Debts of more than $5 million and a possible "unreasonable director-related transaction" are among the findings that led to a Canberra property developer copping a two-year ban from managing companies.
The findings were uncovered in a creditors' report of 3 Property Group 13 Pty Ltd, one of five failed companies Paul Hamilton was involved with before the Australian Securities and Investments Commission disqualified the local developer in October.
Meanwhile, former directors of the company had links to more than 40 companies each, the report found.
One of the former directors put the company's struggles down to a "horrible period in the construction industry", when contacted by The Canberra Times.
The creditors' report on 3 Property Group 13 Pty Ltd, released in 2021, was among the records ASIC relied on to disqualify Mr Hamilton and offers some insight into how trouble unfolded for one of the many 3 Property Group companies.
Developments in Wright, Coombs and Throsby
The name 3 Property Group may be familiar to Canberrans who have seen the bright green logo displayed across job sites.
The group's townhouse projects include Debut in Wright, Form in Coombs, Vivace and Allegro in Throsby and Avani terraces in Greenway.
Some may also be aware of 3 Property Group from reports in 2021 and 2022 of the group's attempts to cancel buyers' off-the-plan townhouse contracts and resell the properties at a higher price.
The development group was thrown back into the spotlight in October when ASIC disqualified Mr Hamilton, 3 Property Group's sales and marketing director, from managing companies for two years over his involvement in five failed companies.
Together, the companies owed more than $11.8 million to unsecured creditors, ASIC found.
Among the five companies was 3 Property Group 13 Pty Ltd, which entered administration in 2020 owing more than $5.87 million to secured and unsecured creditors.
The liquidator involved in the administration identified possible instances of unfair preference payments, insolvent trading and uncommercial transactions in its 2021 statutory report to creditors.
When contacted by The Canberra Times, 3 Property Group 13 former director Jaime Farrelly said the group had been through "a horrible period in the construction industry".
"There have been no winners as a result of the impacts to the sector. Disputes that have arisen just make things worse," he said.
"Hopefully things can stabilise with construction as we understand the fallout can affect everyone."
How 3 Property Group 13 unravelled
The creditors report, prepared by liquidator Stephen Hundy of Worrells, stated 3 Property Group 13 Pty Ltd was incorporated in September 2017.
Gary Kelly started as director and Jaime Farrelly was also appointed as a director the following month.
The company purchased land in Campbell in 2018 with the intention to build four townhouses on the site.
The group took out loans with a credit asset management firm and a group of mezzanine financiers, a hybrid form of funding often considered high-risk.
Following a dispute with a builder, in July 2020 the company sold the Campbell property to a related entity, 3 Property Group 17 Pty Limited, which listed Mr Kelly and Mr Farrelly as its directors at the time, for $4.05 million, the report stated.
After the mortgage was discharged, the sale proceeds, about $802,000, were deposited to 3 Property Group 13's bank account.
The liquidator noted in the report "it appears that the transfer of the Campbell Property to 3PG17 may be an uncommercial transaction under s588FB of the [Corporations] Act or a creditor-defeating disposition under s588FDB of the Act".
The report also outlined the property transfer "may also [be] considered ... an unreasonable director-related transaction", given Mr Kelly and Mr Farrelly were directors of 3 Property Group 17 at the time.
Mr Kelly and Mr Farrelly resigned as directors of 3 Property 13 on October 22, 2020, the same day Paul Hamilton was appointed as director.
One day later, the director determined the company was insolvent and a meeting of creditors should be convened, the report stated.
The company's sole shareholder was another related entity, 3 Property Holdings 2 Pty Limited, which resolved to wind up the company.
Former directors linked to more than 40 companies
The creditors' report also detailed the entities associated with the director and former directors at the time of the report in January 2021.
Mr Hamilton was the director of seven associated entities at the time.
Mr Kelly and Mr Farrelly were listed as current or former directors of 44 and 47 companies, respectively.
Earlier this year, a number of 3 Property Group companies were renamed, ASIC searches show, to variations of Elly Property.
This includes 3 Property Group Holdings 2 Pty Limited, which has been renamed to Elly Property Pty Ltd.
Mr Kelly and Mr Farrelly are no longer listed as directors of Elly Property Pty Ltd.
Emily Kelly and Saphyre Ann Farrelly were appointed as directors of Elly Property Pty Ltd on October 9, 2023, ASIC documents show.
The creditors' report of 3 Property Group 13 was one of a series of documents ASIC relied on to ban Mr Hamilton in October.
The decision means Mr Hamilton is barred from managing corporations until October 23, 2025.
He has the right to seek a review of the decision through the Administrative Appeals Tribunal.
ASIC found Mr Hamilton "showed a lack of care and diligence" when he agreed to act as a director of the five companies to allow the former directors to maintain their credit scores and continue managing other companies in the group.
The Canberra Times asked ASIC whether it was investigating the former directors of 3 Property 13, Mr Kelly and Mr Farrelly, on the back of Mr Hamilton's disqualification, but the regulator was unable to comment.
We've made it a whole lot easier for you to have your say. Our new comment platform requires only one log-in to access articles and to join the discussion on The Canberra Times website. Find out how to register so you can enjoy civil, friendly and engaging discussions. See our moderation policy here.
