VCON Subcontractor Causes $1 Million Damage Amid Ongoing Collapse Fallout

The collapse of luxury Victorian builder VCON continues to unfold, with a subcontractor reportedly causing over $1 million in damage to a major apartment development in Brunswick. According to the Herald Sun, the incident involved concrete being deliberately poured down a water pipe at the Brunswick Yard project, a 122-apartment complex located on Ballarat Street. The development, which features two- and three-bedroom apartments priced between $840,000 and $1.4 million, is still awaiting rectification works.

A former VCON contractor, who claimed he was owed more than $30,000, alleged that the damage was a result of unpaid subcontractors, stating, “They’ve made that many contractors angry. More than a million dollars worth of damage on that project just from contractors not getting paid.”

VCON Group Collapse and Insurance Claim

The VCON Group, which includes entities operating under V-Struct and Element Five, entered administration in late 2023, resulting in job losses for nearly 100 workers and leaving creditors facing more than $30 million in losses. The Brunswick Yard project was being managed by Element Five (Aust) at the time of the incident.

Administrator Grant Thornton, led by Andrew Hewitt and Matt Byrnes, confirmed that the damage was covered under an insurance claim lodged late last year, but estimated there is still $1 million worth of rectification work outstanding, along with an additional $300,000 in defect works.

Uncertainty Over Completion of Works

Mr Hewitt said discussions were ongoing with QBE Insurance to determine whether it would continue funding the administrators to complete the rectification works. If QBE agrees to continue funding, administrators may resume limited trading to finalise the project. If not, operations will cease. A $1 million security bond held with Swiss may be released upon completion, potentially benefitting secured creditors.

Creditors and Allegations Under Investigation

According to the Herald Sun, Element Five (Aust) entered administration owing $2.8 million to secured creditors and $899,771 to unsecured creditors. Preliminary investigations have identified three potential unfair preference payments totalling $45,332, along with a “significant amount” of related party transactions within the VCON Group, including director-associated entities. Further investigations are pending if the company proceeds to liquidation.

The administrators also noted that Anthony Morton, director of Element Five (Aust), had not returned the mandatory ROCAP report outlining the company’s financial position, a matter which may be referred to ASIC unless resolved.

Collapse Tied to Brighton Project Dispute

Mr Morton attributed VCON’s financial collapse to a dispute with a developer on a major Brighton project. The fallout from this dispute reportedly led to cashed performance guarantees, a damaged reputation, and cash flow problems across the VCON Group. These issues eventually prevented VCON and Element Five from securing new work, despite a previously substantial project pipeline.

Millions More Owed Across VCON Group

Other entities within the group reported significant additional debts. V-Struct alone was listed as owing 171 unsecured creditors more than $5.5 million, including:

• Australian Tax Office – $163,708

• Corbell East Formwork – $310,200

• Fuhua Plaster – $534,421

• Stone Age Tiling – $219,749

• Tesko Fire Protection – $251,232

In addition, V-Struct Projects No. 1 reportedly owes 46 employees over $2.3 million and $1 million to unsecured creditors. This is in addition to the more than $32 million owed to unsecured creditors from VCON (Aust) and the broader group collapse.

Award-Winning Past, Uncertain Future