South Australian Senator Bob Day has quit parliament, announcing his business has collapsed.
Family First Senator Bob Day has announced he will quit Parliament and revealed his national home-building company has gone into liquidation.
“With great sadness I am writing to let you know that earlier today, the Home Australia Group of companies went into liquidation,” Senator Day said in a statement on Monday.
Just four days after SBS revealed the NSW arm of his building group, Huxley Homes, had been evicted from the HomeWorld display home sites – and that it faced eviction today from its headquarters because of unpaid rent – Senator Day said: “I will be working closely with the liquidator and offering a proposal to enable me to find a way to pay back every debt fully, no matter how long it takes.
“As for my role as a Senator, I will of course resign. I am incredibly sorry for the pain, stress and suffering I know this will cause.”
After 40 years in the business he started, Senator Day says he will lose the family home.
His Home Australia group has ceased building all homes across five states - more than 200 currently under construction.
Senator Day is blaming the collapse of his businesses on a Philippines-based company, which he alleged signed a fraudulent document claiming it would buy a big stake in Home Australia, thereby ensuring its liquidity.
As SBS revealed last week, Huxley management had been openly telling customers that its funds had dried up and it could not complete their homes – and could not guarantee they would be refunded.
Work had all but stopped on the home sites of dozens of Huxley customers, while another 21 clients of its sister company, Ashford Homes in Victoria, are worried about their projects.
'As for my role as a Senator, I will of course resign. I am incredibly sorry for the pain, stress and suffering I know this will cause.'
Senator Day had previously declined to answer questions about the solvency of his operation.
The strife extended to his his parent company, Home Australia, and to Senator Day’s operation in South Australia, where he is based.
The NSW Fair Trade Minister, Victor Dominello, said: “We have worked very hard behind the scenes to hold Huxley Homes to account. I encourage affected homeowners to contact NSW Fair Trading to find out how to make a Home Building Compensation Fund claim.”
"I personally met with affected consumers on several occasions to discuss their complaints against Huxley Homes. I understand the terrible stress that many of them have faced."
Mr Dominello said: "As late as last Thursday, the company submitted an application to renew its building licence, and had given no indication of the impending liquidation."
Fair Trading had received an application on Friday to renew Huxley’s licence following multiple complaints from customers about long delays to projects and poor workmanship.
Monday’s announcement will come as a relief to many customers because insolvency is a trigger for them to be covered by home warranty insurance.
But tradespeople and sub-contractors will have to get in line with other creditors to be paid.
Family First can nominate a replacement and Senator Day’s his chief of staff, Rikki Lambert, has confirmed he will nominate for the vacancy.
The South Australian parliament will have to hold a joint sitting to approve whoever replaces Senator Day, who has provided a critical conservative vote in support of the federal Coalition Government in the Senate.
The company going into liquidation did not automatically force the resignation. Bankruptcy is a trigger for resignation, but Senator Day has opted to go now.
Matthew Caddy and Barry Kogan of McGrathNicol have been appointed as joint liquidators of Home Australia and its wholly owned subsidiaries: Huxley Homes in NSW, where 56 homes are still under construction; Homestead Homes in South Australia, where 48 homes are being built, Ashford Homes in Victoria (57 homes), Collier Homes in Western Australia (29), and Newstart Homes in Queensland (17).
The liquidators advise that customers with homes under construction should contact their insurer about the insurance certificate which was issued with their home building contract.
In cases where no certificate was issued, customers may have a claim against the relevant Home Australia entity with which they had a contracted.
The liquidators will contact customers in writing in coming days. The invited parties interested in acquiring the businesses or its assets to contact McGrathNicol.
Meetings of creditors for each entity must be held within 18 days of the appointment of liquidators, they said.
The meetings of creditors will be convened for November 4 or earlier.
Mounting financial stresses
Senator Day was the sole director of his companies. In June, SBS revealed the mounting financial stresses on his businesses, the long delays to homes and the many months it was taking to pay trades and suppliers.
SBS also reported that Electoral Commission records showed the senator had provided Family First with political donations and loans worth more than $2 million over the past five years.
Then, the last available financial statement to ASIC from Home Australia, for the year ending June 2012, included a warning from its independent auditor that the company’s liabilities exceeded its assets by $29,931,123.
The auditor also dismissed the directors’ goodwill valuation of $10,065,887 for Huxley Homes.
He said it should instead be written down to zero, given the outlook for the next five years.
These conditions, the auditor said, “indicate the existence of material uncertainty which may cast significant doubt on the consolidated entity’s ability to continue as a going concern and therefore the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.”
'He's taken the honourable course'
Former Prime Minister Tony Abbott paid tribute to Senator Day, saying he always liked and respected him.
“Obviously, it's disappointing that, with Bob necessarily busy in the Senate and unable to give it much attention, the business is now in trouble,” Mr Abbott said on his Facebook page.
“He has taken the honourable course. He hasn’t sought to avoid responsibility or blame anyone else. He’s resigned from the Senate so he can once more focus on the business and discharge its debts.
“Although Bob did not always make life easy for the Abbott government, he was a principled and courageous senator who made a big impact in a relatively short time. I hope his successor will be equally smart and principled.”
But Senator Day was still blaming others for his troubles on Monday.
He claimed a Philippines-based suitor was set to buy a big stake in Home Australia and had signed a fraudulent document claiming the deal was about to go ahead.
The senator said he had considered a number of proposals from local, national and international groups which culminated in the signing of a contract to sell a 75 per cent stake in Home Australia to the Philippines firm.
As evidence of its ability to complete the deal, it had produced documentation purportedly from HSBC Manila to CBA Melbourne.
“The funds to invest in Home Australia should have been transferred last week but each day there was a different excuse,” Senator Day said.
“After several high-level enquiries over recent days it became clear the HSBC-CBA document was fraudulent. I had based all creditor payment plans and commitments on this deal going ahead.
“Given the strict ‘trading while insolvent’ rules that apply in Australia, it would not be possible now for the business to continue operating until another buyer is found.”
And Senator Day did seek to blame others at the end of last month, when he tweeted about the troubles: “Let’s be clear about two things here. Firstly, when I became a senator I left the building business. I only stepped back in to help after others’ poor management decisions affected some customers and suppliers.
“It is important to fix the problems and I am working to ensure everyone who is owed money is paid and every customer’s home is finished – as the company has done for over 30 years.
“Secondly, all businesses have problems.”
Mr Dominello said that under the Home Building Act 1989, consumers who have entered a contract for residential building work valued at over $20,000 should have received a certificate of insurance under the Home Building Compensation Fund.
"This insurance covers consumers for up to six years for incomplete or defective building work when a builder has become insolvent, died or disappeared."
Mr Dominello said: "Fair Trading has at all times held Huxley Homes accountable for its behaviour by carrying out onsite mediations and inspections, issuing rectification orders, and taking disciplinary action on two occasions resulting in penalties to the company and its director."
Customers of Huxley Homes with incomplete building work should contact QBE Insurance on 1300 790 723, to make a claim or notification of loss.
Alternatively, they can also contact the administrators, Barry Kogan and Matthew Caddy, of McGrath Nicol, on 03 9038 3100 or by emailing Home_Aust_Customers@mcgrathnicol.com.