UFC Gym Australia collapses into liquidation owing $15.6m after drawn out legal battle

An embattled gym chain with businesses all across Australia has gone into liquidation and one of its directors has been bankrupted over the debacle.

EXCLUSIVE

An embattled gym chain with businesses all across Australia has collapsed six months after external administrators first took over the business amid a protracted legal fight, with one of the directors going bankrupt.

Mixed martial arts gym franchise UFC Gym Australia and New Zealand, which at its peak had more than 10 fitness centres in Sydney, Melbourne, Perth and the Gold Coast, was court-ordered to go into liquidation late last week.

On Thursday afternoon, the NSW Supreme Court appointed Desmond Teng and John Refalo of insolvency firm Byrons as liquidators of the chain’s parent companies, Ultimate Franchising Group Pty Ltd, Ultimate Franchising Group Properties Pty Ltd and UFC Gym Prospect Pty Ltd.

These companies held the master franchise agreement for operations in Australia and New Zealand.

According to reports lodged with the corporate regulator, there is a total of 62 creditors cumulatively owed $15.6 million from the company’s demise.

A spokesperson for UFC Gym insisted this would not impact the gym’s franchises and was only a blow to their main headquarters.

“It was a difficult decision which only impacts head office,” they told news.com.au. “It has no implications for operations.”

UFC Gym Australia is now in liquidation.

It’s unclear if operations will continue.

News.com.au previously revealed in June that UFC Gym Australia had gone into administration after a court ordered the business to pay $5.2 million to three franchisees when a court found the company and its directors had “engaged in misleading and deceptive conduct” during the process of selling said franchises to them.

One of Ultimate Franchising Group’s directors, Sam Husseini, is in the process of trying to appeal this.

A related entity called Train Different Pty Ltd proposed a deed of company arrangement (DOCA) which would see creditors receive one cent for every dollar they were owed.

Control of the business then reverted back to the directors.

Gym franchisees owed money were left fuming from the arrangement.

Karim Girgis, the owner of UFC Balcatta in Perth, told news.com.au at the time the small 1.06c return was “pathetic”.

Mr Girgis’ company is owed $1.236 million, according to proof of debt documents accepted by the administrator, which means he would have only recovered roughly $13,000.

As a result, he and two other gym owners spent around $60,000 challenging the DOCA and the NSW Supreme Court

“We forced their hand,” Mr Girgis said, adding that he was glad to have forced the company into liquidation due to the “principle”.

The trio of litigating franchisees – Balcatta in Perth, and Castle Hill and Blacktown in Sydney – have also caused one of the directors Maz Hagemrad to declare bankruptcy.

They have also issued a notice to the other director, Mr Husseini, with intentions to bankrupt him.

Both were contacted for comment via the UFC Gym spokesperson.

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Karim Girgis (right) during his gym’s grand opening in 2018 with UFC fighter TJ Dillashaw.

Mr Girgis on the opening day of Balcatta. He regrets becoming involved with UFC Gym.

Mr Teng, one of UFC Gym’s liquidators, told news.com.au on Monday morning that the DOCA’s return was “very uncommercial”, resulting in the Supreme Court ruling in favour of creditors.

“The DOCA is now terminated by a court order,” he added.

He said that his investigations are in their infancy and he has not yet made a decision about whether to shut down operations.

We’re “trying to work out the best way going forward, working with all the stakeholders, including the franchise stores,” he said.

Maz Hagemrad is one of the directors of UFC Gym Australia. Picture: Justin Lloyd.

Mr Hagemrad is bankrupt over the debacle. Picture: Justin Lloyd.

In early May, Justice Tom Thawley from the Federal Court of Australia ruled in favour of the three disgruntled franchises after a four-year legal battle against the master franchise holder of UFC Gym Australia and New Zealand.

During the six-day civil trial, the judge found that the co-directors of UFC Gym Australia, Mazen Hagemrad and Samer Husseini, had misrepresented the gym’s financial position in order to sell franchises.

The directors claimed two of the franchises were profitable when they were actually losing money, told prospective buyers an estimated cost of starting up various franchises which was much lower than it turned out to be, that there would 1200 members in the space of 10 months and that gyms would break even straight away, according to the court’s findings.

Mr Hagemrad, one of the co-directors, also claimed to prospective buyers that he had “preferential payments” in place that would make “fitting out” their venue into a UFC style gym considerably cheaper, according to court documents, when in reality he marked up these prices and took a cut of the profit.

Some of the companies he referred franchises to in order to obtain branded equipment were run by his family members, but he denied during the trial that he received any “kick-backs’.

The Balcatta gym was awarded total damages of $1.7 million while the Blacktown one’s total payout came to $1.9 million. The Castle Hill gym was granted $2 million in damages.

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