The co-founders of a successful property developer Nicheliving are mired in a legal dispute after plans to buy out key executive Danne Forte were halted when other directors questioned his financial projections.
The co-founders of successful Perth property developer Nicheliving are mired in a legal dispute after plans to buy out key executive Danne Forte were halted when other directors questioned his financial projections.
A Supreme Court ruling handed down yesterday also revealed home builder Choice Living Homes has commenced proceedings against Projex Management & Construction, which was one of four companies that made up the group.
The legal dispute follows a sharp fall in the number of housing starts by the company, from 201 in 2014-15 to 47 in 2015-16.
An affidavit by Mr Bitdorf, which was summarised in this week’s court ruling, revealed multiple contentious matters.
“These include overstatement of projected receipts, and significant undisclosed liabilities,” the court ruling stated.
“In particular, among those liabilities, are liabilities or potential liabilities to Choiceliving (WA) Pty Ltd, arising out of agreements signed by Mr Forte on behalf of Projex.
“Choiceliving (which trades as Choice Living Homes) has now commenced proceedings against Projex, claiming under agreements made in 2015, and for money it lent or advanced to Projex.
“Mr Bitdorf also refers to evidence of funds transferred into Projex from other bank accounts, funds to which Projex is not entitled; and to the suspension of home indemnity insurance in March 2016, which affected the ability of Projex to commence new stages in existing developments and, as a result, its cash flow.
“Mr Bitdorf says that, as a result of those matters, the whole of the projected profits in the last of the projections given to him before entering (Mr Forte’s exit) deed would have been 'wiped out'.”
The falling out between the three directors goes back to late last year, when Mr Forte advised that he wished to retire from the group.
“Following a dispute about the affairs of the group, the parties entered into a written deed of settlement and release,” the court ruling stated.
Mr Bitdorf had stated that an investor had to be found, to fund the payout, boost working capital, and reduce debt.
The company set up a ‘data room’ at the offices of William Buck Chartered Accountants & Advisors, and in April 2016 signed a binding term sheet with investor Net Pacific.
The first instalment of $375,000 was paid to Mr Forte on May 11, two days after he left the business, but Messrs Bitdorf and Elhaj have refused to pay the balance.
They told the court they had relied on financial information prepared by Mr Forte in their negotiations with Net Pacific, but discovered multiple issues (disclosed in the affidavit) after he left the business.
Mr Forte commenced legal action to enforce the planned payout.
He argued that Mr Bitdorf was also a director of Projex, and that Mr Bitdorf and Mr Enhaj were also directors and/or shareholders of Nicheliving for 13 years, all of them operated from the same office with full day-to-day knowledge of the affairs of the group.
Mr Forte asserted that the group forecasts drew on information from several people and were accurate to the best of his belief.
In yesterday’s ruling, Justice Jeremy Allanson set aside an earlier judgement in favour of Mr Forte being paid out.
Justice Allanson said he was satisfied, based on the material in the affidavit, that there was an issue to be tried.