Commercial Litigation Associate, Georgia Taylor explains what legal steps you can take if you have been affected by the Ralan Group collapse.
On 31 July 2019, one of the largest development companies in Australia, Ralan Group Pty Ltd’ (Ralan Group) and its more than 50 subsidiary companies were advertised as being in voluntary administration.
It was known at the outset of the administration that the businesses run by Ralan Group would be conducted “business as usual”, giving a glimmer of hope for the some 1800+ off the plan contract holders. But with that said, how is it with the newly built ‘Ruby Apartments’ and more than 50% of off the plan apartments already sold, did Ralan Group get into so much strife?
Ralan Groups inevitable demise is now suspected to be from promising off the plan purchasers’ ‘interest’ on their deposits at an estimated rate of 15% which the group was likely unable to meet along with skyrocketing overheads.
In a letter published by the Ralan Group liquidators, Philip Campbell Wilson, Graham Killer and Said Jahani of Grant Thorton Australia Limited dated 31 July 2019, most off the plan contracts were made with subsidiary companies, Ralan Capital Investments Pty Ltd (Administrators Appointed) or Ralan Arncliffe Pty Limited. This letter has identified that some purchasers chose to release their deposits to these companies as an ‘unsecured loan’ whilst others, chose to keep their funds in a ‘trust account’ administered by the group.
This puts the prospective purchasers into two groups, one being those whose deposits are now unsecured loans and others whose funds are held ‘in trust’. Whilst this is well and good, a voluntary administration is by no means a speedy process.
Ralan Group voluntary administration
Typical steps taken in a voluntary administration we explain below.
As a director of a company, you have a duty under the Corporations Act 2001 (Cth) to ensure that at all times, your company is trading solvently. In simpler terms, the company must be able to pay its debts.
If the company is in financial strife a process you can undertake as a director(s) is to (by resolution at a meeting of directors in writing) decide to appoint a voluntary administrator. A voluntary administrator is a person suitably qualified and accredited by ASIC, to administer affairs of a company that is possibly insolvent.
From the date of administration, a voluntary administrator must:
- Hold a first meeting of the creditors within 8 days of being appointed (relevant exceptions apply);
- Investigate the company’s affairs and report to creditors;
- Hold a second meeting of the creditors within 25 business days of being appointed (relevant exceptions apply) of which the creditors can decide, upon receiving advice from the administrators to:
a. Return the company to control of directors: This is a resolution made and recommended by an administrator when a company can be returned to the directors’ solvent;
b. Accept a deed of company arrangement (DOCA): This is an agreement made to creditors to accept ‘cents on the dollar’ for the monies owed to them, to allow the company to be returned to the directors’ solvent and operational;
c. Put the company into liquidation: If the company cannot be returned to solvency and a deed of company arrangement is not passed or feasible, the company will be placed into liquidation with a view to be wound-up.
Unfortunately, the process isn’t as easy as it seems. As an administrator you must within the time of the two meetings for creditors, conduct a thorough investigation into the company’s affairs, manage, if possible, the continuation of the business that company conducts and form a report to creditors with a recommendation of how the company should proceed (3a-c above). This leaves administrators with a taxing job along with the additional obligations to manage the concerns and questions of anxious creditors.
Ruby and Sapphire apartments – what should buyers do now?
Locate and review your contract
It is important as a creditor to conduct your own enquiries and seek legal advice about your rights so you may be informed as to your likely financial position in each possible resolution likely to be passed at the second creditors meeting.
As a purchaser of an apartment under the Ralan Group, you must first review your contract. Your ‘off the plan’ contract will (or should) have clauses relevant to the developer’s administration or insolvency event. This clause or section of your contract will hopefully identify for you what your rights are in these circumstances. As identified, this will be different for the two groups of purchasers being those with their funds in ‘trust’ and those with their funds released to the respective company.
Contact the administrator
As a purchaser with your funds in trust, the terms of your contract will be particularly important because administrators will be looking to the contracts to know how to appropriately deal with the funds. In the letter from Grant Thorton, the administrators will deal with each deposit held in trust on a case by case basis. In this instance, you should contact the administrators immediately and ask what they require to prove your claim. The documents will likely include your contract and a proof of payment to the respective ‘trust’ account.
Unfortunately, if you are a purchaser who has released their funds, you will likely be deemed an ‘unsecured creditor’. Whilst each creditor will be dealt with case by case and pursuant to their respective contract, it has already been revealed that most monies released to the group have been spent. As an unsecured creditor, you will be the last to receive a ‘dividend’ of any monies leftover in a worst-case scenario.
Seek legal advice for the best outcome
It is early days of the Ralan Group administration and recent reports show that prospects for creditors are dim, however, it’s not over yet. Should you wish to seek legal advice about your prospects and position under the Ralan Group administration, please contact Amanda Heather, Attwood Marshall Lawyers Commercial Litigation Department Manager & Senior Paralegal on 1800 621 071 or email firstname.lastname@example.org.