Luxury Melbourne builder VCON probed for shuffling cash, assets before collapse

The liquidator of high-end Melbourne construction company VCON has raised concerns over more than $7m in payments allegedly made to related entities in the months leading up to its downfall.

A collapsed Melbourne luxury building group is being probed for allegedly shuffling millions of dollars to related companies in the lead up to its downfall.

A collapsed Melbourne luxury building group is being probed for allegedly shuffling millions of dollars to related companies and selling off assets – including 10 cars – in the lead up to its downfall.

The liquidator for VCON has raised concerns over more than $7m in payments allegedly made to companies associated with its directors, as well as a number of asset sales covering cars, property, plant and equipment and an active building contract.

VCON, known for its award-winning projects across Melbourne including apartment block Fawkner House in South Yarra and winery Jackalope on the Mornington Peninsula, collapsed into liquidation late last year.

The latest update from Grant Thornton liquidator Andrew Hewitt shows the amount owed to unsecured creditors by VCON (Aust) and VCON Group – the two companies which hold the group’s key assets – has snowballed to over $32m.

That is more than double an initial estimate given by the directors of $14m.

Mr Hewitt is now probing a number of financial transactions which may have breached rules around unreasonable director-related transactions and uncommercial transactions.

VCON is known for its award-winning projects across Melbourne, including Jackalope Hotel.

Jackalope is located in Merricks North on the Mornington Peninsula.

Among them is “a large volume of payments” totalling $7.4m from both VCON (Aust) and VCON Group to related entities in the six months prior to their collapse which “warrant further review”, Mr Hewitt said.

“We understand that the company operated within a group of entities, and that there were substantial intercompany transactions between the entities,” he said.

“The records disclose these payments as ‘loan repayments’, or otherwise just note the entity which the funds were paid to.

“These payments may include payments made to VCON Group relating to employment expenses.”

Mr Hewitt said VCON Group also sold off 10 vehicles and disposed of a range of property, plant and equipment assets ahead of liquidators being appointed.

“Our investigations are continuing to understand the details of the sale(s) entered into by the company, to confirm that any property, plant and equipment assets sold by the company prior to our appointment were sold on commercial terms,” he said.

Mr Hewitt also noted shortly before its collapse VCON (Aust) transferred its interest in an active building contract to a related entity, V-Struct

“We are currently reviewing the transfer … to determine if it enlivens any claims under the act, including but not limited to an uncommercial transaction,” he said.

Unreasonable director-related transactions take place when a company makes a payment or transfer to a director or close associate of a director for their benefit under circumstances where a reasonable person would not consider the transaction appropriate.

Uncommercial transactions are those made that had no or limited financial benefit, or were detrimental to the company’s financial position, such as selling off assets at less than their true value.

Mr Hewitt said VCON Group sold off 10 vehicles ahead of liquidators being appointed.

Mr Hewitt said the amount owed to unsecured creditors by VCON (Aust) and VCON Group has snowballed to over $32m.

Mr Hewitt is also probing a number of transactions which may have breached unfair preference rules by favouring one creditor to the expense of another.

“We have reviewed the company’s payments to unsecured creditors in the six months prior to our appointment and have identified a number of transactions to creditors which we consider warrant further review,” he said.

“These payments are either large in volume, rounded or appear to be subject to payment plans.”

VCON (Aust) and VCON Group may have traded while insolvent from at least June 2024 and July 2023 respectively, Mr Hewitt said.

“This is based on negative net assets, poor liquidity and poor trading performance,” he said.

Mr Hewitt warned creditors it may not make economic sense to take action against VCON owners over any breaches or corporations law even if they could be proven.

“Once our investigations are completed, we will determine the commerciality of pursuing these claims if any, with considerations to … the costs to bring such a claim, the respondents capacity to pay, as well as any defences that may be available to the respondents,” he said.

The director didn’t appear to own any property in Victoria but had a range of shareholdings in privately owned companies, Mr Hewitt said.

“We understand that the director may be personally exposed on a number of bank guarantees which could significantly affect his ability to meet any insolvent trading claim, should one be made against him.”

VCON was behind apartment building Fawkner House in South Yarra.

VCON (Aust) and VCON Group may have traded while insolvent from at least June 2024 and July 2023 respectively.

VCON, which described itself as “one of Melbourne’s most prestigious construction companies”, was operated by brothers Anthony and Robert Morton.

The company had various luxurious developments including the $40m development of Jackalope Hotel in Merricks North which included a 143-year-old homestead and winery with a 46-room hotel.

The brothers also founded another construction company in Melbourne, Element Five, which focuses on high end multi-residential and commercial projects.

The liquidators most recent report said VCON (Aust) went bust owing 296 unsecured creditors more than $28m and an additional $770,159 to secured creditors.

VCON Group owes an additional $3m to unsecured creditors.

Nearly 40 employees are owed more than $2m, not inclusive of superannuation, including $107,405 in salary and rostered days off, $378,339 in annual leave, $249,433 in long service leave and $906,514 in redundancy payments.

At the time of its collapse, Melbourne property developer Landream had launched legal action against VCON in the Victorian Civil and Administrative Tribunal in relation to an outstanding claim totalling $17.2m, Mr Hewitt revealed.

He said the director attributed the company’s collapse to difficulty in completing a major contract which led to the company suffering significant reputational damage within the industry.

“At the time, the company said it had a pipeline of various contracts totalling $200m, of which the director was in various stages of discussions with the project owners,” he said.

“Due to the reputational damage suffered by the company however, the company failed to convert this pipeline of work and as such was unable to generate a future income stream.”

Mr Hewitt said rising costs within the construction industry also led to VCON’s downfall.

VCON was contacted for comment.