Key to Australia Pty director Graham Mark Scarrott used ‘most of’ $1.67m investor cash for ‘personal expenses’

A Queensland property developer took almost $2.4m from investors for a Gold Coast residential scheme instead used their money to cover personal and company expenses.

A tribunal found the developer spent a large chunk of investor money on himself.

A Queensland property developer took almost $2.4m from 17 victim investors for a Gold Coast residential scheme but instead fraudulently used a large chunk of the funds to cover personal and company expenses, a tribunal has ruled.

Key to Australia Pty Ltd, which has since been deregistered, and sole director Graham Mark Scarrott, who has since declared bankruptcy, have already been ordered to pay more than $1.5 million to victims after a separate legal case in Southport Magistrates Court in 2021.

In a further court judgment published this week, the Queensland Civil and Administrative Tribunal ordered Key to Australia and Mr Scarrott to pay a New Zealand victim more than $100,000 in compensation.

The victims were all New Zealanders, except for one Australian claimant. In total, they paid Mr Scarrott and Key to Australia around $2.38m on the promise of high profit returns on already-purchased land at Pimpama in the northern Gold Coast.

The QCAT judgment outlined the promises made by Mr Scarrott during in-person meetings in New Zealand between April and June 2019 with the victim – Simon Allan Wilson.

Mr Scarrott claimed Mr Wilson would make an estimated return of $200,000 by investing $110,000 in land which Gold Coast City Council had pre-approved for subdivision.

Mr Scarrott said he and his company, Key to Australia, would subdivide the land and then on-sell the subdivided lots for Mr Wilson to make the profit.

“I presume the plan was to either on-sell the subdivided lots with approved plans or to erect the townhouses on the subdivided lots and to on-sell these subdivided improved lots,”

QCAT Member Vass Poteri said in his 20-page decision.

“However, Mr Scarrott did promise almost all the claimants that they would not have to invest any further funds in the scheme nor have to become purchasers of the individual lots.

“It was all a question of timing and the Gold Coast City Council approving the subdivision of the individual lots without the necessary setbacks and relaxation of on-street parking.

“In the end, the Council took 10 months to assess and reject Mr Scarrott’s application, financing became more difficult, and Covid made all commercial activities more complicated.”

Mr Poteri found Mr Scarrott paid $708,000 in various fees and deposits to the Vendor, Gold Coast City Council, and town planners. This left around $1.67m outstanding.

“Mr Scarrott and Key to Australia had at their disposal well in excess of $1,000,000,” the QCAT judgment concluded.

“It is clear that most of these funds were used without the implied or express authority of the claimants on personal expenses, company expenses and keeping the whole scheme going.

“The funds were dishonestly and fraudulently used by Mr Scarrott and Key to Australia.”

Mr Scarrott and Key to Australia did not appear at the QCAT hearings. Mr Scarrott did provide a statement, which Mr Poteri described as “very general, self-serving and not corroborated”. Key to Australia filed no material in its defence.

QCAT did rule that some of Mr Scarrott’s claims to investors were true or at least plausible, others were deemed false or misleading.

“If everything had fallen into place, in terms of time and Council approval as planned by Mr Scarrott, then Mr Wilson may have been able to on-sell his interest in the land at a profit,” Mr Poteri wrote in his judgment.

“It seems to me that Mr Scarrott was too optimistic and/or unrealistic in the view that every cog in the process would go smoothly.”

Mr Wilson’s claim for $109,000 in compensation and $865.35 in legal fees was approved by QCAT, with Mr Poteri also finding Mr Scarrott and Key to Australia “jointly and severally responsible” for the New Zealand victim’s financial losses.