Suite 2, Level 2, 1160 Hay Street, WEST PERTH WA 6005 | PO Box 92 West Perth WA 6872 Tel +61 8 6145 0700 ABN 34 799 701 147

Liability limited by a scheme approved under Professional Standards Legislation.

Statutory Report to Creditors (IPR 70-40) 8 September 2021 SCHLAGER BUILDING SERVICES PTY LTD (in Liquidation) ACN 601 882 188 (the Company) Formerly trading as Schlager Homes I refer to my appointment as Liquidator of the Company on 8 June 2021. You have been sent this circular because you are listed as a creditor of the Company. This is a follow-up report and is made pursuant to section 70-40 of the Insolvency Practice Rules (Corporations) 2016.

1 Update on progress of the liquidation

Since the commencement of the liquidation, the following key tasks have been undertaken:

• investigating potential breaches of director’s duties, insolvent trading and unfair preference payments;

• investigating third party claims; • investigating potential assets; • pursuing pre-appointment insurance policy refunds; • following up and pursuing outstanding debtors; • meetings and discussions with the Director; • liaising with homeowners and assisting homeowners to find new builders, where

possible; • liaising with security interest holders and assisting with retrieval of secured assets; • liaising with legal representatives and collating evidence in relation to third party

claims, with a view to publicly examine relevant persons; • preparing application to the Supreme Court of Western Australia to publicly examine

relevant persons, including employees of the professional services firm, BDO; • preparing and lodging statutory forms with the Australian Securities and Investments

Commission; • preparing correspondence to creditors and attending to their enquiries; and • assisting employees and providing information to the Fair Entitlement Guarantee

Scheme;

2 Estimated assets and liabilities of the Company

At the commencement of the liquidation, I requested that the Company’s Director complete a Report on Company Activities and Property (ROCAP). The Company’s Director, Mr Asher Schlager, provided me with the completed ROCAP on 15 June 2021. I set out below a summary of the Company’s assets and liabilities based on information contained in the ROCAP. It includes my assessment of those assets and liabilities.

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$'000 Ref Director’s

ERV* Liquidator’s

ERV* Assets Accounts receivable 2.1 550 3 Plant and machinery 2.2 25 - Other assets 2.3 - at least 30 Related party receivables 2.4 - unknown Total assets 575 equal / more than 33 Liabilities Secured creditors 2.5 70 - Employee entitlements 2.6 34 89 Unsecured creditors 2.7 485 1,553 Related party creditors 2.8 - 25 Total liabilities 589 1,666 Estimated surplus / (deficit) (14) equal / more than (1,633)

*ERV – estimated realisable value I comment on the referenced items below:

2.1 Accounts receivable To date, $3k in debtors have been recovered. It appears that the Director’s ERV was overstated, based on enquiries made with the Company’s customers, which revealed invoicing ahead of work done, disputes over amounts owed, claims of incomplete or unsatisfactory workmanship and possible counter claims. The likelihood of recovering any further debtor amounts is unlikely.

2.2 Plant and machinery Plant and machinery figure reported by the Director relates to a quantity of scaffolding owned by the Company, which was in use at building sites in Albany. Investigations into the value of the scaffolding revealed that the cost to retrieve the scaffolding would likely exceed its realisable value. Accordingly, the amount I expect to recover is nil.

2.3 Other assets Other assets realised are payments from the Government’s apprentice incentive scheme available to the Company at the date of the liquidation and a pre-appointment insurance policy refund. A potential further insurance policy refund may also be available; its value will likely not exceed $10k.. Other potential assets include unfair preference payments totalling $15k to the Australian Taxation Office and recoveries that may be available from the third-party claim against BDO. Further commentary regarding the potential claim against BDO is provided under Section 4.

2.4 Related party receivables There was a director loan owing at the date of liquidation of approximately $580k. Recoverability of this loan is currently unknown; however, preliminary investigations indicate that the Director likely does not have sufficient unencumbered assets to repay the loan. I

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have requested a statement of personal assets and liabilities from the Director, which the Director undertook to provide. As at the date of this report I am yet to receive this statement from the Director.

2.5 Secured creditors The Director’s ERV relates to the amounts owing in relation to motor vehicle finance. I have assessed the value of the vehicles against amounts owed to the financiers and concluded that the vehicles have no residual value. Accordingly, all of the vehicle finance contracts have been disclaimed. Any shortfall to the finance companies remaining after disposing of the vehicles would be classed as an unsecured claim and as such, my ERV does not report any amounts owed to secured creditors.

2.6 Employee entitlements Outstanding employee entitlements are as follows: Entitlement Amount ($) Unpaid wages 12,751 Unpaid superannuation 20,574 Annual leave 13,843 Redundancy / payment in lieu of notice 41,471 Total 88,639

Unpaid superannuation reported above excludes penalties and interest imposed on superannuation amounts paid late. The debt is therefore likely to be higher. Unpaid employee entitlements (excluding superannuation) may be paid by the Fair Entitlement Guarantee Scheme (FEG). In such instances, FEG will step into the shoes of the employees and receive priority entitlement to a dividend, should one be declared.

2.7 Unsecured creditors Unsecured creditors include trade creditors and the ATO.

2.8 Related party creditors At the date of liquidation, Schlager Architects Pty Ltd were listed as a creditor of the Company in the amount of approximately $25k. This is also an unsecured claim.

3 Investigations undertaken to date

3.1 Unfair preferences My investigations uncovered potential preference payments of $15k made to the ATO. A claim has been lodged with the ATO for this amount.

3.2 Insolvent trading My investigations indicate that the Company was likely insolvent from July 2018 onwards. The potential insolvent trading claim is yet to be quantified; however, my preliminary

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investigations indicate that the Director likely does not have material unencumbered assets that would make any potential claim commercially feasible to pursue. I have requested a statement of personal assets and liabilities from the Director; however, I am yet to receive it. Furthermore, insolvent trading claims can be complex and require significant funding to pursue, without any guarantee of success. Further investigations are required to assess the potential claim and its recoverability.

3.3 Uncommercial transactions My investigations have not revealed any potential uncommercial transactions.

4 Further inquiries relating to the winding up that may need to be undertaken

My investigations to date indicate potential claims against third parties. My enquiries are ongoing and to assist in these investigations, I have applied to Supreme Court of Western Australia for summonses to be issued to conduct public examinations of Daniel Olsen and Marc Loftus of BDO, as well as Barbara Olsen. The orders for the public examination to proceed were granted this week and the process has been assigned to a registrar. The registrar has set the examination date to be 16 November 2021. Accordingly, summonses will now be served on the persons to be examined. Notice to creditors of public examination is enclosed at Annexure A. I do not anticipate any further inquiries being conducted other than those identified above and in Section 3 of this report.

5 What happened to the business of the Company?

The Company operated a residential construction business in Albany and Perth, Western Australia. The Director has advised that the Company failed as a result of experiencing cash flow shortages and was unable to obtain an increase in Home Indemnity Insurance cover to enable it to take on further work. I believe errors in accounting treatment also contributed to the Company’s failure. Revenue appears to have been recorded when invoiced, without recognising deposits and other amounts invoiced in advance as ‘unearned revenue’. Regard for when revenue should be recognised was not sufficient. This incorrect accounting treatment of income likely concealed trading losses. It appears that the Company had a long history of negative working capital and disputes with its customers, which made recovery of debtor amounts difficult. These contributed to the cash flow shortages resulting in the Company’s inability to meet its liabilities.

6 Estimated outcome to creditors

The likelihood of a dividend being paid to creditors in a liquidation is affected by a number of factors including:

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• the size and complexity of the liquidation; • the amount of assets realisable and the costs of realising those assets; and • the value and priority of creditor claims.

I am unable to provide a dividend estimate with any certainty at this stage of the liquidation. If I do declare a dividend, any creditor whose claim has not yet been admitted will be contacted and asked to submit a proof of debt. The likelihood of creditors receiving a dividend will depend on the outcome of the possible legal actions described in Section 4 of this report.

7 Where can you get more information?

The Australian Restructuring Insolvency and Turnaround Association (ARITA) provides information to assist creditors with understanding liquidations and insolvency. This information, including details of your rights as a creditor, is available from ARITA’s website at www.arita.com.au. ASIC provides information sheets on a range of insolvency topics. These information sheets can be accessed on ASIC’s website at www.asic.gov.au. Should you have any queries, please do not hesitate to contact my office. Yours faithfully For the Company Dermott McVeigh Liquidator Encl. Contact person: Miriam Schmidt Phone: +61 8 6145 0700 Email: mschmidt@aviorconsulting.com.au

Suite 2, Level 2, 1160 Hay Street, WEST PERTH WA 6005 | PO Box 92 West Perth WA 6872 Tel +61 8 6145 0700

ABN 34 799 701 147

Liability limited by a scheme approved under Professional Standards Legislation.

SCHLAGER BUILDING SERVICES PTY LTD (in Liquidation) ACN 601 882 188 (the Company)

Formerly trading as Schlager Homes

NOTICE TO CREDITORS OF PUBLIC EXAMINATION

Notice is hereby given, pursuant to section 596E of the Corporations Act 2001 (Cth) that, upon application of Dermott McVeigh in his capacity as Liquidator of the Company, the Supreme Court of Western Australia has ordered that Mr Daniel Olsen and Mr Marc Loftus, both of the professional services firm BDO, and Ms Barbara Olsen be summonsed to attend and give evidence on the examinable affairs of the Company, pursuant to s 596B of the Act.

The public examination is scheduled for 10:00am (AWST) on Tuesday, 16 November 2021.

If you have any questions regarding the above, please contact Eve Switka of this office.

Dated this 8th day of September 2021

Dermott McVeigh Liquidator

ANNEXURE A