. The costs involved in extracting data from the existing images (albeit incomplete) of the Company s outlook server are estimated at $10-$15k. The Liquidators are currently assessing their options including the cost of repairing and re-imaging the Company s servers. We have resolved the initial access issues with the Previous Liquidators and are currently in possession of their electronic and physical working files. Recoveries PKF Monies The Previous Liquidators have advised they currently hold $731 of the Company s funds. To date, no funds have been remitted to us by the Previous Liquidators. The Previous Liquidators have asserted a claim in the liquidation for outstanding time costs incurred in dealing with recovering the Company s debtors (discussed below). Given the nominal amount, we have not sought to recover from the Previous Liquidators these monies. Debtors (Retentions) The Liquidators anticipate the recovery of two (2) retentions from the following parties Deakin University (approximately $12,000); and Geelong Grammer School (approximately $50,000). The above amounts are estimates and are subject to change The Liquidators will continue to liaise with the aforementioned parties in relation to the release of retention monies. 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 6
Conduct of Liquidation Conduct of Liquidation National Australia Bank ( NAB ) Deposits In addition to the funds payable to the Company from debtors, we also anticipate receiving a refund of deposit monies from NAB following finalisation of its Bank Guarantee ( BG ) liability. Messrs Salvatore Algeri and Glen Kanevsky of Deloitte Touche Tohmatsu (Deloitte) were appointed Receivers and Managers ('the Receivers and Managers') by NAB on 26 February 2014 to certain assets including BG's provided to the Company and WCQ. We have been liaising with the Receivers and Managers with respect to their appointment and to monitor NAB s surplus security position. We understand that of the $7.1m in outstanding BG's as at the date of the Receivers and Managers' appointment, $2.8m in BG's have been returned or cashed in as at 13 November 2014. NAB has claimed a right of set off over all term deposit accounts held by the Company and WCQ to secure its exposure for BG s provided on behalf of the Company and WCQ. NAB currently holds $4.5m in cash securing its BG s. The Receivers and Managers have advised that since their appointment, cash has been depleted due to: BG s being cashed in; Works undertaken to complete defects; Receivers and Managers professional fees; and Funds used to clear the shortfall on other facilities provided to the Company by NAB (i.e. HP facilities). The Receivers and Managers are currently determining the collectability of the BG s. At this point the Receivers and Managers estimate a surplus of c.$1.2m may be available to the Walton Group from NAB on completion of this process. Competing Claims Assetinsure ( AI ) have a second ranking circulating security interest over the Company and may potentially have a claim to any surplus funds available from NAB and debtor realisations. We are currently reviewing AI s charge in order to determine the extent to which their claim may be secured. Subcontractor Bank Guarantees At the time of our appointment, there were a total of 89 BG s with a combined value of c.$1.63m which were provided to us by the Previous Liquidators. To date, we have attended to the following: Liaising with various subcontractors regarding the return of their BG; Reviewing documents held on the projects in an attempt to determine whether the BG s should be released; and Liaising with project Principals requesting confirmation of any outstanding defect claims against the Company in relation to projects; Facilitating the release of BG s. In order to release the BG's, the Liquidators are required to assess whether the Defects Liability Period (DLP) for the relevant projects has expired and that no defect claims by the Principals made during the DLP are outstanding. Unfortunately, the process of releasing BG s has been protracted in some cases by the lack of active co-operation from project Principals. 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 7
Conduct of Liquidation Conduct of Liquidation Investigations Since our appointment we have attended to the following regarding our statutory investigations: Conducted initial investigations into the circumstances surrounding the Company s failure and the conduct of the director and its officers; Met with representatives from the Australian Securities and Investments Commission ( ASIC ) to discuss the status of the liquidation, issues surrounding access to the Company s books and records and the need for funding to access the books and records and conduct further investigations; Lodged our report with ASIC pursuant to s533 of the Corporations Act 2001 ( the Act ) in relation to the conduct of the Company s director and its officers; and Requested Assetless Administration Funding ( AA Funding ) from ASIC to support further investigations and to assist with the cost of recovering and storing the Company s books and records. Public Examination The Public Examination ( PE ) is considered an effective tool to establish the circumstances leading to the Company s failure and to gather evidence relating to specific events or transactions that occurred prior to the appointment of Administrators on 3 October 2013. Prior to our appointment, the Queensland Building & Construction Commission ( QBCC ) had entered into an agreement with the Previous Liquidators to fund and indemnify the Company and the Liquidators to the conduct PE. We have submitted a revised funding request to QBCC to meet the costs of facilitating and holding the PE. In the event QBCC decide not to contribute funds, all or in part, we will approach ASIC or creditors for funding support. A PE is scheduled for April 2015 and subject to receiving funding will involve the summoning of documents and examination of 8 key individuals associated with the Company and WCQ (being the Director, Company staff and various advisors to the Company). Fair Entitlements Guarantee Prior to our appointment, the Previous Liquidators had conducted the verification work in respect to various claims submitted to the Department of Employment by the Company s employees for their outstanding entitlements. A portion of these claims were also distributed to employees by the Previous Liquidators. Subsequent to our appointment, we have attended to the following: Distributed funds to priority creditors pursuant to the Fair Entitlements Guarantee Scheme and liaised with FEG with respect to same. 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 8
Conduct of Liquidation Conduct of Liquidation Funding and Indemnity arrangements The Liquidators have entered into a funding and indemnity agreement with Assetinsure Pty Ltd ('AI'), a secured creditor of the Company. This arrangement relates to reviewing legal documents and accessing books and records relevant to determining bond security claims (AI) against the Company. The previous Liquidators entered into a funding and indemnity deed dated 26 March 2014 on the Companies behalf with the QBCC. This deed was to fund and indemnify the Liquidators costs, remuneration and legal fees to conduct public examinations of a number of individuals in relation to the Companies affairs. It is possible we may enter a further agreement with QBCC to fund the proposed public examinations. We enclose at the end of this report an updated Declaration of Independence, Relevant Relationships and Indemnities which includes reference to the agreement entered into with AI. Outcome for Creditors As previously stated, Assetinsure ( AI ) has a second ranking circulating security interest over the Company and may potentially have a claim to any surplus funds available from NAB and debtor realisations. In addition, we are aware of priority claims of employees and the Federal Government Fair Entitlements Guarantee ("FEG") in the sum of c.$1.3m which would be paid ahead of AI and the general body of ordinary unsecured creditors. As a consequence of the above, a distribution to ordinary unsecured creditors is likely to be contingent on the extent of AI's claim to circulating security realisations and the quantum of antecedent transaction recoveries. In this respect, our investigations are continuing and we expect to be in a better position to comment on the likelihood on a distribution to ordinary unsecured creditors following completion of the PE in April 2015. Other matters In addition to the tasks detailed above, the Liquidators have also carried out the following tasks: Attended to statutory lodgements, including GST and PAYG lodgements and liaised with the ATO regarding same; Corresponded with creditors, employees and other key stakeholders regarding the liquidation; Liaised with the Committee of Inspection to address queries and concerns regarding the Liquidation; and Attended to queries from Insurers with respect to personal injury claims against the Company and facilitated access to certain books and records; 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 9
Section 3 Outstanding Acts and Dealings 01. Overview 02. Conduct of Liquidation 03. Outstanding Acts and Dealings 04. Summary Receipts and Payments 05. Estimated Completion Date 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015
Outstanding Acts and Dealings Outstanding Acts and Dealings Outstanding Acts and Dealings Before we are in a position to finalise this matter, the following tasks will be attended to: Conduct further investigations and progress our AA Funding Request; Lodge a supplementary report with ASIC pursuant to s533(2) of the Act; Hold the PE and attend to any further matters resulting from the PE; Continue to attend to requests for release of bank guarantees from subcontractors; Distribute any further FEG claims to priority creditors pursuant to the Fair Entitlements Guarantee Scheme and liaise with FEG with respect to same; Continue to liaise with Deloitte in order to monitor NAB s security position and the progress of the receivership; Determine the extent of AI s claim to circulating asset realisations (including the NAB surplus); Finalise the recovery of the debtors previously mentioned; Determine and consider receipt of any claims against third parties arising from our investigations; Call and hold further meetings of the Committee of Inspection; and Attend to any further queries raised by creditors, employees and other key stakeholders regarding the liquidation. 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 11
Section 4 Summary Receipts and Payments 01. Overview 02. Conduct of Liquidation 03. Outstanding Acts and Dealings 04. Summary Receipts and Payments 05. Estimated Completion Date 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015
Summary Receipts and Payments Summary of Receipts and Payments Summary of Receipts and Payments The adjacent table details the receipts and payments of the Previous Liquidator, PKF Lawler, for the period 3 October 2013 to 29 July 2014. To date, the only funds received by the current Liquidators are those advanced from FEG in respect to priority creditor claims amounting to $119,907. A total of $96,878 has been distributed to priority creditors net of tax, with the balance of $23,029 to be remitted to the Australian Taxation Office in our December quarter Business Activity Statement which is due to be lodged by 3 March 2015. 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 13
Section 5 Estimated Completion Date 01. Overview 02. Conduct of Liquidation 03. Outstanding Acts and Dealings 04. Summary Receipts and Payments 05. Estimated Completion Date 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015
Estimated Completion Date Estimated Completion Date Estimated Completion Date We anticipate that the liquidation may be finalised by December 2016. However, this is contingent on the outcome of the PE and any recovery actions commenced against the Director or others. Should you have any queries with respect to this report, please contact Mr Raffi Dishoian of my office on (03) 8663 6272 or Raffi.Dishoian@au.gt.com. Michael McCann Joint and Several Liquidator 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 15
Appendices A. Declaration of Independence, Relevant Relationships and Indemnities 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015
Appendices A. Declaration of Independence, Relevant Relationships and Indemnity 2015 Grant Thornton Walton Construction Pty Ltd (In Liquidation) (Receivers and Managers Appointed) 6 February 2015 17