Iris Capital suing Descon Group and Danny Isaac for $122m over failed V&A Broadbeach deal
A besieged construction company and its controversial director are being sued for an eye-watering nine-figure sum by the developer of a billion-dollar project at Broadbeach. Here’s why.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
A besieged construction company and its controversial director are being sued for a heart-stopping $122 million by the developer of a billion-dollar project at Broadbeach.
Iris Capital, a company directed by billionaire hotelier Sam Arnaout, has lodged two separate court actions involving Descon Group companies. One of the actions names the group’s managing director Danny Isaac as a defendant.
The actions, both in the Queensland Supreme Court at Brisbane, reveal a spectacular high-stakes falling out over construction of the colossal Victoria & Albert project in the centre of tourism hub Broadbeach. Descon is expected to defend the actions
Descon had been contracted by Iris to build V&A, a 56-floor twin-tower project on the site of the former Niecon Plaza. But the deal broke down in February, leaving the development without a builder on the eve of its construction start date.
Descon and Mr Isaac were slapped with a court-ordered asset freeze ahead of the one of the cases with Iris, which has named construction insurance provider BCS Broking as respondent.
Descon and its boss have faceda number of court actions in recent months including an unrelated case with American Express in which he blamed his former personal assistant and lover for a six-figure charge card debt.
The ATO is also chasing the group for alleged unpaid staff superannuation.
In its latest claim, V&A developer Iris is seeking either $90m or $122.3m – depending on how the case plays out – from Mr Isaac, Descon Group Australia and/or its related companies Adcon Qld, Adcon Vic and Colligere.
At the time the deal broke down, Iris said it was “business as usual”, while Descon claimed it had been a mutual and “amicable” decision, however, the court documents have revealed Iris terminated the contract.
Iris’s claim said it selected Descon to complete design and construction of the V&A development for a fixed price of $392.7m, rejecting a tender from another contractor with a fixed price of $425m.
The claim said the breakdown of the Descon deal meant Iris lost a finance opportunity for the project and faced a massive construction cost blowout.
It said a new contractor, not named in the court documents, had priced the project at a steeper $515m.
Iris is claiming $90m in loss and damage, being the difference between the unsuccessful contractor’s price and the new price.
Alternatively, it claims loss and damage of $122m – the difference between Descon’s fixed price and the price agreed with the new contractor.
It is also seeking interest and legal costs.
Iris said Descon had been required under the contract to obtain bank guarantees totalling $19.6m by the time it finished the demolition stage of the work, scheduled for completion in November 2022.
Bank guarantees are used in the construction industry to ensure payments to customers and suppliers are met if the builder defaults on the contract, without the builder needing to supply cash as security.
The claim said Descon’s conduct in accepting the contract had been “misleading or deceptive” as it had been unable to obtain the bank guarantees as required.
As Descon did not provide the bank guarantees, the claim said, Iris was unable to obtain finance.
Iris’s claim said it considered Mr Isaac personally liable as he “controlled and directed the day-to-day activities of Descon” and because he was directly involved in the contract negotiations.
Iris’s claim said demolition work was completed by January 24, 2023, aside from a slab that did not need to be removed before the start of work on the tower structures.
The claim said Descon should have provided the bank guarantees by that date, but failed, leaving Iris with no choice but to terminate the contract.
In its second action, Iris is suing Descon Group Australia and insurance broker BCS Broking for $648,490, over alleged “deceitful” receipt of insurance premium refunds by Descon.
Iris’s claim said it paid $1.8m for an insurance policy, obtained by Descon for the V&A project.
After the contract with Descon fell over, Iris sought to cancel the policy and obtain a refund for the unused portion, emailing BCS representative Shane Stewart and Mr Isaac directly about that intention in February.
The claim said BCS had declined to cancel the policy or refund the premium at Iris’s request – despite Iris paying for the policy and being insured under it – explaining that it could only be cancelled by the policyholder, Descon.
According to the court documents, BCS said it was a matter for Iris and Descon to sort out whether to cancel the policy and how to divide any premium refunds.
On March 9, the claim said, Descon cancelled the policy and instructed BCS to pay the premium refund to it.
BCS processed the refunds at the end of March, transferring the funds to Descon.
Iris said it was unaware the policy had been cancelled, or that Descon had requested the refund for itself, until April 5.
According to the claim, Mr Isaac emailed Iris’s lawyer Brad Russell on March 23, two weeks after the policy had been cancelled, saying that cancelling the policy could expose Descon to “a risk of under insurance”.
Iris alleged the email was a deliberate attempt at “deceiving Iris”, by concealing the cancellation of the policy and hiding the possibility of impending substantial refunds to Descon.
The claim accused BCS of “fraudulent conduct” by “deliberately” not responding to emails from Iris inquiring about the status of the policy after it had been cancelled.
It said BCS had deliberately concealed its intention to pay the refunds to Descon without informing Iris, from which it had received the initial $1.8m premium.
The claim said if BCS and Descon had not “successfully deceived Iris”, the developer would have initiated court action to prevent the refunds being paid to Descon.
Iris is seeking payment of $648,490 as well as “damages for deceit”, interest and multiple declarations about the refunds.
The defendants were yet to file any response on Thursday.
Chalmers the stock picker makes a bad call
The Future Fund has thrived by having the independence to make its own financial calls. The Treasurer wants to trash this with his own risky bets.
Read more
First look: Giant ‘sky-mansion’ tower on quiet residential street
Plans for a giant riverfront tower, which will boast the Gold Coast’s largest penthouse, have been unveiled for a residential street which have been high-rise free until now.
Read more