August Towers residents want project financier CEG Direct Securities to pay $323,000 for maintenance, building levies

Residents in a city apartment tower, linked to a notorious builder, are suing a financier for $323,000.

The $35m August Towers development on the corner of South Tce and Hutt St. Picture: Naomi Jellicoe

A notorious city apartment tower is at the centre of a $323,000 legal claim for money raised to pay for critical building repairs.

Residents in the August Towers development in the city are having to pay hundreds of thousands of dollars for critical fire-protection and carpark upgrades and borrowed $350,000 from an owner to complete work in the South Tce building, the District Court has heard.

Community corporations of the 14-storey building have sued financier CEG Direct Securities which took control of assets of developer South 2015 in 2018 after the company was wound up with debts of $28m.

CEG loaned $20m to South 2015 – whose director was disgraced builder and former bankrupt Salvatore “Sam” Sgherza – to build the project but the company defaulted on the loan.

The community corporations claim that CEG owes $323,234 for building, maintenance and carpark levies issued to it as mortgagee in possession of several apartments as of February this year.

“As at the date of this pleading, the balance outstanding with respect to the monies payable by CEG in relation to the developers lots is $323,234.86,” the claim, filed in February, said.

“Despite demands for payment CEG has failed to pay the outstanding balance that’s payable with respect to the developers’ lots.”

Salvatore 'Sam' Sgherza outside the Adelaide Magistrates Court in June 2019. Picture: AAP Image/Russell Millard

The statement of claim reveals that residents have voted to raise hundreds of thousands of dollars for levies including a sinking fund, maintenance and a carpark stacker levy since their first meeting on November 23, 2017.

In May last year the residents agreed to fix a “special levy” of $201,000 for fire compliance works to meet requirements of the Adelaide City Council and Office of the Technical Regulator.

In its defence CEG had initially denied the corporations claim for compensation.

In a hearing before District Court Master Elizabeth Olsson on August 2 CEG made a formal offer, which CEG’s director Jim Ventrice told The Advertiser was to pay the full amount claimed “plus costs”. But he said the corporations were trying to “amend the claim to add further contributions”.

“CEG has wanted to put an end to the claim for over two years but I believe that the costs being claimed are excessive and unnecessary and I intend to object to the costs,” he said.

”This development should have been the magnificent development ... before it was sabotaged by related parties.”

He said the building has “serious safety issues” and noncompliance with development approvals.

The community corporations’ lawyer Caroline Christie said it would not be appropriate to comment while the matter was before the courts. The matter is listed for another hearing in November.

Adelaide City Council’s associate director regulatory services Stephen Zaluski said the fire safety “noncompliance” was found in the partially occupied building in March 2019.

“The (council’s) Building Fire Safety Committee determined that there was no immediate risk to the occupants and did not require occupants to vacate the building,” he said.

“The developer is in the process of undertaking the required works, which we understand are nearing completion.”

Mr Sgherza’s company – and associated building firm Build 29 – were wound up in 2018 owing unsecured creditors $12m.

The Advertiser revealed in March 2018 that Build 29 had undertaken construction without a builders’ licence. In August 2019 he was convicted and fined for breaching bankruptcy laws over the illegal withdrawal of $247,000 from bank accounts a year before he declared himself bankrupt in 2015.