Daniel Grollo v James Packer: it’s all a point of view
Court documents reveal developer Daniel Grollo claims he was hung out to dry by Barangaroo bosses’ ‘deceptive’ conduct.
March 30, 2017: Daniel Grollo sits in Cafe Feoh, a modest eatery known for its Vietnamese fusion bacon and egg rolls and home-baked granola, in Lindfield on Sydney’s north shore.
Melbourne’s skyscraper king is anxious about his punt on Sydney’s Barangaroo, which he hopes will deliver a massive profit, but at this early stage is already placing his company, Grocon, under financial stress.
Sharing the table at Cafe Feoh — 15km from the prime harbourside development — is Craig van der Laan, chief executive of the Barangaroo Delivery Authority.
Grollo needs an answer to a critical question; what will the height rules be for Grocon’s Barangaroo development, next door to James Packer’s $2bn casino and hotel?
“Don’t worry because we are not far. It will be issued soon,” van der Laan assures him, according to documents lodged in the NSW Supreme Court.
The 51-year-old Grollo’s entire adult life has been about constructing tall buildings: the Eureka Tower on the Yarra River being his grandest design. He inherited Grocon, founded by his grandfather Luigi 70 years ago, from his father Bruno.
In his Melbourne world, height and size equal money. But in Sydney, there is a competing profit driver: harbour views, and most lucratively of all, in Crown’s case, views of the Harbour Bridge and Opera House.
The Cafe Feoh interaction is just one of multiple exchanges detailed in a 117-page document lodged in the NSW Supreme Court, in which Grocon alleges it was ruined by the BDA and its successor Infrastructure NSW.
“The real story isn’t about Daniel losing his home (a Eureka penthouse), that’s just silly noise. This is a story of how the NSW government destroyed Grocon,” a source familiar with Grollo’s position told The Weekend Australian.
Biggest battle
Four years on from the Cafe Feoh get-together, the fallout from the Barangaroo bust has been catastrophic for Grollo and Grocon, with 87 Grocon companies and subsidiaries now in administration. Grollo faces losing his penthouse, valued at $16m.
Grocon has launched legal action against Infrastructure NSW, demanding $270m in compensation, claiming that the BDA withheld information about how the Crown development would slash the scale of Grollo’s plans, and his expectations of pocketing a $150m profit from the project.
Grollo declined to be interviewed for this story, but in recent comments to the ABC, he summed up Grocon’s plight this way: “Our losses are huge. Our advisers assess the damage to be between $60m and $190m. This is the biggest battle this company has undertaken in its 73-year history.
“This is the last roll of the dice, we’re in the battle of our life. We’ve paid $400m (for the Central Barangaroo project), we won the project; they (Infrastructure NSW) did a deal with someone else to our detriment.”
For its part, INSW has filed court documents rejecting Grollo’s claims and says the company’s financial predicament predates the Barangaroo problems.
The NSW Supreme Court has released more than 300 pages of documents to The Weekend Australian, which for the first time allow Grollo’s version of events to be laid out in forensic detail.
Grocon’s filing, dated November 10 last year, reveals increasingly desperate attempts by Grollo over several years to get clarity of the “sight lines”, amid escalating costs and financial exposure.
According to its version of events, the executives of the BDA strung Grollo and his lieutenants along, engaging in “misleading and deceptive conduct” over four years. Further, Grocon alleges, it failed to “act in good faith” and engaged in “unconscionable” conduct.
The delays ultimately forced Grollo to sell out of the project, incurring the major losses, according to his legal document. Between 2015 and 2019, Grollo’s legal documents state, the NSW bureaucrats repeatedly promised but failed to deliver a ruling on the sight lines.
Among these instances, as set out in the legal claim, were:
● An October 7, 2015, meeting between van der Laan and Grollo, in which the BDA chief said words to the effect of: “There are no restrictions with what we want to do” and “there is a work around with the covenants that exist between the Authority, Lendlease and Crown and this would not be an issue for Grocon” and that “Grocon should feel confident to come on this journey with us”.
● On November 24, 2015, van der Laan is alleged to have told Grollo the BDA was going to push for more height and more money at the development at Central Barangaroo.
● On March 2, 2016, van der Laan said words to the effect to Grocon Holdings: “The whole consortium should be very proud of the presentation and proposal. It is of an exceptional standard and a credit to you all.”
● On July 12, 2016, Grollo attended a meeting with van der Laan at which he stated words to the effect of: “We have an obligation to consult reasonably, but after that we have the right to terminate the consultation and move forward with what we want.”
● On August 17, 2016, in an email between BDA and Grocon, executives said the “sight lines negotiations” were to be concluded by August 31, 2016.
● In late November 2016, during a phone conversation with Grollo, van der Laan is alleged to have said words to the effect: “Don’t worry. These issues with Lendlease and Crown will not impact Grocon in the long run.”
According to the legal filing, the issue over the sight lines spilt into 2017 and on June 1 that year van der Laan and Grollo met at the BDA offices. Van der Laan said words to the effect: “We are close. The sight lines will be issued in a few weeks.”
● On August 25, 2017, van der Laan met Grollo. In response to a question from Grollo as to when the sight lines negotiations would be resolved, with van der Laan or another BDA executive at the meeting said: “The notice will be issued in time for Grocon to secure funding.”
● On September 1, 2017, according to the Grollo court filing, Tim Robertson, a BDA executive and a former senior adviser to former NSW premier Mike Baird, during a meeting with Grollo, in response to a question about the resolution of the sight lines negotiations, stated words to the effect: “We are close. It won’t be long.” Van der Laan was also present during this meeting and in response to a question about the resolution of the sight lines negotiations he stated words to the effect: “You should not worry about this.”
● On November 14, 2017, during a phone call between van der Laan and Grollo, van der Laan stated: “I think we are on sight lines issues in the next 24/48 hours”.
And on and on the assurances went, according to Grocon’s legal claim.
Money pit
All the while, Barangaroo was a money pit; by February 2016, Grollo had already incurred $3.6m in costs in connection with the tender process. By June that year this had risen to $4.3m. As at November 15, 2017, this had soared to $30.5m.
Undeterred, on December 12, 2017, Grocon doubled down on its Barangaroo bet, making a non-refundable deposit of $7m and setting up the provisions of an ANZ Bank guarantee in favour of the BDA for $93m.
On February 9, 2018, Grollo spoke to Robertson via phone where Robertson said words to the effect: “The sight lines are not more than three weeks away.”
2018 rolled on like the previous year. There were lots of meetings, plenty of talk, but no deal on the sight lines. In July, according to Grocon legal papers, van der Laan, in describing the BDA talks with Crown, said words to the effect to Grollo: “It’s an obligation to consult and if Grand Bargain doesn’t work, we walk away and we’ll proceed with Grocon’s development … don’t worry.”
On September 10, van der Laan, according to Grocon legal filings, was equally adamant it would prevail over Crown, saying: “We will win or settle the proceedings in our favour because the Authority clearly only has a duty to consult, and no more. We are working on a resolution and once it’s settled the sight lines notice will be issued.”
Authority hits back
In its response, lodged in the NSW Supreme Court on Christmas Eve, INSW says Grocon submitted its bid “aware that the Authority would modify the heights of the Central Barangaroo development as needed to address the sight lines”.
In support of this, INSW included in its court document a WhatsApp message from Grocon executive Chris Carolan to Robertson sent at 7.45am on October 30, 2018.
“There were no height limits when we submitted the bid. We … set our heights on the master planning context for 150k above the ground with a strategy around maximising the revenue from the Block 5 tower … we did so will (sic) full expectation the BDA would modify consistent with being land owner and whatever impact sight lines would bring — as BDA discussions with Crown and LL were not known to us.”
Grocon claims that in April 2018 Robertson briefed Grollo that the BDA had “made a recommendation to Cabinet as to the final position … for the purposes of the sight lines negotiations”.
In its court filing, Grocon claims another BDA executive told Grocon chiefs that “the Authority has many levers to pull”.
‘Let’s get over our egos’
In essence, Grocon legal case is built on its claim that it lost $270m because of a deal between the BDA and Crown that protected the harbour views of its casino and hotel and capped Grocon’s.
Crown had launched legal action against the NSW government in August 2018 to protect its harbour views. (Crown won that case, and ultimately Crown’s views were protected.)
Despite years of increasingly tense talks, by 2019 there was still no deal. Grollo was losing patience when, according to his legal filings, in a February 27 meeting with van der Laan, Grollo said: “We need to get on with it. We are working on multiple schemes and none of this works without a sight lines resolution notice. Let’s get over our egos and get on with the Judgment Compliant Scheme and move on.”
In response, according to the Grocon filing, van der Laan said words to the effect of: “I agree. We are moving forward on this.”
But Grollo’s position became more complicated with van der Laan’s exit from the top job in April 2019, and then in July the BDA was abolished and Infrastructure NSW took over the Barangaroo development and negotiations.
Grocon v INSW returns to the NSW Supreme Court next month. It’s a high-stakes gamble, but it seems Grollo has nothing left to lose.
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