The building industry watchdog will pursue the cancellation of Modco Residential’s builders’ registration following liquidators being appointed to wind up the failed building business.
The building industry watchdog will pursue the cancellation of Modco Residential’s builders’ registration following liquidators being appointed to wind up the failed building business.
Building and Energy WA told Business News it would be contacting the newly appointed liquidators Richard Albarran and Cameron Shaw from Hall Chadwick regarding the cancellation of Modco’s builders’ registration, as standard practice.
It comes after the Federal Court ruled that Modco be wound up on the grounds of insolvency following legal action initiated by one of up to 50 creditors claiming debts totalling around $5 million allegedly owed by the embattled builder, founded by Perth's lavish couple Cynthia Lu and Yusuf Khan in 2020.
The industry regulator said Modco’s insolvency enabled homeowners to begin the process of engaging another registered builder to complete the work if they hadn’t already.
Modco’s collapse has reportedly left 18 building projects in a lurch.
“Building and Energy is advising homeowners who have contracts with insolvent builder Modco Residential to contact home indemnity insurance provider QBE,” a spokesperson said.
“As is the standard practice, Building and Energy will be contacting the liquidators regarding cancellation of their registration.”
It follows Building and Energy’s stark warning in May over concerns for Modco’s financial status, unpaid subcontractors, inactivity on projects and premature demands for progress payments.
In the Federal Court hearing on Tuesday, Registrar Phillip Allaway ruled that Modco be wound up in insolvency by liquidators Cameron Shaw and Richard Albarran from Hall Chadwick.
The decision came after the embattled builder’s lawyer Nathan Draper attempted to oppose court action lodged by Rostron Carlyle Rojas Lawyers (RCR Lawyers) to take over as plaintiff of the legal action, which was initially sparked by recruitment and labour hire services company Torquejobs.
Kewdale-based Torquejobs initiated the winding-up application against Modco over three unpaid invoices totaling more than $28,000 in June, as revealed by Business News.
After failing to oppose the application for substitution made by RCR Lawyers, Mr Draper pivoted to seek an adjournment in order to discuss the future of Modco at an upcoming creditors meeting.
It was previously expected that a deed of company arrangement would be tabled at the meeting scheduled for next week, initially proposed by Modco co-founder Cynthia Lu.
But ultimately, Mr Allaway said there was no evidence to support that it was in the interest of creditors to delay the winding-up application, and ruled that Modco be wound up in insolvency.
It was also revealed on Tuesday that Modco was “clearly insolvent” by July 2022 or potentially a year prior, according to an administrators report prepared by GTS Advisory’s Mathieu Tribut.
The newly appointed liquidators will be tasked with further investigating Modco’s finances, Business News understands.
The pair will also be tasked with assessing any possible insolvent trading claims.
If Modco is found to have been insolvent from July 2021, a claim for insolvent trading may exist against the company’s director for $2.8 million, which can be defended.
Modco co-founder Yusuf Khan could be deemed defector or shadow director and held liable to any insolvent trading claim, despite him denying allegations he was acting as a director for the builder.
In the administrators report prepared prior to the Federal Court ruling, Mr Tribut said it was his opinion that any actions for insolvent trading may not result in benefits for creditors given the director’s lack of assets and the likelihood of bankruptcy being filed.
Modco ceased trading in May and had just $300,000 in assets and $534 across four bank accounts when a voluntary administrator was appointed in July, according to the report.
Initial enquiries indicate there are up to 50 creditors with claims totaling around $5 million.
That includes a $2.1 million secured debt claim made by Ms Lu, through her entity Ms Lu Holdings, which holds a 75 per cent stake in Modco.
Another claim of $1.75 million was made by Riveria Home WA, who worked with Modco under a series of agreements when the troubled builder wasn’t able to secure home indemnity insurances.
The liquidators were contacted for comment.
