VCON collapse: Subcontractor causes $1m damage to Brunswick site
The fallout from the collapse of builder VCON has escalated, after a worker reportedly poured concrete down a water pipe, causing over $1m in damage to an apartment project in Brunswick.
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The fallout from the collapse of luxury Victorian builder VCON has intensified, after an angry subcontractor allegedly caused over $1m worth of damage to an apartment project in Melbourne’s north.
The 122-apartment complex, dubbed Brunswick Yard, located on Ballarat St in Brunswick, is still waiting for rectification works, after a worker owed money reportedly poured concrete down a water pipe.
The high-end project is advertised online as “ready to move in”, with two and three bedroom apartments selling from $840,000 and $1.4m respectively.
“Brunswick Yard is your once-in-a-lifetime opportunity to live at the centre of it all. Limited residences remain in this stunning, modernist-inspired building,” their website states.
VCON, known for its award-winning projects across Melbourne, including winery Jackalope on the Mornington Peninsula and apartment block Fawkner House in South Yarra, collapsed into liquidation late last year.
Other entities that operated within the VCON Group, including companies trading under the V-Struct and Element Five brand, have also gone bust – bringing total job cuts to nearly 100 and leaving creditors facing losses of more than $30m.
Grant Thorton administrators Andrew Hewitt and Matt Byrnes – who are now picking through the financial wreckage of six entities within the VCON Group – said the company had made a successful insurance claim for the damage late last year, with rectification works underway at the time of its collapse.
Mr Hewitt said Anthony Morton, who was the director of Element Five (Aust) which was the company heading the project, estimated that there was still $1m worth of works to complete under the insurance claim, as well as an additional $300,000 worth in defect works.
A former contractor of VCON who claimed he was owed more than $30,000, previously told the Herald Sun that the worker “tampered with the water mains and put concrete down the plumbing”.
“They’ve made that many contractors angry. (More than a million) dollars worth of damage on that project just from contractors not getting paid,” he said.
Element Five (Aust) engaged subcontractors and a small number of former employees of the now defunct V-Struct Projects No. 1 to complete work on the project.
Mr Hewitt said his team was in discussions with the company’s insurer, QBE Insurance, to determine whether it would continue funding the administrators to complete the rectification works.
“In the event QBE confirms they will continue to fund the administrators, further assessment of the position will be made by the administrators as to whether the insurance rectification works can be completed,” he said.
“If so, we will continue to trade in a limited capacity to complete the works. In the absence of funding from QBE, we will cease to trade the company.”
If the company is able to finish the insurance and defects works, a security bond of $1m held with insurer Swiss is expected to be released by the project developer and returned to the company’s secured creditor.
“We consider that it is in the company’s best interests to secure the bond release, and as such we are currently exploring the completion of the rectification works under the insurance claim with QBE,” Mr Hewitt said.
“The company was placed into administration to allow it to continue attending to these rectification works, with a view to reducing the claim of the secured creditor and thereby increasing potential funds available to unsecured creditors.”
The report lodged with the Australian Securities and Investments Commission this month shows Element Five (Aust) entered administration owing secured and unsecured creditors $2.8m and $899,771 respectively.
Mr Hewitt said his preliminary investigations had also identified three potential unfair preference payments totalling $45,332.
Unfair preference payments are payments made by a company prior to entering administration or liquidation that unfairly favour one creditor over others.
He said he had identified a “significant amount” of related party transactions between the VCON Group and to directors and associated entities, the majority of which were recorded through various related party loan accounts.
“We consider further review is warranted to determine if these transactions enliven any claims … further investigations into these transactions will be conducted in the event the company is placed into liquidation,” he said.
Mr Hewitt said Mr Morton had also failed to complete and return a report on the company’s business property, affairs and financial circumstances – known as a ROCAP.
“The director has failed to complete and return the requested ROCAP … we will report this matter to ASIC unless we receive it in the interim,” he said.
Mr Hewitt said Mr Morton had attributed the financial woes of VCON Group to a dispute with a developer on a substantial project in Brighton.
“As a result of these difficulties, VCON Aust was unable to complete the contract, and a new builder was assigned to the project,” he said.
“The developer cashed a range of performance guarantees, significantly impacting VCON Aust and the wider VCON Group’s cash flow.
“At the time, the VCON Group held a substantial pipeline of work.
“However, the cash flow strain, as well as significant reputational damage sustained as a result of the Brighton development resulted in VCON Aust and (Element Five (Aust)) being unable to secure new projects.”
New documents lodged with ASIC from other entities under the VCON Group have revealed additional millions owed to unsecured creditors.
V-Struct was listed as owing 171 unsecured creditors over $5.5m, including the Australian Tax Office ($163,708), Corbell East Formwork ($310,200), Fuhua Plaster ($534,421), Stone Age Tiling ($219,749) and Tesko Fire Protection ($251,232).
V-Struct Projects No. 1 was also listed as owing 46 employees over $2.3m, as well as $1m to unsecured creditors.
This is on top of the more than $32m owed to unsecured creditors from the collapse of VCON (Aust) and VCON Group alone.
VCON, which describes itself as “one of Melbourne’s most prestigious construction companies” had been operating for over 20 years.
The company worked on the $40m development of Jackalope Hotel in Merricks North which included a 143-year-old homestead and winery with a 46-room hotel.
They were also behind an award-winning 30-residence complex Elwood House in Bayside, and apartment complex No. 6 Sydney Street, in Prahran.
VCON and Element Five were founded by brothers Anthony and Robert Morton.
The Herald Sun previously revealed VCON was 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.
Mr Hewitt previously 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.
The Herald Sun is not suggesting any wrong doing by the Mortons, only that the liquidators are investigating these allegations.
Originally published as VCON collapse: Subcontractor causes $1m damage to Brunswick site
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