Builder facing legal action over alleged defects awarded $22,000 government grant

A Victorian construction company facing legal action over alleged apartment defects has been awarded a $22,000 federal government grant to improve its business.

Meanwhile, legal fees continue to mount for the apartment owners who are locked in an ongoing legal battle with the builder, Shangri-La Construction.

In July, Melbourne woman Tamara Railton-Stewart told ABC’s 7.30 that expert reports and legal fees alone had cost the 10 apartment owners in her building complex about $500,000.

The company denies the allegations against it and is defending its workmanship in the Victorian Civil and Administrative Tribunal (VCAT).

In a separate case heard by VCAT in early August, Shangri-La director Obaid Naqebullah was fined $25,000 for historic misconduct at another building site in 2012.

That case concerned the use of flammable expanded polystyrene (EPS) exterior cladding, which was not approved on the building permit documents.

It was found that Mr Naqebullah “failed in his duties as a building practitioner, and the results of that neglect created a serious risk to members of the public”.

On August 25, approval was granted to Shangri-La Construction for a $22,000 federal government grant through the Department of Industry, Science and Resources Entrepreneurship Program.

Ms Railton-Stewart said she was shocked to find out, as her legal fees continued to rise in the ongoing dispute.

Woman with long blonde hair wearing glasses looking serious.
Buying an off-plan apartment turned into a long legal battle for Tamara Railton-Stewart.(ABC News: Daniel Fermer)

“To find out that our federal government … is giving away $22,000 of taxpayer money to a company [whose director] have been disciplined and successfully prosecuted by the VBA (Victorian Building Authority), and who also have current cases against them at VCAT, is disgusting,” she said.

“Where is the justice in our legal system when SLC [Shangri-La Construction] can [have] a legal case against them for years, but simply apply for a $22,000 grant from our government and have it approved in a few months?”

Shangri-La ‘deeply concerned about allegations of defects’

In a statement, Mr Naqebullah told ABC’s 7.30: “Shangri-La remains very concerned about allegations of defects at [Ms Railton-Stewart’s] property.”

“The satisfaction of our customers is always foremost in our minds,” he said.

“We have previously left no doubt that we are extremely proud of the quality of the projects we deliver, and that we take any allegations of defects very seriously.

“However, as we have previously advised [ABC’s] 7.30, we cannot comment on any defects at the property as the allegations of defects are the subject of current proceedings at VCAT.

“In that process, not only the extent of any defects, but also the allocation of responsibility for any such defect between multiple parties [including the subcontractors who were responsible for much of the physical work and the building surveyors who issued the relevant occupancy permit] is in question.”

In the matter heard by VCAT in August, it ruled against the Victorian Building Authority’s recommendation that Mr Naqebullah have his registration suspended for three months due to his previous record.

A blue and white sign stands on a concrete pillar.
Shangri-La defends its craftsmanship in the Victorian Civil and Administrative Tribunal.(Provided by: VCAT)

The tribunal accepted that Mr Naqebullah had no previous disciplinary history and had run a successful construction company over a period of 14 years.

Despite this, the VBA has since confirmed to ABC’s 7.30 that it is currently investigating Mr Naqebullah for work in a number of areas, but said he could not provide further details.

In a statement, Mr Naqebullah said ABC’s 7.30 Shangri-La Construction was “still trading and striving to deliver homes to our valued customers in a difficult economic environment”.

He said he could not disclose how many staff the company currently employs or what its annual turnover was.

“To do so would be inappropriate to our employees, partners and other stakeholders, all of whom also have the right to protect their confidential information,” Mr Naqebullah said.

“Shangri-La Construction complies with all its financial and regulatory obligations as a duly incorporated company under the Corporations Act.”

The government says it was not aware of proceedings against Shangri-La

A spokesperson for the Department of Industry, Science and Resources told ABC’s 7.30 the department was not aware of the proceedings against Shangri-La and the fine imposed on its director before the recent $22,000 award was made.

“The grant was awarded to support business improvement activities recommended by a business advisory service received under the Entrepreneurs programme,” the spokesperson said in a statement.

“Payments are made upon completion of those activities.

“As of October 12, no payments have been made to Shangri-La Construction.”

A danger sign on a metal fence with cranes in the background.
“The system is designed to turn a blind eye to the plight of apartment owners with defects,” Australian Apartment Advocacy director Samantha Reece said.(ABC News: Ian Cutmore)

Cladding Safety Victoria, which works with owners’ corporations to fund remediation on buildings at high risk due to combustible cladding, has committed $24.5 million to remediating buildings where the original builder was Shangri-La Construction.

Of the 338 buildings approved for funding so far, 13 were built by Shangri-La Construction.

Ms Railton-Stewart said the ongoing costs of legal proceedings meant she was facing bankruptcy.

“As a result of a decision I made in 2014 to simply buy my first home, my family’s life will be financially destroyed forever,” she said.

Australian Apartment Advocacy (AAA) director Samantha Reece said Ms Railton-Stewart’s situation highlighted flaws in the system.

“The system is set on turning a blind eye to the plight of apartment owners with defects,” she said.

“When AAA was made aware of the $20,000 innovation grant provided to Shangri-La, we were concerned that there was a lack of transparency between state and federal jurisdictions.”

Watch ABC’s 7.30, Monday to Thursday 7.30pm on ABC iview and ABC TV

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