Larry Kestelman, Obaid Naqebullah sued over ‘major defects’ in Melbourne apartment complex

The rich lister is being sued by a company linked with the late Jonathan Hallinan, and along with builder Obaid Naqebullah is being chased for damages by owners of an apartment block in Melbourne’s blue chip suburb of Brighton.

Richlister Larry Kestelman is named in the lawsuit. Picture: Linda Higginson/Tasmania JackJumpers

Rich lister Larry Kestelman and builder Obaid Naqebullah are being sued personally over claims their building company constructed a Melbourne apartment block with “major structural and cosmetic defects” when it was sold as a luxury development.

In a twist, the ex-director of the special purpose vehicle which owns a number of the apartments and filed the statement of claim against the two men was wealthy property developer, Jonathan Hallinan. 

Mr Hallinan died age 47 last year after a battle with cancer, but his company 30 Willansby Street is now seeking $1.6m in damages from Mr Kestelman and Mr Naqebullah whose building outfit Shangri-La Constructions produced a dodgy 23 unit blocks in the affluent suburb of Brighton, in Melbourne’s south east, according to court documents seen by The Australian.

The late property developer Jonathan Hallinan at his home on St Kilda road in Melbourne in 2018. Picture: Aaron Francis/The Australian

After the apartments were built between 2009 and 2011, “major structural and cosmetic defects became apparent”, the statement of claim read.

“(This included) critical fire safety defects including combustible cladding and insulation and a lack of fire separation between units,” the documents said.

“Critical water ingress problems, including roofing and stormwater drainage problems and waterproofing membranes being omitted from bathrooms and render falling off the exterior of the building.”

Mr Kestelman could not be reached on Tuesday as he was returning to Australia from overseas, but in an email a staff member from his office said they were “not aware of any proceedings being commenced”.

He is listed as the first defendant on the statement of claim and according to the documents was the director of Shangri-La Constructions Pty Ltd between 2008 and 2013 which entered into a contract to build the apartments. He is no longer a director.

A website for the block of units says the apartments in Brighton, a blue-chip beachside suburb, were developed by BPM – the construction and property group founded by Mr Hallinan.

According to Domain, a two bedroom, two bathroom unit sold from the block for $1.25m in 2017. Realestate.com.au reported the median price of units in the suburb are currently sitting at $1.1m.

Mr Kestelman ranked 165 on The Australian’s Richest 250 this year, with an amassed wealth of $912m after he made his fortune from the $230m sale of internet services provider Dodo in 2013.

The successful entrepreneur moved to Australia from what is now Ukraine aged 12, before becoming a property developer and now owner of the National Basketball League.

During a separate dispute concerning the block of apartments, Victoria’s civil tribunal ruled last year that Shangri-La Constructions must pay damages to Mr Hallinan’s company in the sum of $3,344,445.

Richlister Larry Kestelman (left) is being sued by the company assocated with developer Jonathan Hallinan who died last year.

According to reasons published in the matter, residents initially sought damages of $8.7m plus extra money for accommodation while rectification works were carried out worth $81,000 per month. This was rejected.

After Mr Hallinan’s company received $2m following an insurance payout, it is now seeking the remaining $1.6m.

In January, via its solicitors Holding Redlich Mr Hallinan’s company “made a demand in writing” on Mr Kestelman and Mr Naqebullah for payment pursuant to liability under the deed of guarantee and indemnity.

“On 27 February 2024, Kestelman, by his solicitors, K & L Gates, responded to the demand sent on 19 January 2024 denying liability under the deed of guarantee and indemnity,” the statement of claim said.

Mr Naqebullah also denied liability.

“As at the date of this statement of claim, the defendants (Mr Kestelman and Mr Naqebullah) are jointly and severally liable pursuant to the Deed of Guarantee and Indemnity to 30WS for damages in the sum of $1,685,976,” the statement of claim said.

Mr Naqebullah has been the sole director of the company since 2013.

Mr Naqebullah and BPM Group were contacted for comment.