Investors win court fight to wind up Lion Property Group as lawyers drop cash-strapped developer

A luxury property developer accused of mishandling $120 million of investor money has been placed into liquidation at the request of its investors.

Lion Property Group was put into liquidation by the Supreme Court of Victoria on Wednesday after the group failed to hand over its books and records to an independent auditor as it had promised.

Sonja Boric is helping a family member navigate a difficult legal process after they lost money invested with Lion Property Group.Credit: Wayne Taylor

Lawyers for the investors told the court the liquidation was necessary because Lion had told its own advisers that it could not provide a full set of its books and records or pay for the audit of their business because it had “no cash in the bank”.

Lawyers for Lion flagged they would be dropping their client because they had also not been paid by the group, the court heard.

As well as placing the group into liquidation, Justice Patricia Matthews ordered that Lion’s founders, John Sader and Garry Pesochinsky, be restrained from making key decisions about the fund’s syndicates while the group was in liquidation.

Lion was behind a series of high-end boutique property developments in blue-chip areas in Melbourne, such as Brighton, Camberwell, Elwood and South Yarra, as well as affluent suburbs on the Gold Coast and in Brisbane. The properties being developed were expensive – often $4 million per townhouse.

This masthead revealed last month that a group of investors had taken action against the group amid concerns about how their money had been used. Many of the projects had not been started or were delayed, and several development sites had been sold by mortgagees in possession.

The court action alleged Sader and Pesochinsky had engaged in a range of breaches of their duties to investors.

At an earlier hearing, the court heard that some investors were concerned that Lion was running a Ponzi scheme.

Those allegations remain untested by the court, despite Matthews’ decision to place the business into liquidation.

Lion, Sader and Pesochinsky have said that they deny these allegations and that the majority of Lion’s investors were happy with how their investments had been managed. They said the complaining investors did not understand the investment they had invested in, and also blamed a range of factors for the group’s delays, including COVID-19, planning issues and a bad builder.

The court heard on Wednesday that Lion was yet to provide any formal response to the allegations in court via a formal defence document or any affidavit material.

The fate of the investors’ money will now be investigated by liquidator John Lindholm from KPMG.

The Supreme Court heard that about $60 million of investor funds had been unaccounted for following a review by Lindholm of the limited documents provided by Lion.

Lindholm told the court that $37 million of investor money had been used on the group’s property projects, while another $37 million of investor money destined for property projects was instead redirected to Lion via loans or cash withdrawals.

Lion’s Eminence project in Camberwell.Credit: Joe Armao

The judge said she was concerned about the conduct of Lion during the proceedings.

“Much of the defendant conduct of this interlocutory process has been just inexplicable. They have not complied with a number of orders that I have made,” she said, noting that this was not the fault of Lion’s lawyers.

The judge also said Lindholme’s preliminary review of the business had raised significant concerns to appoint a liquidator.

“He [Lindholme] indicated that he didn’t have all the documents that he needs in order to be certain of Lion’s situation,” she said.

“But that what he has seen thus far is – and which he described for the court – lead me to the very concerned financial state of these companies, and to be concerned as to whether or not any of the assets of the company are at risk.”

Lion had argued against the liquidation, with its lawyers telling the court the group was exploring a voluntary administration.

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