Walton in ‘deals’ claim

SOME of Australia's biggest companies may have been party to agreements finalised in the month before the collapse of a major construction company that protected their interests at the expense of sub-contractors.

Asset Sale Arrangements signed before Walton Queensland and Walton Construction were placed in administration and subsequent liquidation moved completion of its projects to two companies Lewton Asset Services and Peleton (now Tantallon).

Those companies were formed in August last year principally by directors of Mawson, the business advisor to Craig Walton recommended to him in February by NAB after an audit uncovered significant problems with the finances of his two companies.

At the time Sunshine Coast sub-contractors working on the $21m Nambour Coles project were incurring costs to honour contracts for which they would never be paid.

A $518,625 security bond held by Coles to guarantee completion of the Nambour project and for which Craig Walton was personally liable, was returned to him on or about September 23 last year a week to 10 days before his companies went into administration.

However according to a report to creditors by the liquidator it wasn't until October 14 that practical completion was actually achieved at a cost of about $500,000.

The completion work was funded by Coles drawing down from $1m it owed the builder for work completed in September, most of which would have gone to sub-contractors.

September invoices which would have required Walton to provide statutory declarations that sub-contractors had been paid were never submitted.

Walton went into administration on October 3 after appointing Lawler Draper Dillon as administrator.

The insolvency specialist had been recommended to him by his business advisors Mawson.

Now the liquidator, Lawler Draper Dillon has also yet to submit the invoices to the food giant.

Sub-contractors who worked on the project are owed $2.9m.

Under the unique to Queensland Sub-contractors Charges Act subbies should have been able to access security bond - peformance defect liability - to help satisfy their contracts.

Walton Sub-contractor Alliance head Les Williams said this week that the completion costs should have been satisfied by using the security bond returned early to Mr Walton.

He said subbies want tested whether the early return of the bond was part of a pre-arrangement that diminished their rights under the Sub-Contractors Charges Act.

They believe they should have access to the full $1m owed by Coles to Waltons and two remaining bonds totalling about $550,000.

They have deep concerns and are pushing to have investigated the roles played and knowledge held by various parties about the true state of Walton's finances.

They want tested whether sole director Craig Walton's exit strategy from Walton Construction Queensland aimed to defeat their rights under Section 11A of the Sub-Contractors Charges Act.

Mr Williams said arrangements reached in the months before the Walton collapse appear to have allowed the return in record time of bank guarantees and bonds to Craig Walton.

Those arrangements, he said, suggest that several parties held a high degree of knowledge about the state of the construction company's finances.

The board of Wesfarmers, Coles' parent company, has responded to correspondence from the Alliance saying it would review the actions of Coles representatives.

Mr William, a director and co-owner of Coolum based civil contracting company Williams and Kersten Pty Ltd trading as WK Civil says the nature of Walton's demise raises serious questions.

His company is owed nearly $700,000 on the Nambour Coles' project.

The Australian Securities and Investments Commission also holds serious concerns about what occurred in the lead up to the collapse, the involvement of the business advisory group Mawson and the independence of the liquidator.

It went to the Supreme Court on December 16 to seek to have Lawler Draper Dillon removed from its position as liquidator or to have its future in that role referred back to creditors for their consideration.

Mawson was referred to Walton Construction and Walton Queensland sole director Craig Walton in February/March last year by National Australia Bank.

Its directors subsequently became directors of Peleton and Lewton Management Services, companies that took over 31 Walton projects. Mawson director Pat McCurry also heads QHT Investments, a company that purchased for $30,000 the $18.9m debt Walton Construction owed Walton Queensland.

Those relationships were the subject of a Sunshine Coast Daily article - The Inside Story of the Walton Collapse - published in October last year.

In its affidavit to the Federal Court of Australia filed in December last year, ASIC maintains that the liquidator failed fully disclose to creditors its relationship with Mawson which had referred 7.5% of Lawler Draper Dillon's total revenues valued at $400,000 in the preceding two years.

It contends that the referral relationship extends beyond the commonplace.

QHT Investments, a company owned by Mawson director Pat McCurry is a significant Walton creditor, Mawson continues to advise Craig Walton and via Tantallon, Mawson directors are one of the purchasers of Walton Construction and Walton Queensland.

These arrangements should, according to ASIC, all be subject to investigation by the liquidator including whether the transactions were commercial and whether Craig Walton breached statutory and legal duties by causing Walton to enter uncommercial transactions and if so whether Mawson, QHT Investments and Mawson director Pat McCurry are liable for knowing receipt, knowing assistance, and knowing involvement in statutory breaches of directors' duties.

A judge is yet to hand down a decision on ASIC's bid to have the liquidator removed.



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