Home » Watersun Homes: Silence, Secrecy and Shattered Lives

In late February, news broke that Watersun Homes had slipped into voluntary administration, signalling it may sail off into the sunset. In the ensuing weeks, unsettling elements surfaced: the deafening silence of the directors, the extreme secrecy surrounding the downfall and most disturbingly, the disregard for the many thousands of lives shattered. When the first limited information filtered out, it sent shock waves across Victoria. Watersun had building contracts with home owners in Melbourne and all across the state. Initially, it was suggested that Watersun’s administration had left 300 home owners in the lurch, $10 million owed to creditors and 100 employees out of work. But as is standard with such collapses, the original statistics were understated and ‘alternative facts’ camouflaged the magnitude of this construction fiasco. After the announcement, the directors went into hiding. They locked the Southbank office doors, scratched the Watersun sign from the building’s façade, immediately shut down the website and sank into silence. As we later learned, many owners and creditors had been subjected to this subterfuge for months, their attempts to communicate thwarted, their calls unanswered and messages ignored. The directors refused to attend the first creditors’ meeting (mandated under Corporations Act 2001) in March. Instead, claiming fears for their safety, they prepared a short statement to be read out. Blaming cost blowouts and expansion into regional areas, the suggestion was that they had exhausted all avenues prior to appointing administrators. Their postscript: they “regretted the impact on employers, home owners and creditors.” Little consolation for the casualties! There was no any indication furnished as to the company’s future direction. This, combined with the directors remaining hushed and holed up, predictably fuelled further questioning: “What is buried beneath the cover of silence and secrecy?” Meeting maintains mystery The first creditors’ meeting provided no word on the disposal of the company’s assets in order to meet outstanding debts. Also the decision on whether Watersun Homes would continue trading or go into liquidation was deferred until the next creditors’ meeting in April. Watersun’s indecision indeed was a decision – to be woolly and wavering – with all caught up in this catastrophe left in the dark. At the first meeting, only two resolutions were on the agenda. The first was whether to confirm Rodgers Reidy as the administrators. Evidently, this went unchallenged. As to the second, whether a committee was appointed to assist with the administration, this is unknown because minutes of the meeting were not released. The only piece of information announced was that no figure had been calculated as to the amount Watersun owes to home owners. Consequently, how many millions of dollars of damage has been inflicted upon these unsuspecting consumers is unspecified. Thus, this meeting brought no clarity. It did nothing to allay the anxieties of the blameless home owners and sub-contractors owed millions of dollars. Constrained under the shadowy skies of insecurity and living in limbo, for those crushed much mystery remains. The question: “Why the prolonging ploy?” Skyrocketing disaster Although the first creditors’ meeting was scant on detail, new statistics divulged the soaring scale of the disaster. It was revealed that Watersun Homes had 420 building projects on the books, debts of $20 million to around 900 creditors (sub-contractors owed $16 million), 90 employees owed $1 million, plus a debt to the Australian Taxation Office of $484,000. Of interest would be how many of the 420 building contracts were signed when Watersun was tiptoeing into administration? It should be easy to determine, but will it be? Most telling, the debt was double the original amount declared, not counting what is owed to home owners! In total 1,400-plus Victorian home owners, sub-contractors and Watersun staff were directly affected. But add in the partners and their families – based on an average family of five, it’s easy to come up with an estimate here of 7,000-plus at the outset. Also, if we consider sub-contractors and other creditors, along with their employees and their families, the number hammered escalates dramatically. Think 900 creditor businesses times five employees which equals 4,500. Just imagine the sum of all the victims and their families. The upshot is unmitigated devastation. Then we have the dynamic force of the domino principle across all the businesses, employees and families dependent on the income and spending of those burned by the Watersun crash – 11,500 persons times spending on an average of $80,000 a year. Across many thousands of businesses (and their employees), the flow on is incalculable. The pyramidal structure combined with the interdependence of businesses means incidentally losses spill over to thousands otherwise not touched. Imagine the compounding effect across the interlinked communities of so many businesses and families, their livelihoods and lives intertwined. Collectively, they are looking down the barrel of colossal financial and emotional hardship – threatened by massive monetary losses through no fault of their own. The aggregate is impossible to gauge, but factoring the total fallout multiplies to mega millions of dollars. On any scale, it’s a skyrocketing disaster. Was the writing on the wall? ASIC did not receive notice to deregister Watersun Homes until February 2017. However, for the ‘regulator’ the classic signals were flagged. Let’s examine the facts: In announcing its administration, Watersun cited “insufficient funds” – a clear sign of a company in distress. It is now known that the company owes $20 million. That much debt is a definite danger sign. When the company’s directors, Gary Caulfield and Tanya Lewis (of parent company of Watersun Homes, WSH Group) signed off on the company’s 2014 accounts in 2016, they advised ASIC of a net loss of $674,326 on revenues of almost $66.9 million. Stressing “significant uncertainty” as to whether it could continue as a going concern, it admitted that during the financial year and after “the company was in breach of the financial covenants governing financial liabilities.” Whilst demonstrating compliance with directors’ duties, this an alert to Watersun’s viability. The company changed its name from Watersun Homes to an unknown name in November 2016 – a cautionary notification of possible impending insolvency. There was a change of directors, with multimillionaire developer Benni Aroni, a long-term director and co-founder of WSH Group Pty Ltd (company behind Watersun Homes) resigning his responsibilities over two years. As events unfolded, markers designating Watersun’s demise were undoubtedly on the wall! Sirens sounding Although an incomplete narrative, from our present perspective it’s possible to pick up on some of the sounds of silence. Alarm bells were ringing, though muted to barely measurable. These sounds were undetectable to most about to be whacked by the turbulent waves in the wake of Watersun’s downfall, not ‘discoverable’ by those directly damaged, not discernible to others. If we review Robert Gottliebsen’s insider revelations, they shed light on how long ago the sun began to set on Watersun. As quoted in The Australian, he believes, with the benefit of hindsight that from 2014 it “was in bad shape and had no hope”, the warning signs to subcontractors “up in neon lights!” The sinister signs detected by Gottliebsen were real, but only ‘for all to see’ retrospectively. Home owner hardships As noted in ABC online, Sarah Sims from Geelong heard rumours and sensed something was wrong. Having waited 16 months after signing her contract with Watersun, and no soil turned to begin her family’s ‘dream home’, she became so distraught she tried to cancel the deal. When threatened with being taken to court, she was so intimidated she abandoned any idea of legal action. Meanwhile, Sarah’s block of land remains visibly vacant. Alison from Bendigo found out Watersun had entered into administration through a Facebook group. She and her partner signed the contract for their new home in April 2015 with the assurance they’d be moving in by October 2016. But their house remains unfinished. Subcontractor suffering Geelong Radio heard of several sub-contractors owed hundreds of thousands of dollars by Watersun, all holding little hope of ever being paid. Worse, some fear the collapse could leave their own businesses in tatters. “I know of one subbie who employs five blokes but his supplier won’t hand over any more materials because he owes them money,” a contractor was quoted as saying. “Watersun hasn’t paid him so he can’t pay his bills, and with his supplies cut off he can’t take on more work to cover his losses.” Another local tradie said that for years he had suspected all was not well with the company. He said Watersun staff deflected questions about its financial state and sometimes gave misleading answers. They handed over a portion of what was owed, promised the rest in a few weeks but “of course, that money would never appear!” According to The Bendigo Advertiser, Nathan Tresize of Superior Concrete and Construction knew of uncompleted Watersun houses throughout Bendigo, feeling “for the families that had invested their hopes, dreams and savings in those properties.” Working for Watersun for about two years and owed $17,000 since September 2016, Tresize was unwavering, saying “They have always been slow payers.” Justifiably upset, he said this would “hurt us, as a small family business, considerably.” After administration There were other ominous indicators foreshadowing Watersun’s failure. Only after the event did the cloudy ambiguity clear to reveal the depressing reality. Sadly, this came too late for those cast as casualties who, deprived of information, were denied any opportunity to mitigate their losses. On March 2, Geelong media exposed disquieting reports that Watersun had advertised for staff one day before it went into liquidation. More cruelly, there were reports of Watersun accepting deposits on new homes less than 24 hours before announcing its administration. Another issue relates to the administrators. They did not, as is normally the case, release the Creditors’ List five days prior to the first creditors’ meeting, which raises another dubious matter. Watersun appointed the administrators, and given that their client is Watersun, they may not be objective in taking account of the interests of home owners and creditors. This especially disconcerting given the enormity of outstanding debt. Lastly, we have learned that the WSH Group have other entities trading profitably in commercial construction. One has to ask: “Why did these companies not support the domestic building company through difficult times?” Watersun sealed watertight This story shines a light on just how Watersun was sealed watertight. The directors were ‘waterproofed’ – Watersun’s super weapon synchronizing silence and secrecy. Not a scrap of official information seeped out to empower the besieged to dodge the damage of the hidden tidal wave about to destroy their lives. Watersun has managed to circumvent critical scrutiny, primarily protected by government’s appalling legislation and almost nil oversight. For the victims, their fate was to be dumped up the proverbial creek, left in a leaky boat – and without a paddle. Their lives now shattered, they are forced to live precariously in the shadows. As always, business protected and the victims the ‘protected not.’ Anne Paten Anne Paten Building Consumer Advocate Anne Paten is a well-known Building Consumer Advocate who has worked for ten years ca… Full bio + Like + Comment Judy-Ann Steed 2 weeks, 4 days ago Well done Anne for again using your investigative skills in exposing yet another scandal this time into Watersun Homes. As a Broadcaster for 3mdr I can assure your readers, of your incisive long term interest for consumers having interviewed you on other topics relating to building consumer nightmares over the past five years. Questions I would ask: – which State and Federal Ministers, Administrative Department heads are responsible for not seeing the warning signs. – what legislation might cover this situation or if not to introduce covering legislation. Judy-Ann Steed 3mdr 97.1fm 0 Beverley-jane 2 weeks, 4 days ago Once again, so many who saw the warning signs and were suspicious did nothing. The many so called protection systems and bodies our tax dollars pay for, failed us again! The multiple damning Ombudsman’s reports nothing more than futile and expensive exercises swept under the carpet. Most of these families looking for the basic security of their own home, worked hard, saved what was left after paying taxes and now will struggle to recover financial and emotional security for their families. Whilst I understand that there are businesses and trades who will feel the impact as well, unlike the trusting homeowners, these suppliers and trades heard alarm bells that the homeowners could not. Alerted to the imminent danger, they had a moral duty of care to alert authorities, not only to save their own skins. We had the same issues with our revolting building experience where after the fact, trades and suppliers said they had not been paid and realised ‘the project was too big’ for our builder, but they said and did nothing allowing both the financial and material damage to escalate. You sleep with dogs, you get fleas! And of course the directors and partners will move on virtually untouched, able to re-emerge under glowing new banners and ‘window dressing directors’ to do more damage! Sick and immoral cycle that nobody seems to be accountable for! 1 Rodger Partridge 2 weeks, 1 day ago Seems to me BJ you are a previous victim of an unscrupulous builder like I am. It is sad this seems to re-occur time and time again. Like you I am amazed that the “Protection Systems” that Tax Dollars are paying for, still are absolutely useless. Les Williams 2 weeks, 4 days ago Well done Anne – this ” collapse” has all the signs of a pre-packaged liquidation. There should be an investigation for a possible illegal phoenix here. The construction industry is plagued by them. It should be made known how many home builders lost deposits and how much. For inactivity on that front for so long needs an investigation for fraud. That means the police. ASIC and the liquidator operate under the federal law and then there is state law. What should be occurring is the creditors should appoint a spokesperson and demand the Victorian government refer the matter to police for investigation for fraud — the South Australian Government should do the same with former Senator Bob Days company. These liquidations are rarely the result of market forces – they are fraud – but our representatives are asleep at the wheel. It is not a good sign that creditors did not challenge the director appointed liquidator – creditors should be aware that recent changes to the Act allows the committee to replace the liquidator if he is not conducting the investigations they want – they should inform him of those and make sure he complies – or get rid of him. Needs a police investigation – appalling – Write that book Anne. 0 Jenna Corbett 2 weeks, 4 days ago Criminally financially & personally devastating for all the families invested in Watersun, & all the sub contractors & creditors owed. Watersun’s commercial company arms should pay! The company owners jailed! And urgent change to oversight & regulation legislation to Protect consumers be Enacted! And Building Warranty Insurance not be further devastatingly argued and years long to pay out, if they will at all.? Disgusting! And where All the So-called Oversight & Regulation Well paid out by all Our Taxes to nip this type of misbehavior in the bud & Prevent such massive broadscale damage.??? Shame, Shame, Shame! Liberal & Labor Parties been calling on but denying urgent overhaul & reform the Same. SHAME ON YOU!!! 0 Tim Oakshot 2 weeks, 4 days ago This is obviously a disastrous situation for all involved. Personal safety reasons are a pathetic excuse for failing to attend a creditors meeting. Seriously, what did the directors think was going to happen? They just don’t want to face up to their customers and creditors, that’s all. 0 Les Williams 2 weeks, 4 days ago It’s evident what you need in Victoria. Packer didn’t seem to have much trouble getting his huge billion dollar Crown building approved with all of the normal approval processes set aside. Political donation rules. The Victorian government smells just like the regulator – VBA. Get rid of both . 0 AG Entfraud 2 weeks, 3 days ago Should the VMIA monopoly DBI insurer and its agent QBE meet all uninsured consumer losses incurred due to the tragic failure to protect using prudent commercial underwriting techniques? 0 Les Williams 2 weeks, 3 days ago We are witnessing serious corporate corruption in the Australian construction industry . Everybody gets to feed on the bones of innocent people . Consumers / tax payers / small business are getting done like a dinner . If you haven’t been done you are only waiting. If you can’t donate then you can’t negotiate. 450 homes affected plus consumers plus small business – they got the lot. Nobody seems to care . The public just don’t matter. Legislation is influenced by these corporate criminals – nothing in the pubic interest . Changes to the insolvency laws pending will make this scenario only worse. 0 Fil Gilbert 2 weeks, 2 days ago Simple – buy an established house and dont give the Builder any work, then he will go broke and will know what it is like to have no home and no money like the people that suffer as homebuilders under the current Building Regulations (sic)system. 0 Russ. Jones. 2 weeks, 2 days ago When you read the things that Anne Paten writes about how Aust. People get done over by the hundreds you bleed for them. I personally am ashamed to be an Australian as I have no rights in this country, three levels of Govt and all they say is I have done nothing wrong and thats the end of the matter. The fool PM. Turnbull bragged the other day about law returned to building sites if you are getting a house built it is a building site no pollie will do anything as liberal / labour are only concerned about the building comp.You can bet this company of bosses wont lose out of there pockets.. R. Jones.. 0 MArk Whitby 2 weeks, 1 day ago Well done Anne again with your incisiveness. A necessary and fairly simple reform could be the compulsory annual auditing of medium and large firm builders in particular (by ASIC and by the warranty insurers in the residential industry to avoid such disastrous bankruptcies. Another signal is the rapid increase in deposits taken and contracts signed by desperate builders. AUDITING NEEDED NOW. 0 Rodger Partridge 2 weeks, 1 day ago Well done Anne – very descriptively covered. After being a victim of the WELCOME HOMES demise back in 2012 I thought the Victoria Building Commission and State Government would have instituted laws and regulations to stop these “free wheeling construction Operators” by now. It seems not. And I suppose the poor victims of these criminals will also be shafted by the VMIA like I and my fellow victims were. It is sad – very sad and I have empathy for these poor souls who now have nothing but financial hardship and despair ahead whilst looking for justice that it’s doubtful they’ll ever receive. Quite plainly the domestic building industry in Victoria stinks. Very few genuine and honest Operators out there. However, my project in Craigieburne had a somewhat happy outcome by my finding a very ethical and honest set of Builders who completed my project. If anybody would like their name – feel free to contact me through Anne. I will be glad to assist in any way I can. 0 Lesley 2 weeks, 1 day ago Another disgraceful building/construction industry disaster that is destroying family lives. I am suggesting to my children that when they are ready to pursue the great Australian dream of home ownership that they buy old houses that have been up for a number of years and that have not fallen down in that time. Perhaps that way they might have some hope of achieving their dreams without having their lives destroyed by unethical building companies as well as by the inaction of government departments that are supposed to be in charge of monitoring building and construction practice. I feel very sorry for those people who have lost their money, have no house to live in, also those sub contractors left in the lurch and all those people who have no idea who to turn to in this building debacle. 0 B.McKenzie 1 week, 4 days ago I am one of the affected homeowners, and I am also on the creditors committee. The Australian Tax Office new for 2 years that Watersun was unable to meet its taxation obligation, but extended terms time and time again, Watersun did not lodge company returns since 2014, no body did anything. The NAB new the company situation and did nothing. But what is most disturbing of all is that several companies listed as creditors are owned by the directors, that some creditors that had a close relationship with Gary Caulfield are now engaging in blackmail and extortion to homeowners to get outstanding accounts paid and refuse to release certificates and reports to home owners that are required to complete their homes, these are companies that had account terms with Watersun that had been breached many times going back 12 months or more. These companies knew what was going on and did nothing but now want to throw the home owners that are left on their own to sort out the mess, under the bus again. Shame on them and neither consumer affairs or the VBA wants to help. The money for these services, Building Surveyors and Consulting Engineers, was paid to Watersun by the homewoners, and we can not get it back. A Building Surveyor is protected by the present laws, the homeowner is not. There is so much more that should come to the publics attention, how another major home builder was and is involved on an ongoing basis, and yes, it is my opinion the company was set up to go into liquidation. The hush up is deafening, and Mr Andrews never made one comment. What will this mean to the industry ? The cost to buy land and built a home will now go up and absorb the $20,000 first homer buyers grant very quickly. The trades and supply companies have only one way to recover from this, and that is to charge more. But most of all, we as homeowners are afraid and intimidated to speak up for fear of further reprisals 1 Mel 6 days, 11 hours ago What a disgrace. Thank you Anne for uncovering (once again) yet another scandal. Unfortunately knowing to some degree how the system works I can’t see these poor homeowners and small business owners who have been left in the lurch getting any sort of recompense. 0 Diarmuid Hannigan 5 days, 10 hours ago The home owners by law should be listed as secure creditors, at the very least they should be placed on the list as prefered creditors before the likes of the ATO and others. 0 Marie 5 days, 7 hours ago Anne thank you for your insights and support in the process of build completion post Watersun administration. I have been on an exponential learning curve and I now discourage all of my friends from building a new home and to learn from my experience. In a poorly regulated industry, you provide transperancey. Thank you for your work in consumer advocacy. 0