Unsecured creditors in failed Bunbury builder Devaugh Pty Ltd look likely to receive 27 cents in the dollar after they agreed to accept a deed of company arrangement proposed by its director Mervyn Waugh.
Under the deed, Devaugh will be taken over by Allmont Pty Ltd, a company headed by Andrew Ellison, for about $2.6 million.
Mr Waugh rejected an alternate arrangement proposed by Fero Novacoat even though it could have resulted in an extra 1.5 cents in the dollar return to unsecured creditors had it been attached to Mr Waugh’s DOCA.
Representatives from Fero Novacoat made a spirited bid to change Mr Waugh’s mind during the meeting.
The overall return to creditors may fall if a claim by Works Infrastructure for about $960,000 materialises.
That claim is currently under arbitration.
Under the DOCA, Mr Waugh will pay $388,000 towards the settlement to creditors plus $200,000 to creditors he had given a personal guarantee to.
About $1 million in loans to Devaugh owed to Mr Waugh or parties related to him have been forgiven.
Devaugh administrator Martin Jones told creditors that it was likely Devaugh could have been trading insolvently from June last year.
He said there was the possibility of liquidating the business and pursuing a claim of insolvent trading against Mr Waugh.
If creditors had chosen to pursue that option, Mr Jones estimated the best return would have been about 26 cents in the dollar but cautioned that there were risks of losing the case and getting a much lower return.
The creditors could have gone after Mr Waugh’s share in his Siesta Park home, a property valued at between $1.5 million and $1.8 million.
According to Australian Securities and Investments Commission records, Allmont Pty Ltd was set up on June 2 2003 and has Mr Ellison as both its sole director and company secretary.
An Australian Stock Exchange announcement relating to the deal says Mr Ellison was general manager of aiM Maintenance Limited, which was sold to Henry Walker Eltin in March 2004 for about $9.3 million.
aiM was a 50 per cent owned subsidiary of aiLimited.
Mr Ellison told creditors he planned to grow the Devaugh business and was prepared to put in the necessary capital.
Mr Jones had earlier told creditors that Allmont planned to spend between $4 million and $5 million on Devaugh.
A Fero Novacoat representative raised several questions during the meeting about why their bid had been rejected by Mr Waugh and even increased the offer by $250,000 during the meeting.
Despite that Mr Waugh stayed with the Allmont offer.
Creditors also approved about $290,000 in fees to be paid to Ferrier Hodgson for the work it had done in the 34 days to the second creditors’ meeting.
That works out to about $8,500 a day. The firm could earn a further $85,000 for administering the company until the DOCA takes effect.
Devaugh was placed into voluntary administration on December 31, owing 500 creditors about $12.6 million.
Some of those creditors on the Albany Justice Complex job look like receiving a full return on their debts after the WA Government stepped in.