The largest building contractor on the Sunshine Coast, Sechelt-based Wakefield Construction Inc., was deemed bankrupt on Jan. 20, leaving about 40 projects unfinished and some 450 creditors who are owed almost $10 million in unverified claims.
“Our family is devastated by the impact this has had on all parties involved,” company president Lance Sparling told Coast Reporter Wednesday.
Many of the company’s approximately 100 employees had already been laid off after it filed a notice of intention (NOI) under the Bankruptcy and Insolvency Act on Jan. 9, Sparling said by email.
Sparling said the company reached out to creditors after the NOI was filed to solicit support for a proposal that would have allowed it to restructure its financial affairs, but did not receive a sufficient level of support.
“The filing of the NOI was intended by Wakefield to lead to a process by which its business could be wound down in an orderly manner most advantageous to its stakeholders, including transitioning its current construction contracts to new managers or contractors,” Sparling said.
“However, Wakefield subsequently determined that the process it envisioned was not garnering enough stakeholder support to be viable, and in particular, Wakefield was unable to file a cash-flow statement establishing its ability to carry on during the period in which the proposal was intended to be finalized and voted upon.”
As a result, on Jan. 20, Wakefield was deemed bankrupt, and Vancouver trustee Boale, Wood and Company took possession of Wakefield’s assets and property.
“Some of Wakefield’s employees explored the possibility of establishing a new business to take over some of Wakefield’s current jobs, but concluded that there was not a sufficient opportunity there,” Sparling said.
About 40 projects were in progress “and they have all stopped as a consequence of the deemed assignment in bankruptcy,” he said. “The trustee is in the process of negotiating termination agreements with owners to enable them to continue their projects on their own or with a new contractor.”
The trustee is also in the process of handling unpaid wage claims of the company’s employees, he said.
Almost 100 of Wakefield’s 435 creditors that were initially listed by the trustee are Sunshine Coast businesses, and the only secured creditor among the Coast firms was Sunshine Coast Credit Union, which was reportedly owed $300,000.
Of the unsecured creditors, nine local businesses were listed as owed more than $20,000, with amounts ranging up to $184,600. Most of the creditors are sub-contractors, but the hardest hit are building supply companies.
A spokesman for the trustee confirmed Wednesday that additional claims, including $2 million from Sparling himself, have driven up the total amount from about $6.5 million to almost $10 million. All of the listed amounts are subject to verification by the trustee.
Under bankruptcy law, the trustee will distribute the proceeds from assets to secured creditors first, with any amounts remaining paid out to the unsecured creditors on a proportionate or pro rata basis according to their claims.
In a “message to owners” earlier this month, Sparling cited accounting irregularities as an issue tied to the company’s financial difficulties.
“We discovered in early October that our accounting department was not producing accurate information,” he wrote. “As a result of this work, we found that bank reconciliations had not been done for 10 months, vendors were being paid by invoice and not by statement, and we had, to the best of our knowledge, between $600,000 to $800,000 in lost invoices.”
Asked if other factors, such as Wakefield’s recent expansion to the Lower Mainland, also contributed to the company’s demise, Sparling said: “As with any business failure, there were a constellation of factors that ultimately led to insolvency.”
Sparling said he did not believe Wakefield’s bankruptcy will have a long-term impact on the Coast’s economy, “but in the short term it will depend on how the owners make arrangements to continue their projects.”
He added, “If there is anything I can do to facilitate those transitions, I will. I’m hoping the employees will all find work quickly.”
Sparling started the company 10 years ago when he purchased the seven-acre Wakefield Inn site in West Sechelt and redeveloped it into the award-winning 46-home Wakefield Beach complex. The company expanded into custom homes, renovation, commercial, development and marine services divisions, opening offices in West Vancouver and Vancouver’s Kitsilano area. Its most ambitious project was the two-tower Watermark condo development in Sechelt.
Major commercial developments in progress include an expansion of the South Coast Ford dealership in Sechelt and reconstruction of the Pender Harbour Hotel and Grasshopper Pub in Pender Harbour.
