Liquidators flag concern over Podular management conduct
A home-building company that went bust last month owing an estimated $5.2 million was still taking new clients’ money weeks before going into liquidation.
Podular Housing Systems Ltd’s director Charles Innes signed a contract with an Auckland couple for a new home on October 31.
The pair paid a $56,000 deposit days later.
The contract was signed two weeks after a Podular shareholder emailed some customers on October 18, saying their home builds had been “significantly delayed” because of “serious mismanagement” at the company.
Podular went into liquidation on November 25, with the liquidator’s first report estimating the company had taken $2m in deposit payments from clients for house builds that were never started.
Innes did not provide comment for this story but has previously said “sorry” to customers.
However, a Podular employee with knowledge of its finances said he believed it was wrong for Innes to accept the most recent deposit payment. The insider believed the company was in financial trouble at the time, he said.
Podular had by then accepted payments on more than 50 home builds it had either not yet completed or not started and was struggling to meet costs, the insider claimed.
“I didn’t think it would’ve made sense at all to take new customers when we weren’t satisfying the existing ones,” he told the Herald.
He felt the deposit should have been held in a trust account. Instead, it was spent “very quickly”, likely on staff salaries, he claimed.
Podular’s collapse is one of the largest to hit the modular-home sector, with 13 customers having sharing their stories with the Herald. They say they’ve lost jobs, been financially ruined, and left in tears from the stress of dealing with Podular.
Most had been impressed by its promise to build kitset builds in its factories at a time the prefab industry was seen by some as an exciting way to build more homes faster. Instead, multiple customers say they’ve likely lost hundreds of thousands of dollars.
Liquidators have identified 217 creditors who claim Podular owes them money, including district councils, the Inland Revenue Department and contractors.
At least one customer said they have registered a complaint with the Serious Fraud Office against Innes.
Another former employee of Podular, who didn’t wish to be named, claimed to have spoken with the SFO. However, the SFO is yet to confirm this.
“The SFO does not generally confirm or deny information about complaints or investigations, including whether it has received a complaint about a person or organisation or whether an investigation is under way,” a spokeswoman said.
Gerry Rea Partners — the liquidators called in to try find money to repay customers and businesses owed cash by Podular — plan to investigate the management.
“The liquidators have concerns regarding the conduct of the management of the company and will conduct an investigation into the failure of the company,” Ben Francis, insolvency manager with Gerry Rea Partners, said.
His first liquidator’s report estimated the company owed $5.2m to its creditors, including taking $2m in deposits for homes never started.
It was not certain where the $2m worth of deposit payments had gone, Francis said.
“The deposits were held in the company’s general account and do not appear to have been spent for the purposes in which they were paid.”
His team had secured Podular’s assets and seized all building work.
They were “working to identify the situation on each customer’s project and contract”.
Speaking about the law in general terms, Jonathan Wood, senior property lawyer with Court One, said all directors had an obligation to act in their company’s best interests.
“In normal times, the best interests of the company on the whole, is a reflection of what’s in the best interests of the shareholders.
“That flips around if you are aware as a director that your company is either balance sheet insolvent or cash flow insolvent.
“Then the obligation is still to the company as a whole but that company as a whole is now more properly thought of as the creditors of the company. ”
He said directors who did not act in the interests of those the company owed debts to in these circumstances could be in breach of the law and possibly face fines and prison time.
Podular director Innes has not answered questions sent by the Herald. But he earlier told media outlet Stuff he was “terribly sorry” to Podular’s customers.
“I guess I’ve got them in this situation and I’m responsible for it and I need to do what I can, to help them through it . . . I’m terribly sorry.”
Innes told the outlet part of Podular’s problems was that its business grew too fast and it was hit by difficulties caused by Covid lockdowns and building-supply price increases.
He also claimed he did not have the right financial or management support and had tried to get help.
Wellington doctors Kathryn Percival and David Pirotta fear they have lost more than half a million dollars.
They paid more than $500,000 in progress payments for a home to be built offsite at Podular’s factory and delivered to their Marlborough Sounds property.
The home is yet to be delivered and Pirotta believes it may never be finished. He said he had registered a complaint with the SFO.
Young parents Eli and Sophie Thomas said they paid $380,000 for a house in Martinborough that had not been delivered. They’re now facing financial ruin and living in a caravan with their 6-month-old.
Another customer told the Herald he paid $370,000 for a home not yet delivered, while a Raglan couple said they’d paid $150,000 for an undelivered home.
Multiple couples allege problems with a finished build or cannot use their house as Podular is holding up final council approval.