The former director of a now liquidated development company has accused the bank-appointed receivers of making his liabilities worse, by “refurbishing” a brand new, unoccupied hotel prior to sale.
Michael Doherty told the banking royal commission about how his lender, Bankwest, effectively pushed his business, Doherty Group, and himself into bankruptcy.
This was done through a number of errors and maladministration on the bank’s part, including by appointing valuers not qualified to conduct the type of valuation required, incorrectly reading those valuations and the components of his mixed-use development, forcing his business to pay out over $500,000 in additional professional fees.
He also implied Commonwealth Bank-owned Bankwest foreclosed on his business prematurely, given it held a $3 million bond with another business and that, despite the hotel portion of his development being completed and ready to commence trading (which would bring in much-needed revenue), the bank refused to sign it off.
“We were totally bankrupted, lost houses, the whole scenario,” he said.
But it was the bank-appointed receivers, KordaMentha, who were reserved Mr Doherty’s most angst-ridden testimony.
He claimed that KordaMentha wasted a significant amount of money “refurbishing” the hotel component prior to it being sold, despite it being brand new and designed to a high spec.
The only thing left to do was to physically hang the television sets on the wall, Mr Doherty said.
However, KordaMentha ordered the removal of the fit-out worth around $450,000, including several chandeliers in the lobby area worth $180,000. These costs contributed to Mr Doherty’s overall liability, and the bank’s ultimate loss on the project, which CBA itself estimated at around $38 million.
Mr Doherty claimed they were also the ones who refused to act on the $3 million bond.
KordaMentha was contacted for comment, but no response had been received prior to publishing.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
Ask the Experts: Does automation stack up financially?
By Christopher Overton
Opinion: How bad do things have to get?!
By Adam Zuchetti
Business lessons from the All Blacks
By Steve Stanley