08/04/2021 - 15:08

Gillett sues CraigCare for $3.4m

08/04/2021 - 15:08

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Perth businessman John Gillett is suing his former aged care company CraigCare Group over alleged breaches of a consultancy agreement he claims cost him more than $3.4 million.

Gillett sues CraigCare for $3.4m
According to a writ filed in the state’s Supreme Court on Thursday, Mr Gillett has launched legal action against Craigcare Group and its holding company Menzies Hold Co 4. Photo: Gabriel Oliveira

Perth businessman John Gillett is suing his former aged care company CraigCare Group over alleged breaches of a consultancy agreement he claims cost him more than $3.4 million.

According to a writ filed in the state’s Supreme Court on Thursday, Mr Gillett has launched legal action against CraigCare Group and its holding company Menzies Hold Co 4 - of which he was the sole director until he sold the company to Bain Capital for about $50 million in February, 2017.

The breaches relate to a Share Purchase Agreement (SPA) the two parties entered into on Christmas Eve in 2016 in which Menzies offered to buy Mr Gillett’s shares in CraigCare Group.

As the company’s director, the former Moran Health Care executive held and was the beneficial owner of all of CraigCare Group's issued shares.

Not only did Menzies agree to buy the shares, but it allegedly offered to make payments to Mr Gillett in respect of a two-stage, 51 to 71-place expansion of the company’s Pascoe Vale Facility in Victoria.

But that agreement was subject to four major project milestones being achieved within a specific timeframe; milestones that required action by both parties to acquire land, negotiate with lessors and progress development applications for the project with the local government.

Under the agreement, Menzies offered to pay Mr Gillett $42,250 per allocated place during stage 1 of the expansion and, should not all 71 places be allocated under stage one, the proposed expansion should include additional places as part of stage two.

The agreement stipulated that Mr Gillett was to have primary responsibility for achieving the milestones on behalf of the group, but that Menzies, CraigCare Group and the subsidiary companies involved were to assist Mr Gillett in achieving the milestones.

Twenty-four hours after completing the Share Purchase Agreement, Mr Gillett resigned from his position as director of CraigCare - a move that coincided with the change of the company’s ownership.

Instead, Mr Gillett entered into a consultancy agreement with the company in his capacity as director of Five Cygnet Group, offering advice and assistance in the development of the Pascoe Vale Facility until June 1, 2017. 

On April 26, 2017, Mr Gillett alleges that Menzies’ director David Williams informed him that he was no longer authorised to act for Menzies or CraigCare Group in any capacity. 

But five months later, CraigCare Group’s chief executive officer Tony Stephenson allegedly reversed the decision, informing him that the SPA arrangements would continue as previously agreed and that the company would continue to use all reasonable endeavoUrs to help Mr Gillett achieve the original milestones.

Mr Gillett accepted the offer, with the two parties amending the SPA by extending each of the periods in the clause by 12 months and imposing additional obligations on Mr Gillett in relation to reaching the milestones.

The first two milestones for stage one of the development were satisfied in February 2017, but Mr Gillett claims that it was CraigCare Group’s failure to use all reasonable endeavours to assist him that prevented him from obtaining milestones three and four.

In the writ, he alleged milestone three could have been met by February 28, 2017, had CraigCare not withheld information necessary for negotiations with the lessor Virginia Residential and alleged that the company failed to commence negotiations with the lessor within the required timeframe.

Mr Gillett further alleged that Menzies failed to take any action to assist him in obtaining the milestone by excluding him from direct discussions with the local government; subsequently delaying the completion of milestone four by more than two months.

That milestone required the preparation of revised drawings of stage one of the development, which Mr Gillett alleged CraigCare failed to do with “reasonable diligence”.

According to Mr Gillett, the drawings were not finalised until September 27, 2017 - 20 days after his request.

Further amendments, requested by the lessor, were allegedly not finalised until October 26, 2017, leading to further delays.

According to Mr Gillett's writ, CraigCare also failed to pursue its development application to build the stage one expansion within the required timeframe.

Mr Gillett further alleged that the company’s delayed responses to requests by the local government for more information led to a month-long delay; an issue Mr Gillett argues was beyond his control as he had been excluded from the direct communications with the council. 

CraigCare Group determined that 24 additional places would be created by stage two of the expansion, but that it could only proceed if the land was rezoned from industrial to residential. 

Moreland council invited CraigCare Group to initiate the planning scheme amendment, allegedly contacting CraigCare’s town planning consultants and notifying them that the amendment could not proceed without impeding the Stage one development application. 

But the company did not initiate the amendment for 11 days; a failure Mr Gillett claims led to further unnecessary project delays and missed deadlines.

As a result of the breaches, Mr Gillett claims he suffered loss and damages in that he did not become entitled to receive the stage two milestones payment of $2.366 million, the equivalent of $42,250 for each of the 56 allocated places, nor did he receive the $1.014 million he was entitled to as part of stage two. 

He is claiming damages in the order of $3.44 million, as well as interest and court costs.

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