Wellington doctors Kathryn Percival and David Pirotta stand to lose more than $500,000 if their Marlborough Sounds modular home isn't built. Photo / Mark Mitchell
A home building company that went bust last month owing an estimated $5.2 million was still taking money from new customers just 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, with the customers paying a $56,000 deposit days later.
The contract was signed two weeks after a Podular shareholder sent an email to some customers on October 18, saying their home builds had been “significantly delayed” because of “serious mismanagement” at the company.
Podular later 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 the company’s 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 that stage accepted payments from customers 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 believed the deposit should have been held untouched in a trust account. Instead, it was spent “very quickly”, most likely on staff salaries, he claimed.
Podular’s collapse is one of the largest to hit the modular home sector with 13 customers having now shared their stories with the Herald, saying they’ve lost jobs, been financially ruined, and left in tears from the stress of dealing with Podular.
Most had been drawn to Podular because of its promise to build fast, kitset homes in its factories at a time when the prefab industry has been seen by some as an exciting way to build more Kiwi homes faster.
Instead, multiple customers said they’ve likely now lost hundreds of thousands of dollars.
Liquidators have identified 217 creditors claiming Podular owes them money, including district councils, the Inland Revenue Department and tradies.
At least one customer said they have registered a complaint with the Serious Fraud Office against Podular director Innes.
A different former employee of Podular, who didn’t wish to be named, claimed they had 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 underway,” a spokeswoman said.
The Ministry of Business, Innovation and Employment’s Integrity and Enforcement Team said it was reviewing information about the company and its management.
The Commerce Commission said it had received four enquiries about Podular.
Gerry Rea Partners - the liquidators called in to try to find money to repay customers and businesses owed cash by Podular – said they now plan to investigate the company’s 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, senior 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 that were never started.
It is 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,” he said.
Francis said his team have secured Podular’s assets and seized all building work.
They are now “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 the Companies Act contained a number of offences that relate to company directors.
One of them is insolvent trading.
All directors have an obligation to act in their company’s best interests, Wood said.
“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,” he said.
“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 that 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 did not respond to 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. That’s what it boils down to ... I’m terribly sorry,” he said.
Innes told the outlet part of Podular’s problems was that its business grew too fast and that it had been 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 said they alone have likely 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 then delivered to their Malborough Sounds property in the South Island.
The home is yet to be delivered and Pirotta believes it may never be finished now the company has gone into liquidation.
“The liquidation to us suggests that we’ll be struggling to recover anything,” he said.
Pirotta said he has registered a complaint with the SFO.
Young parents Eli Thomas and Sophie Annen said they also paid about $350,000 for a house in Martinborough, 80km north of Wellington, that has not been delivered.
They’re now facing financial ruin and stuck living in a caravan with their 7-month-old baby.
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 a home not delivered.
Multiple other couples said they’d received homes but claimed they’ve either had problems with the finished build or are still unable to use the houses because Podular hasn’t given them the paperwork needed to get final council approval.
One woman said she’d been left feeling physically sick with stress after she claimed Podular built her Kaipara Coast bach, north of Auckland, too low, ruining its sea view.
Lower Hutt customer Jonathon Batchelor said suffered debilitating stress and was forced to leave his job because of Podular.
He ordered a simple one-bedroom $63,000 modular home for his backyard so his mother could live with him.
But what was supposed to have been a “painless” build became a drawn-out two-year battle, he said.
Most customers the Herald spoke to accuse Innes and the company of misleading them into making early progress payments by saying certain landmarks in the build process had been achieved when this wasn’t true.
One single mom living in a caravan believes she was tricked into paying a $131,000 progress payment that was conditional on the framework being started on her home.
She claims Innes told her by phone to make the payment because the framework had been done.
But when she booked accommodation to visit Podular’s factory and inspect her build, she said the company told her she couldn’t come to look at her home and she wasn’t let onsite.
She and her 10-year-old son are now facing financial ruin after she paid more than $200,000 for a Podular home that hasn’t been delivered.
Rain started falling at the top of the country before dawn.