A liquidator is investigating a collapsed family-run building firm after company funds were used to buy a number of residential properties in which family members held interests, while homeowners claim they were left with incomplete and defective houses.
That’s according to a liquidator’s report filed to the Australian Securities and Investments Commission (ASIC) last week into collapsed Victorian residential builder Brurob Nominees Pty Ltd, also known as Langford Jones Homes.
This firm built houses along Melbourne’s bayside and south eastern suburbs as well as the Bass Coast, but went into liquidation in late June owing $23 million. Its collapse impacted 66 homes and more than 400 creditors, liquidators said.
The latest liquidator’s report revealed certain members of the Langford-Jones family acquired interests in residential property in the years leading up to the company’s demise.
Appointed liquidators Richard Stone and Jonathon Colbran of RSM Australia Partners filed a statutory report on Friday which was obtained by news.com.au.
The report stated that money was taken out of the building company to fund three property purchases and a loan, at a total of $2.044 million. Several other properties are also under investigation, according to the liquidator’s report.
Two of the properties were bought by a company that was controlled by Langford Jones family members Bruce and Sam, the father and son duo that acted as directors of Langford Jones Homes at various points in time. Another company run by Bruce borrowed money which was recorded as an “investment” and not a loan in the building firm’s accounts.
In another case, a property was bought using a loan from the company by the company and the partner of Sam Langford-Jones.
Liquidators have demanded the loans be paid back to compensate creditors but Bruce, Sam and Sam’s partner claim they are also owed money from the company after investing millions.
While it is not unusual for family businesses to spend funds on other family-owned enterprises, liquidators said they were investigating whether any breaches of directors’ duties had occurred at this particular company from its current director, Bruce, and its former director, Sam.
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Liquidators wrote: “Our initial assessment is that there are indicators that the Director and Former Director may have breached section 180 of the (Corporation) Act.”
The only current director of the company, Bruce Langford-Jones, told news.com.au the family had poured $14 million into the now-defunct business including all personal assets and that he was “devastated” by the company collapse and he is facing bankruptcy.
Sam was contacted for comment.
Company accounts show that more than $1 million was transferred out of the Langford Jones Homes to an entity known as BRSP.
According to the liquidator’s report, BRSP is controlled by Bruce Langford-Jones and his son Sam.
“The loan repayable by BRSP was first recorded in 2018 and its balance has varied since that time,” the report states.
Some of the money was put towards a property in the eastern Melbourne suburb of Brighton, where the lot was subdivided into two separate properties and sold on.
Several Langford-Jones family members and the company also purchased another property in Brighton using those funds.
All three properties were part-owned by Andrew Leigh Langford-Jones, Nicole Maree Langford-Jones, Sam Langford-Jones and BRSP.
By the time the company went into liquidation, company accounts showed there was an outstanding loan of $257,021.40.
The liquidators have issued a demand for the $257,000 to be paid back.
“We have not had a formal reply to our demand, however we are advised by the directors that BRSP has insufficient resources to repay the loan,” they said.
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Yet another property was snapped up in Brighton in December 2017, with liquidators now demanding $1.7 million be paid back.
The property was purchased jointly for $2.17 million by both Langford Jones Homes and a woman called Sian Elizabeth O’Farrell.
“We understand Ms O’Farrell is Sam Langford-Jones’ partner,” liquidators wrote.
The property was subdivided, with one given to Langford Jones Homes and the other to Ms O‘Farrell.
Ms O’Farrell’s property was sold before the liquidators were appointed for $2.67 million to an unrelated party. The settlement was on September 2 this year.
“We also issued Ms O’Farrell with a demand for payment of the investment of $1,701,854.39,” liquidators wrote.
The report indicates that Langford Jones Homes does not think that Ms O’Farrell owes any money to the company, and in the event that she does, it should be offset against the amounts advanced by the Langford-Jones family to the company. Ms O’Farrell is expected to claim that she is owed $800,000 from Langford Jones Homes.
Another loan has also come under scrutiny from a related company.
A $87,564.82 loan was handed out to an entity called Flip. Liquidators pointed out: “Flip is a company controlled by Bruce Langford-Jones.”
They added: “The loan repayable by Flip was recorded in the management accounts in July 2021 as an investment in Flip rather than a loan.”
Again, a demand of repayment has been issued.
News.com.au contacted Sam Langford-Jones and attempted to contact his partner Sian Elizabeth O’Farrell for comment.
Several other properties based in Inverloch, a seaside town along the Bass Coast, are also under investigation.
News.com.au has spoken to one contractor who was working on a house in Inverloch.
The contractor, Brody*, runs a small business with three other employees and claims he is owed $150,000 from Langford Jones Homes after outlaying his own money to buy materials.
“I really don’t have any money, I’m having to borrow money from my father,” the 49-year-old told news.com.au.
It was the sum total of his life savings and he kept working on Langford Jones Homes projects in the hopes that he would eventually be paid.
But finally enough was enough.
“You’re building it (the house) on my money,” he said. “That was the last straw.”
He stopped working for them shortly afterwards but says he is yet to recover what he is owed.
Liquidators are looking into several Inverloch properties after a number of requests from creditors.
“Creditors have also contacted our office and raised queries regarding the company’s construction and dealings with a number of properties at Inverloch in Victoria,” liquidators wrote.
“Our investigations regarding these properties and the Company’s dealings in relation to them are ongoing and all material developments will be reported to creditors.”
Liquidators said it appeared Langford Jones Homes was insolvent since “at least” June last year.
The company failed for a number of reasons including the impact the Covid-19 pandemic had on supply chains, a cyber attack that wiped $2 million off the balance sheet, a legal proceeding with a disgruntled customer that cost $825,000 and insufficient working capital, according to the report.
Liquidators are still investigating whether any breaches of director’s duties have transpired.
“Dealings with related parties are not uncommon in the context of family owned enterprises,” they wrote.
“However, when an enterprise fails, it is necessary to consider whether these dealings were appropriate in the circumstances and importantly whether or not the creditors and the company suffered any damage as a consequence of the dealings between the company and the related parties.”
Investigations are continuing regarding if there were voidable transactions — which is when money was transferred to a related party while the company was insolvent – or if it was otherwise detrimental to the company to take out the money for their own purposes.
News.com.au previously spoke to several affected homeowners and employees, including Donna Taylor, a postwoman in Phillip Island south of Melbourne, who says she has been potentially left $180,000 out of pocket from the whole ordeal.
Ms Taylor, 53, signed with Langford Jones in 2020 and only has a frame after a year and a half on her $365,000 build.
She forked out $155,000 in progress payments before Langford Jones Homes went bust.
Now the aspiring homeowner is worried her frame needs to be entirely torn down as it has been uncovered for four months during heavy rain and some of the wood has turned black.
Unfortunately, Victoria’s Domestic Building Insurance only pays back up to 20 per cent of the building contract price.
“The builder’s insurance will only cover me for $70,000,” Ms Taylor said.
“I’ve already got a builder’s quote (and I’m) going to be $180,000 out of pocket.
“I had $210,000 left to complete the house. To complete it now is costing something like $460,000.”
David Drummond and his wife, in their late 60s, said they are “devastated” and that the company’s winding up “will be a huge financial loss for us”.
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“We will sell and move on and not proceed with the build with anyone else. This has also destroyed our plans for a retirement by the sea,” he told news.com.au.
*Name withheld for privacy reasons
alex.turner-cohen@news.com.au
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