Construction group Grocon's legal battle with Crown Resorts pushes it into financial strife
The construction group Grocon has been pushed into deep financial strife by a legal battle involving James Packer’s Crown Resorts over views to the harbour from a property development at Barangaroo.
On Tuesday, Grocon Group Holdings told the corporate regulator that its director, Daniel Grollo, had not passed a resolution stating that the company was solvent.
The company is required by law to pass such a resolution every year but if it fails to do so is required to file documents recording this fact with the Australian Securities and Investments Commission.
A Grocon spokeswoman said the move was due to “the challenges faced by the construction industry during the Covid-19 pandemic, and Grocon’s ongoing legal action in the NSW supreme court seeking compensation for the financial losses the company experienced as a result of major delays in Central Barangaroo project”.
Related: The Crown inquiry: will the house that Packer built come tumbling down?
However, it is understood the Barangaroo drama is the main cause of Grocon’s financial difficulties.
It is the latest in a series of financial blows to hit Grocon over the past few years, but the move does not amount to an admission it cannot pay its debts as and when they fall due and is insolvent.
Grocon, which is responsible for landmark buildings including Melbourne’s tallest, Eureka Tower, was banned from starting projects in Queensland in 2017 after blowouts on projects including the athletes village for the Gold Coast Commonwealth Games topped $1bn.
It put two of its subsidiaries into administration a year ago amid a legal battle with landlord Dexus, which was claiming $28m in allegedly unpaid rent. In July last year a federal court judge reduced the amount owing to $13.9m; Grocon appealed the ruling but the case was settled in November last year.
The company has also been bruised by a long-running battle with the construction union that reached a peak with blockades of its sites in 2012, and the fallout from an accident the following year when a wall on one of its sites fell over and killed three people.
At Barangaroo, Grocon was in a joint venture with another developer, Aqualand, and shopping centre group Scentre to build a shopping centre, apartments and open space at Central Barangaroo that is supposed to link Crown’s hotel and casino development to its north to a commercial district to its south.
Grocon withdrew from the project in September last year, selling its stake to Aqualand for $73m.
This came after Crown and its development partner settled a court battle with the NSW government over its right to build towers that impeded the view from Central Barangaroo to the harbour.
Grocon is suing the NSW government over the same issue, accusing it of selling the same views twice.
It would have been able to sell its stake in the development for $270m more if the views had been preserved, the company has told the NSW supreme court.
Grocon wants the state government to make it good for the shortfall, but has had difficulty moving its case forward.
Last month the court ordered Grocon to pay $1m into trust against the NSW government’s legal costs after the government questioned its financial stability.
After seeing evidence of Grocon’s financial position, judge Patricia Henry said it was “doubtful that Grocon Holdings has the capacity to pay a substantial costs order of around $2.5m in favour of INSW [Infrastructure NSW] if ordered to do so”.
