$2m pricing mistake led to group collapse

Directors of the failed Stanley Group of construction companies have told the liquidator they now believe they under-priced a flagship Housing New Zealand project by as much as $2 million.

The liquidator’s first report on Stanley Group shows it owed $10 million to staff and external creditors when it went into liquidation last week.

The top 10 creditors, mostly subcontractors, are owed $3,143,610.

Some of those subbies have spoken with Stuff about their pain and anxiety over the collapse, leading to questions about whether government agencies are doing all they can to make sure subbies get paid for work on ‘‘safe’’ government projects.

Stanley Group and related company Tallwood were placed into liquidation after a vote by shareholders on September 5, bringing work to a halt on several projects, including a flagship Housing NZ development in the Auckland suburb of Mangere.

The business had about 100 staff, who were owed a combined $524,105.

The business was headquartered in Takapuna, with a factory and office in Matamata.

‘‘The Stanley group of companies were registered around 2010, however the business has a long history, going back three generations to the 1920s,’’ liquidator Damien Grant of Waterstone Insolvency said in the report.

‘‘Descendants of the original Stanley family remained active in the business and held the majority of the shares.

‘‘The business grew organically over the years and was responsible for the construction of many high profile projects, including a Continental Cars showroom in Auckland, and a cafe´ at Mt Ruapehu.’’

In 2015, it hit trouble, and survived only when creditors agreed to forgive some of the group’s debts.

However, Grant said: ‘‘The business was successful in winning a large Housing NZ project in Mangere.

‘‘The directors advised that they now believe that they under-priced this project by as much as $2 million. This was further compounded by cost over-runs on the project that eroded the group’s working capital.’’

Work was now under way to salvage the projects, and Housing NZ said it was focused on subbies being paid for the work they had done.

‘‘At the time of writing, Housing NZ and the liquidator have agreed on a process to allow for the orderly handover of the three Housing NZ sites and for the subcontractors engaged on these sites to remain engaged on this project on terms that the liquidator believes will be favourable to those subcontractors,’’ Grant said.

Subbies have been building a legal fighting fund to probe the actions of Stanley Group directors.

Grant said: ‘‘It is standard on all insolvencies of this size for the liquidator to investigate the financial affairs of the companies to determine if there have been any breaches of the financial duties of the directors and to seek the appropriate redress.

‘‘This process shall commence once the immediate issues have been addressed.’’

The liquidator’s first report on Stanley Group shows it owed $10 million to staff and external creditors when it went into liquidation last week.