The liquidator of Stanley Group says the construction company is facing a $13.5 million deficit and it appears it has not held on to some retentions.
The group of six Stanley companies were put into liquidation, alongside its related Tallwood companies late last week.
It appeared to be family business Stanley Group’s expansion into Auckland from its Waikato home which ultimately led to it and its related company Tallwood’s downfall, according to the liquidator’s first report.
“The Auckland expansion was not successful. The business continued to win work, but was unable to maintain control of its costs and quality,” liquidator Damien Grant wrote in his report.
The work won included a large Housing New Zealand contract in Māngere, but the directors told the liquidator they now believe they under-priced that project by as much as $2m.
The liquidator estimates the group owes $9.5m to external creditors, and when taking into account all assets and liabilities is facing an almost $13.4m deficit. Tallwood’s deficit is $2.6m.
Grant also said it appeared there would be a shortfall in the retentions held by the company and they believed the company may have broken the Construction Contracts Act.
Retention is money withheld from contractors by construction firms as a guarantee and under the law must be held in trust and cannot be used for anything else.
It appears that there will be a shortfall in the retentions held by the companies as prescribed by the Construction Contracts Act.
It is uncertain as to the extent of this shortfall.
This article was originally published on RNZ and re-published with permission.