Melbourne construction company’s link to dodgy cladding crisis

They’re the construction brothers who’ve built at least 17 complexes the government has labelled a high or extreme fire risk. And the dodgy cladding has left hundreds of Melbourne homeowners trapped in apartments they can’t sell.

The Nicholson apartment complex in Coburg is one of at least 25 Hickory-built properties afflicted with non-compliant aluminium panels. Inset is Michael (top) and George Argyrou. Main picture: Wayne Taylor

A family-run construction company can be identified as the builder of at least 25 apartment blocks around ­Melbourne clad in dangerous aluminium panels.

A Sunday Herald Sun investigation can today reveal the Victorian Building Authority has hit the Hickory Group, run by brothers Michael and ­George Argyrou, with disciplinary action over its use of dodgy cladding.

At least 17 of the company’s non-compliant buildings have been rated at high risk or ­extreme risk of fire, including Anstey Square in Brunswick, which experienced a balcony blaze in 2017 that spread via cladding to the next floor.

The VBA has ordered ­Hickory to show why it should not be sanctioned over its role in the cladding crisis.

Anstey Square in Brunswick after the fire. It spread to the next floor through the cladding. Picture: Wayne Taylor

Premier Daniel Andrews is considering radical measures to fix the costly issue, ­including a state government-backed class action.

The state government is also looking at retrospective legislation in a bid to claw money back from builders to pay for cladding fixes.

The action would target builders such as Hickory, who take advantage of federal laws to set up single-project businesses, then shut them down after the project is complete, allowing the directors to continue working without facing liability claims from defects which might emerge in the future.

“We are looking at all legal avenues to pursue those who’ve done the wrong thing,’’ Mr Andrews told the Sunday Herald Sun.

He would not comment on Hickory, but said: “There are too many companies who have hammered the final nail and disappeared, only to re-emerge under a new name.’’

Hickory’s Elm apartments, on Dorcas Street in Southbank, were identified as having potentially dangerous cladding.

Hickory co-founder Michael Argyrou defended the company and its structures, and said the cladding they had used was compliant at the time it was used.

He said he was not aware 25 of their buildings had been identified as non-compliant, and said that the company was seeking to address every cladding-related issue they were required to.

He also said he wrote to the Planning Minister Richard Wynne last month in response to the VBA’s show-cause notice, saying: “As a result of the issue of this notice, we feel that we are subject to retrospective regulation which could have devastating impacts for the industry.’’

The Sunday Herald Sun’s investigation can also reveal:

MICHAEL Argyrou has been a director and/or secretary of 40 companies which are now deregistered.

GEORGE Argyrou, the company’s joint managing director, is a former director and/or secretary of 27 deregistered companies.

SOME owners of the 733 units in Hickory-built apartment blocks in Richmond, Brunswick, South Melbourne and East Coburg are struggling to sell their homes due to the cladding defects.

THE Hickory Group is winding up three of its companies while two more remain in administration. One, H Buildings Pty Ltd, was wound up owing its secured creditors $100 million, and paying out its unsecured creditors just 0.4 of a cent in the dollar.

Mr Argyrou said the company had gone “over and above its legal requirements to ensure no homeowner was “left behind’’ by the H Buildings administration.

“We voluntarily placed H Buildings into administration because the company was placed in financial peril by an unscrupulous developer,’’ Mr Argyrou said, referring to an unrelated court case in WA.

“We have mirrored our structure on typical developers’ structures in order to protect us from a similar incident.

“We are not aware of 25 Hickory buildings having been identified as having non-compliant cladding. We are addressing cladding-related issues on every Hickory building where we are aware this is required. We note that more than 1000 buildings have been identified as having non-compliant cladding, an authority and a $600 million fund established.’’

Mr Argyrou said he could guarantee “we have only ever used approved products on our buildings and will continue to only ever use approved products.’’

He said he considered the show-cause notice slapped on the company by the VBA to be an opportunity for discussion with government on cladding fixes.

“On 19 August, I wrote to the Minister for Planning and pointed out that ‘a shift of responsibility to the private sector has occurred through the use of private surveyors who are regulated by the VBA’,” he said.

He further wrote: “Government has outsourced risk and responsibility to the private sector. The key failings in the oversight of the construction sector and use of materials are those of regulators and policy makers — not builders — and we want to work with government to prevent it occurring in the future.”

Asked about the disciplinary action against Hickory, VBA chief executive Sue Eddy said: “The Victorian community can expect the VBA to use every power and tool available to it to enforce building codes and regulation.’’

Health Minister Jenny Mikakos said changes were in the pipeline to stamp out companies putting lives at risk.

“The allegations that have come to light in relation to this particular building company are very concerning,” Ms Mikakos said.

“This is why our government has made a number of changes when it comes to cladding. We have been calling for the Federal Government to make sure that these products are not coming into Australia at all in the first place, but we are also looking to modernise our building legislation to make sure that we can stamp out any dodgy practices.

“It is just unacceptable that builders are using unacceptable products on residential apartments or any residential properties, potentially putting Victorians at risk.”

State Opposition leader Michael O’Brien said the Andrews government had clearly bungled the issue.

“Everyday we see this cladding crisis get worse not better,” Mr O’Brien said.

“People shouldn’t be going to bed at night in their homes, no matter if they are rented or bought, worrying about is the cladding going to catch fiore because the Andrews government’s regulatory system has failed.”

‘I DOWNSIZED NOW I’M STUCK’

Sue Griffiths downsized from her family home into an apartment in the Hickory-built The Nicholson apartments complex in Coburg.

On paper it looked magnificent. A partnership with the Victorian government, 58 of its 199 apartments were set aside for social housing.

The remainder were sold to first-home buyers, working couples and empty-nesters like Ms Griffith, now 62.

But the building has been identified as one of at least 25 Hickory-built properties afflicted with non-compliant aluminium panels.

Sue Griffiths on the balcony of her Coburg apartment. Picture: Wayne Taylor

The company that built it, Hickory firm H Buildings Pty Ltd, was put into administration last year, and Ms Griffiths is trapped, unable to afford to replace the panels herself and unable to sell the unit with it still in place.

The Victorian Building Authority wrote to the owners telling them the statewide cladding audit had rated their building an “elevated fire risk’’.

“I have absolutely no resources if we get a bill for the cladding,” Ms Griffiths said.

“I don’t know who would want to buy it with a debt. I’m caught between a rock and a hard place.

“My apartment is probably still only worth what I paid for it. And then if it incurs a hefty debt for changing the cladding — I mean, you’d have to be an idiot to buy it.”

The building on Nicholson St. Picture: Wayne Taylor

Ms Griffiths and her neighbours have now been issued with a list of safety instructions, urging them to properly extinguish cigarettes, keep hallways clear in case of evacuation, and keep balconies clear of clutter.

WHO ARE THE ARGYROU BROTHERS?

They’re a Melbourne success story — the fourth-generation builders who turned their family company into a giant construction firm with 550 employees.

But brothers Michael and George Argyrou, joint founders of the Hickory Group, are now in the frontline of Victoria’s cladding crisis.

Michael Argyrou, 48, the company’s founder, is a current director and/or secretary of 61 registered companies, the majority Hickory-related.

He is a former director of 58 companies, of which 40 are deregistered. Two more of the companies in which he was a director are in administration, and a further three are in the process of being struck off after the company sought voluntary deregistration.

Michael Argyrou.

George Argyrou.

George Argyrou, 49, the company’s joint managing director, is a director and/or secretary of 48 companies.

He is a former director of another 43 companies, of which 27 are deregistered. He too is a former director of the two companies that are in administration and the three that are being wound up.

Administrators who wound up one of their companies, H Buildings Pty Ltd, explained the process in a letter to creditors in November 2018.

“In 2012, the Company began to transition to project-specific wholly-owned special purpose entities for each building project,’’ the Ferrier Hodgson liquidators wrote.

“This process was fully transitioned by late 2016, following which the Hickory group undertook its internal restructure.’’

The state government’s $600 million fund to begin rectifying the cladding crisis has seen more than 1400 buildings identified as having non-compliant cladding, a fire risk.

A state government-backed class action, retrospective laws, a defect bond scheme similar to the one being planned for NSW and changes to federal laws are all under consideration.

Premier Andrews said: “When it comes to dealing with (these) companies, Victoria can’t go it alone.”

“We have had productive discussions with the Prime Minister and these are continuing.’’

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How the story unfolded

■ The company was building accommodation for BHP workers at Port Hedland in WA in 2012 when developer Port Village Accommodation went bust and was placed into liquidation by BHP. 

■ PVA’s liquidator accused the Hickory company, then known as Hickory Group (WA) Pty Ltd, of receiving $10.3 million in preferential payments from PVA. The payments, for prefab accommodation modules, were passed on to parent company Hickory Group Pty Ltd. The liquidator had Hickory Group added to the legal action as a respondent. 

■ Hickory successfully defended the claim in WA’s Supreme Court, but the decision was overturned on appeal and set down for retrial. Hickory argued it was still owed another $20 million from PVA. 

■ Hickory Group (WA) Pty Ltd put itself into administration in 2014. The case was then stayed indefinitely as per Corporations Act law.

■ In March 2017, Hickory Group Pty Ltd became H Buildings Pty Ltd.

■ In April 2017, five owners’ corporations from The Local development in Stawell St, Richmond, sued the company for defects in common areas. 

■ In March 2018, all 133 of the individual unit owners of The Local joined the action. 

■ In July 2018, Hickory put H Buildings into administration, citing legal costs from the case in WA.

■ H Buildings has now been wound up.

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Hickory is considered a pioneer in prefabricated construction, which sees it build entire apartments off-site and install them with cranes. The practice is popular with developers because it is fast, and helps keep costs down.

According to Hickory’s website, the company was founded in 1991 by the brothers and has since morphed into a large firm with an office in China, and multiple workshops and building sites across Melbourne.

In 2014, Hickory Building Systems signed a joint venture with Chinese company to QGR United China to manufacture some of Hickory’s building products in Henan Province for the “international market’’. In the past 10 years, Hickory companies have built 8594 apartments across Melbourne and Geelong. The company also lists construction of another 3141 apartments.

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Its current major developments include the 25-storey Hyatt Centric in Downie St, Melbourne, the Holiday Inn Express in Little Collins St, and the five-star Chadstone Hotel atop Chadstone Shopping Centre. The Sunday Herald Sun is not suggesting any problems with these developments.

Planning Minister Richard Wynne said the entire Building Act was being overhauled to “crack down on dodgy practices’’.

“We need to improve how the trades are regulated (and) protect consumers from defect work,” he said.