From the outside it seemed to be smooth sailing for Torry & Sons Plumbing and Heating Ltd. until a mountain of debt swallowed the family-run business founded in 1981.
The Courtenay-based company, which recently grew by leaps and bounds to serve thousands of customers across Vancouver Island, just sold for $655,000 to a British Columbian numbered company at auction Nov. 1.
Though the assets of Torry & Sons were valued at just under $1.3 million in late October, the company's liabilities came out to more than $6.5 million.
The vast majority of the approximately 750 parties owed money by the company will get nothing, Martin Hyatt, a trustee handling bankruptcy proceedings with Vancouver-based the Bowra Group, told an group of 30 or so creditors at the Westerly Hotel & Convention Centre.
"It is all bad news here," he said. "We do not expect there to be any recovery for the unsecured creditors."
All assets were put up for sale and two potential buyers put in offers. The intentions of the successful purchaser, who paid in cash for the capital assets like vehicles and equipment, are unknown to officials.
Over at least the next 12 months secured creditors will work to get their money back, with these claims totaling more than $2.5 million, according to a document filed with the Supreme Court of British Columbia in Bankruptcy and Insolvency. The vast majority of people owed money by Torry & Sons will receive nothing, as unsecured claims come up to about $4 million.
Court documents reveal Torry & Sons owed employees about $175,000 in preferred claims and $425,000 in unsecured claims.
Secured creditors include the Canada Revenue Agency ($50,000), the Royal Bank of Canada ($1.1 million) and the Business Development Bank of Canada ($250,000). Bill Torry Holdings Corp. is also listed as a having a higher priority claim over unsecured creditors, with $990,000 owing.
Hyatt said there might be some recourse for unsecured creditors from credit card companies if that is how they had paid their advance bills.
And some businesses owed larger sums of money - like key equipment suppliers - might be able to recover some of their money if they had building liens associated with project work.
At its peak Torry & Sons boasted about 135 employees and offices in Nanaimo, Victoria and Courtenay.
Fluctuating revenue and net operating income hammered Torry & Sons for the past several years. The company really began to take on water as business slowed dramatically in 2013 with profit margins dropping from the average 20 per cent to less than 6 per cent.
"This slowdown has drastically reduced the profitability of the company," said Torry & Sons director and president Scott Torry in a September affidavit. "In addition, the company mistakenly assumed that some of the older existing contracts that were nearing completion would be more profitable than they actually turned out to be."
The firm ultimately sunk while attempting to continue dividend payments ($300,000 a year) in the face of an inability to cover monthly operating expenses. Torry & Sons was deemed bankrupt October 20, 2013.
Hyatt said a Statement of Affairs document highlighting the assets and liabilities of the company had not yet been signed by a company director. He also noted no company director was present at the creditors' meeting to answer questions, which is a legal requirement.
Torry & Sons did not respond to an interview request for this story.
WorkSafe BC confirmed it is owed about $35,000 by the Torry & Sons for unpaid assessments and will not be attending creditor meetings.
Delco Fireplaces Ltd. Nanaimo manager Dave Lewtas said the company is only owed a fraction of the money outstanding to some of the larger players, adding given the reputation of Torry & Sons in the industry the news of the bankruptcy came as a shock.
"It was a surprise," Lewtas said. "We weren't anticipating hearing that."
Douglas Chivers, a trustee with the Bowra Group not directly involved with the Torry & Sons proceedings explained because the matter is a receivership and a bankruptcy at this point the fallout is governed by the federal Bankruptcy and Insolvency Act.
"This is the general process. There's a lot of little details and intricacies that fall into it," Chivers said. "Under a bankruptcy the actual company is defunct, basically."
The Canada Revenue Agency (CRA) usually gets paid out before employees, unless the workers are covered under the Wage Earners Protection Program.
Each employee must fill out paperwork in order to make a claim under this program in order to get money ahead of payouts to the Royal Bank of Canada and the other secured creditors.
"Source deductions are a deemed trust, meaning they would be paid first before everyone including the bank," he said, referring to money withheld from workers which is supposed to be sent to the CRA each month. "If those are not remitted and a bankruptcy proceeds during that time those deductions are the first priority."
HST or GST, however, would be considered an unsecured claim.
Bankruptcy proceedings aren't the most pleasant experience for creditors but can be beneficial, he added.
"Unfortunately it's a tough time for most people," he said. "A bunch of people aren't getting paid and employees are losing jobs."
Chivers said it can ultimately be a healing exercise.
"You need that closure for people to move on and get over it," he said. "I think it's a good process. It's not the perfect process. But it's the best thing we have right now."
