Descon Group Australia, Adcon, facing court actions, credit defaults and pursuit of funds by liquidator
A national building company - rated “impaired” by a credit agency - faces court action, pursuit by a liquidator and a flurry of credit defaults. Read what the boss has to say about it all
Gold Coast
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The head of a national builder besieged by credit defaults, in court over alleged debts and being pursued by a liquidator, is shrugging off concerns, saying it has a “healthy forward book”.
But a credit agency has categorised Descon Group Australia as “impaired”, meaning it was “highly vulnerable to default or insolvency in the short term”.
As well as the credit rating blow, Descon has recently lost two multi billion-dollar projects on the Gold Coast and is battling multiple court cases over alleged unpaid debts.
Despite the apparent troubles, Descon Group’s Queensland builder licence remains unblemished as far the regulator is concerned.
Descon and its companies have worked on major projects including the CBD North and Parkville train stations in Melbourne, and has current projects across the Gold Coast and in Brisbane, where it announced it would buy a $70m site in the riverfront suburb of Hamilton.
Chairman Danny Isaac, 36, said the group’s companies were solvent.
“Yes, we have a healthy forward book with a large balance sheet with a healthy profit margin in infrastructure,” he said.
Descon “impaired”
As of March 24, Descon Group Australia’s credit rating was considered “impaired” for repayment by Creditor Watch, a category worse than the “high risk” it was considered a week earlier.
The agency said “trading eligibility must be considered” for the company which had “a greater than 20 per cent chance of default within the next 12 months.”
As at March 24, the company had three defaults registered – one worth $43,874 for an invoice due in December, another for $80,752 outstanding since November and a third for $20,000 outstading since January.
The credit agency found 78 defaults for companies directed by Mr Isaac, including Descon Vic, which had one default, Adcon Management which had 13 and Adcon Contracting, which had 26.
Descon Qld was considered “high risk” and had eight outstanding credit defaults listed as at March 23, all added this month.
Amounts ranged between $1980 and $12,102, for invoices due as far back as October.
Adcon Qld, which holds a separate Queensland builder licence, is also considered “high risk”.
That company has two outstanding defaults, including one for $80,000 that was registered this month for an invoice due in November.
Sydney-born Mr Isaac, who is a current director of more than 40 companies, said the defaults were “genuine disputes”.
The credit agency recommended anyone dealing with the companies do so on a cash-on-delivery basis.
“We as a group will not pay for works that are charged that are not approved by our organisation and unless verified by a (quantity surveyor) or our project teams that align with the subcontract,” he said.
The projects
Descon was contracted for the billion-dollar Victoria & Albert towers in central Broadbeach, but left the project last month.
Descon is also no longer the contracted builder on Roberto Badalotti’s giant $2.3bn Imperial Towers project at Southport which is to soar past 100 storeys.
Mr Isaac said market conditions had changed since the company tendered for V&A.
“Imperial square was almost contracted however there was a large price difference from the client’s budget,” he said in an email.
“V&A and Imperial Square would have been loss-making projects, given the current rates, versus late 2021 early 2022, so not having the load on our forward book allows the group to focus on other profitable opportunities.”
Descon Group’s current Gold Coast projects include the Waverley Residences at Southport and the $76m Allure at Chevron Island, which it took on after the $56m collapse of Condev exactly one year ago.
It is also building Tallis Property group’s $180m Akin Residences in South Brisbane.
As well as taking on the work left hanging by Condev, Descon took on multiple subcontractors attached to the projects.
At least one subbie that lost money in the Condev collapse is among those now registering credit defaults against Descon for those same projects.
Descon took on another former Condev job, SPG Land’s Brooke Residences at Robina, which reached practical completion earlier this month.
Multiple court cases
Supreme Court lists show Descon and its related companies are parties in at least 12 current matters – most of which relate to allegedly unpaid debts.
Descon Group Australia is fighting to set aside statutory demands from four companies, including American Express, builder Purple Hills, Hera Engineering and trade finance provider Octet Finance.
In February, Mr Isaac said three of the disputes had been resolved, however all remained current on Supreme Court lists this week.
The Octet Finance matter is listed for hearing on March 24, the Purple Hills matter is next listed for May 3, the Hera matter is listed for May 9 and the AMEX matter is listed for April 21.
In the Octet Finance matter, 22 related companies have applied to set aside statutory demands.
Descon Vic is fighting a statutory demand from Usher & Sons Coatings, which is next listed for April 4.
The related Adcon group of companies are also involved in multiple court actions, applying to set aside statutory payment demands in five cases filed since November last year.
Mr Isaac said the forward dates were “to file discontinuances for settled files”.
“I can confirm, for example, Octet will be off our books by late this week as that was resolved, Purple Hills was an $80,000 dispute for variations on a $250,000-plus contract which was resolved,” he said.
Descon Qld is involved in two cases, as both plaintiff and defendant in each, after seeking damages from two contractors who have then made counterclaims of their own.
Liquidator chasing
Descon subsidiary Adcon Contracting is being pursued by the liquidator of a collapsed formwork company, Final Form (Qld), to which it owes $260,000.
According to the report by McLeods liquidator Bill Karageozis, Final Form loaned Adcon $300,000 in October last year, “to be used for the payment of employee wages and/or entitlements”.
The loan was “payable immediately upon demand” and appeared to have been negotiated when the companies were considering a joint venture, the liquidator said.
The report said a $40,000 repayment was made on behalf of Descon in November.
“We have commenced legal recovery action in relation to the balance of the loan owed to the Company and will keep creditors advised of recoveries from this source,” the liquidator wrote.
Final Form, based in Thorneside, owed more than $17m to creditors when it collapsed in December.
Mr Isaac said Descon had been looking to acquire Final Form when the payment was made.
He said Descon had funded an initial 12 weeks of due diligence work, and Final Form had made the payment to fund an extra 12 weeks, required for extra modelling.
The acquisition was ultimately abandoned, Mr Isaac said.
“While under due diligence for an acquisition, a draft term sheet was offered, they didn’t make the distance for that term sheet to settle,” he said.
Mr Isaac said Descon would “finalise our reconciliation with the liquidator this week”.
Developer duel
Descon, Mr Isaac and fellow director Greg Sneeden, were last year embroiled in a bitter falling out with developer Anthony Quinn, who claimed he was owed more than $1m in alleged unpaid wages and losses over a property investment.
That matter was settled out of court, however the $745,000 settlement has sparked a second court action, with accusations of a text message that “threatened to embarrass” and an attempt to back out of a cash settlement.
In the second case, Mr Quinn is seeking payment of a $150,000 first instalment, along with $22,000 in legal fees, interest and other costs.
Descon and Mr Isaac have claimed Mr Quinn breached the terms of the settlement, by not posing for a public relations photo accepting the cheque at the Descon office, and that it should be set aside.
Mr Isaac was personally embroiled in a stoush over his rented $5000/week Broadbeach penthouse, with the owners trying to evict him for late rent payments.
The payments have since been brought up to date.
Descon’s builder licence unblemished
Despite publicly-available records pointing to potential difficulties for Descon Group Australia, subcontractors examining its Queensland builder licence would find no indication of risk, as it remains unblemished.
Descon holds an unrestricted category seven open builder licence for maximum revenue over $240m, with no conditions imposed on it.
The licence has no record of defective work, tribunal directions, offences, bans, exclusions, infringements, demerits or other QBCC disciplinary action.
Related company Adcon Qld also holds an open builder licence, with Mr Isaac listed as nominee, for revenue of $120m-$240m. Mr Isaac himself holds a carpentry licence.
The QBCC imposed a condition on Adcon Qld’s licence on March 16, which remained active on Friday, banning it from working in the open licence category until the company appoints a nominee with an open licence.
A statement from the QBCC said it “administers the most robust mandatory annual financial reporting system for building industry licensees in the nation”.
“It is a condition of holding a QBCC licence that a licensee must always meet the minimum financial requirements for licensing contained in the Queensland Building and Construction Commission Regulation 2018 (Qld), including having sufficient assets and capital to perform the amount of work permissible for the licensee’s financial category,” a statement from the regulator said.
The QBCC would not say when it had last seen Descon’s financial information, or what action it had taken to ensure it met the minimum financial requirements.
Committed to the Gold Coast
Mr Isaac said his companies remained “committed to the Gold Coast” and had recently reached practical completion of Brooke Residences at Robina, which it took on after the collapse of Condev Construction a year ago.
“We see that the Gold Coast is steady and will increase in activity fourth quarter 2023,” he said.
“With great subcontractor support and a great level of migration into the Gold Coast, Descon and Adcon has a great infrastructure forward book in Victoria and are also on new infrastructure projects, while also active in developments in Brisbane and Gold Coast.”
“We are vertically integrated this model allows us to work on double digit profit margins while the infrastructure sustains a healthy cash flow.”
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Originally published as Descon Group Australia, Adcon, facing court actions, credit defaults and pursuit of funds by liquidator
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