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SA homebuilder under police investigation as owner dodges alleged debts

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EXCLUSIVE | Liquidators have failed to track down the man behind an SA construction company under police investigation for alleged insurance fraud, and which owes creditors nearly $3 million.

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GNC Homes was first accused of forging building insurance in early 2015, allegedly having only 37 legitimate insurance certificates to build more than 200 single-storey houses across South Australia.

SA Police, national corporate regulator ASIC and the consumer protection agencies of three Australian states were involved in a joint investigation into the company, which was soon ordered to cease all building work.

It had more than 70 houses under construction at the time.

GNC Homes was later placed under external administration and, according to the latest liquidator’s report, still owes $2,833,702 to a variety of creditors, ranging from small subcontracting businesses in outer suburban Adelaide and regional South Australia to multinational financial services firm American Express.

Many of these creditors continue to suffer the personal and financial consequences of the company’s failure to pay.

InDaily can reveal that SA Police is still investigating GNC Homes.

And liquidators have failed to locate its owner, Melbourne-born investment strategist Gidon Brott, to chase millions of dollars in debts he and his other companies allegedly owe GNC Homes.

Brott appeared at a Moscow trade show last year, spruiking Australia’s property market to prospective Russian immigrants.

According to ASIC records, he lives in a suburban house in Perth.

Nonetheless, a spokesperson for the company’s liquidator, David Ross of Hall Chadwick, tells InDaily:

“The liquidator’s enquiries – and any associated claims – regarding Mr Brott have been, and continue to be hampered due to him not being able to be located.

“…the liquidator does not know of Mr Brott’s current location (and) previous attempts to serve him at numerous locations have been unsuccessful.

“Generally speaking, in circumstances where an individual cannot be located – to serve documents for example – it is likely that the liquidator will eventually discontinue all enquiries and seek to finalise the liquidation.”

Wherever he is, he has benefitted handsomely from GNC Homes.

According to the liquidator’s reports, obtained by InDaily:

GNC Homes provided Brott and his companies with a series of loans in the years before it was liquidated.

The largest was a $4.42 million loan to GY3, of which he was director and shareholder.

GNC Homes also loaned $174,500 to GY9.

Brott is a former director of GY9. Another of his companies, The Pipas was a shareholder.

GNC also loaned $930,000 into Brott’s personal bank account.

None of these loans – totalling $5.53 million – has ever been paid back.

There’s no way that you would want your kids in this industry because of the stress of it all, not knowing whether you are going to get paid or not

If they were, it would more-than cover the cost of paying back all of GNC Homes’ outstanding creditors.

But it seems unlikely.

Liquidator David Ross issued demands for the repayment of each of the loans in July and August 2015.

GY3 is now a deregistered company.

What happened to the $4.42 million before it was deregistered is unclear.

***

South Australian small business owners are still suffering the effects of GNC Homes’ failure to pay them.

Murray Bridge contractors Steven and Donna Reed are owed more than $150,000.

Steven Reed tells InDaily he and his wife were lucky to avoid having to re-mortgage their house as a result.

He says their bank extended an overdraft instead.

“We were lucky that the bank extended our overdraft … we’re still trying to pay that debt back,” Reed tells InDaily.

“We are only a small family business … (it was) a large financial impact.

“There’s no way that you would want your kids in this industry because of the stress of it all, not knowing whether you are going to get paid or not.”

Dynamic Ceilings employs six full-time workers – including Steven and Donna – and regularly engages about 20 subcontractors.

According to one of Ross’s reports, Dynamic Ceilings took the homebuilder to the District Court to recoup the debt.

A deed of settlement was lodged and executed with the court, requiring GNC Homes to pay the full $177,570, in nine instalments between May 2015 and January 2016.

Dynamic Ceilings received the first instalment of $19,730.

Reed says that was the last payment they received.

Dynamic Ceilings was eventually made to return the $19,730 instalment, because it was deemed an ‘unfair preference’ payment.

An ‘unfair preference’ is generally when a creditor suspects a company is insolvent and receives payment for a debt ahead of other creditors within six months of that company’s liquidation.

***

Che Burrows was registered as the sole director of GNC Homes from August 2012 through to June 2015, when he placed it under external administration.

But he claims he was director “only in name” and that Brott wielded the real power in the company.

SA Police executed a search warrant on the home of Che Burrows in February 2015

In the brief interview he gave to InDaily on the subject, Burrows referred only to his “employment at GNC Homes”, and declined to discuss the role in any detail.

Brott challenged Burrows’ decision to appoint liquidators four days after they took control of the company in June 2015.

Brott claimed that shareholders resolved to remove Burrows as director of the company a month earlier.

To resolve the dispute, liquidators took GNC Homes to the Supreme Court.

Judge Graham Dart ruled that Brott took no action to inform Burrows of his removal before he appointed liquidators.

Several key facts were also established in the judgment, including that:

– SA Police executed a search warrant on the home of Che Burrows in February 2015.

– Burrows’ Encounter Bay residence was GNC Homes’ principal place of business when officers knocked on the front door.

– The police search was the result of “issues relating to the obligation of the company … to obtain a policy of insurance in respect of each residential property under construction”.

Brott had told the court that Burrows acted “in an unauthorised fashion in respect to the insurance obligations”.

He further claimed to be “shocked” by Burrows’ conduct but “took no steps at that time to remove Burrows as director, as might have been expected in the circumstances”, the judgment reads.

“Apparently (shareholders) decided that his continued cooperation in the conduct of the company was required.”

Burrows claimed he acted on Brott’s instructions at all times, and that he repeatedly asked the shareholder for money to pay creditors – and that the funds were not forthcoming.

Judge Dart stressed that the insurance falsification claims were unresolved and remained under police investigation.

He ordered Brott and The Pipas to pay the liquidator’s court costs.

The liquidator only ever received a fraction of those costs back and, as a result, tried to start bankruptcy proceedings against Brott.

The non-payment of subbies is not something that stops at the Queensland border, so I have also written to the Prime Minister to have this issue added to the national agenda

But Brott could not be located, and so could not be served documents in relation to the claim against him – including through his lawyers, Adelaide law firm Charlton Rowley – according to the liquidator’s latest report.

“I have instructed my lawyers to seek substitute service and upon confirmation from the court I will proceed to bankrupt Mr Brott,” the report reads.

A search for Gidon Brott on national personal bankruptcy records returned no results this week, suggesting the attempts to bankrupt him have so far failed.

If Brott is eventually bankrupted, that would end any prospect of recouping GNC Homes’ loans to him, GY3 and GY9.

InDaily put a series of questions to Brott via Charlton Rowley last week, following up with several phone calls and emails.

We were told no-one was available to respond.

***

Brott’s corporate history looks like a whirlpool of circulating cash, unpaid debts and mostly failed or deregistered companies – with his company GY6 at its centre.

GY6 owes $3.1 million to IPGA, which is now under liquidation and which Brott owns through another corporate entity.

If it were ever paid back, $3.1 million would more-than compensate IPGA’s 16 creditors, who are owed $2.4 million.

GY6 also owes $1 million to GY3 – the recipient of the $4.42 million loan from GNC Homes that was never paid back.

GY6 also owes $24,000 to GY9 – the recipient of the $174,000 loan from GNC Homes that was never paid back.

In the opposite direction, GNC Homes owes GY6 a debt of $1.2 million.

GY6 is also a major creditor to Queensland One Homes, which collapsed in 2017, sending shockwaves though the construction industry and the political class in the sunshine state.

According to a series of reports by Gold Coast Bulletin reporter Kathlene Skeene:

GY6 had provided leads for building work to Queensland One in exchange for lucrative commissions.

The Queensland Building and Construction Commission suspended Queensland One’s building licence in mid-2017 and launched an investigation into the company late last year.

A meeting of the company’s 133 creditors – who were owed more than $6 million – heard allegations that money was transferred to Empire Constructions shortly before Queensland One failed.

Queensland One director Paul Callender and Empire Constructions director Amber Callender are husband and wife.

Liquidator Michael Caspaney obtained freezing orders against the pair’s assets in 2017.

In May 2018, subcontractors were reportedly infuriated by news that they had launched a new company called Phoenix Rural Fencing and Landscaping. Paul Callender argued there was nothing untoward about the name at the time.

In February 2019, Queensland Premier Annastacia Palaszczuk announced her government would set up a Special Joint Task Force to conduct a forensic examination into the collapse of several major construction companies, Queensland One included.

“The subbies who have been left out of pocket are mums and dads and small business people left to the whims and mercies of bigger operators who too often leave their subbies in the lurch,” said Palaszczuk at the time.

“I have met many of them. I have listened to their stories of hardship and loss and the fact they felt no one is listening.

“The non-payment of subbies is not something that stops at the Queensland border, so I have also written to the Prime Minister to have this issue added to the national agenda.”

Caspaney told InDaily he was in the process of publicly examining “many stakeholders” related to Queensland One.

A spokesperson for the Queensland Building and Construction Commission said in a statement:

The QBCC is assisting the liquidator with the public examination into the collapse of Queensland One Homes Pty Ltd. 

“At this stage the Federal Court is yet to set a date for the public examination.”

***

According to liquidator David Ross, GNC Homes was insolvent for at least a year before he was appointed.

The director of a company who knowingly allows it to incur debts while insolvent is guilty of an offence, and can be made personally liable for debts incurred during such a period.

In July 2016, Ross issued Burrows with an insolvent trading demand for $2.61 million.

Ross issued an identical demand to Brott, whom the liquidator had deemed to be GNC Homes’ shadow director.

Through his lawyers, Brott denied the allegations and offered to settle the insolvent trading claim by handing over $5000.

The liquidator rejected the offer.

Brott later revised his offer to $10,000, which was also rejected.

If Ross eventually succeeds in bankrupting Brott, this would end any prospect of recovering the insolvent trading claim against him.

Burrows was made bankrupt in 2017.

As a result, Ross writes in one of his reports, “there is no further action” in relation to the claim against him.

InDaily asked Burrows for his response to the insolvent trading claim but he did not get back to us.

The trustee of Burrows’ bankrupt estate, Nicholas Giasoumi of Dye & Co., confirmed that Burrows’ estate had provided no dividend to GNC Homes.

He said it was unlikely it ever would.

***

A major investigation published by InDaily this month revealed that developer Angela Thomas was accused in Queensland Parliament of criminal corporate behaviour nearly two decades ago.

But she and the man believed to be her husband Stephen Thomas, have built a sprawling corporate empire since.

ASIC records show that outside of his role at GNC Homes, Burrows is a former director of one of Thomas’s South Australian construction companies, Liberty Homes Australia.

His directorship of Liberty Homes lasted just four months, but his association with the Thomases would last for years.

Che Burrows’ building supervisors’ licence was cancelled in October 2016

Site work sheets obtained by InDaily suggest that Burrows worked as a building supervisor for Liberty Homes between August 2015 and August 2017.

He commissioned subcontractors for the company on at least 26 occasions during the period, according to the work sheets.

He did similar work for a related company, InFocus Homes, led by now-25-year-old Joshua Aaron Thomas, who is registered as living at Angela Thomas’s home address.

A spokesperson for SA corporate regulator Consumer and Business Services tells InDaily:

“Che Burrows’ building supervisors’ licence was cancelled in October 2016, following an investigation undertaken by Consumer and Business Services and South Australia Police into matters relating to the conduct of GNC Homes.”

A person who does not hold a building supervisor’s licence may, nonetheless, be legally employed to perform similar work for a company or building supervisor that does have a licence.

Both Liberty Homes and InFocus Homes possessed licences during the period that Burrows was working for them, according to the site work sheets – but the companies’ licences were at other points suspended, and eventually cancelled.

Liberty Homes’ licence was suspended twice; both times, for failing to have a building supervisor.

InFocus Homes’ licence was suspended for failing to comply with an audit and cancelled, for the same reason.

Both companies fell into liquidation.

Angela Thomas’s two other South Australian construction companies – Omega Homes SA and Panoramic Homes SA – also collapsed.

Like GNC Homes, Thomas’s companies left trail of unpaid debts to subcontractors across outer suburban Adelaide and regional South Australia.

By the time that they fell into liquidation last year:

In March this year, Omega Homes was forced into liquidation by court order, owing $60,700 to 10 unsecured creditors.

Burrows now says he wants nothing to do with Angela Thomas.

He says his experience with her companies has put him through enormous personal pain and psychological trauma, but did not elaborate.

“I don’t really want to be involved any further,” he tells InDaily.

“I just want to leave it alone.”

Most recently, Burrows has been working for an unrelated construction company, which has contracts to finish several houses the Thomas companies failed to complete.

***

Ross provided his findings on GNC Homes to ASIC on 16 February 2016.

Three days later, ASIC advised it would not launch any further investigations in relation to the company.

South Australia’s corporate regulator Consumer and Business Services has confirmed to InDaily it is no longer investigating the company.

But the SA Police investigation into GNC Homes is ongoing.

A spokesperson declined to explain what was taking so long, or to identify any persons of interest, or to say whether anyone had been charged or convicted of any related crime, adding:

“There is no time frame given by investigators.”

 

InDaily contacted Gidon Brott’s legal counsel for comment. Specifically, we asked where Brott is and whether he is available to be served documents; when he or his companies intend to repay loans from GNC Homes and why they have yet to be repaid; whether he was indeed acting as a “shadow director” for GNC Homes; whether he has any comment on Judge Dart’s rulings; whether he has any personal or financial connection to Paul and Amber Callender beyond Queensland One’s debt to GY6; and the purpose of his appearance at the Moscow International Emigration and Luxury Property Expo. We received no response.

We also put several questions to Burrows after his brief interview on the phone, but we received no response.

The contracts for the construction of houses that were unfinished when GNC Homes was ordered to cease works in 2015 were transferred to another licensed builder. 

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