Building services provider Johns Lyng Group says it is committed to transparency and integrity in response to ABC reports this week criticising the strata industry.

The listed group, which achieved revenue of $1.05 billion last year, has invested heavily in strata managers in recent years, including majority-owned Bright & Duggan.

It says strata services is a “key operating pillar”.  

“As a leader in the sector, we are committed to transparency, integrity and ensuring positive outcomes for all stakeholders,” a statement to the sharemarket says. “JLG pays no commissions or rebates to any company for works we undertake.”

The ABC’s reporting said Victorian Robert Vandermeer, an owners’ corporation chairman, was alarmed when Johns Lyng quoted $95,000 to replace a set of stairs. The quote was obtained by the building’s strata manager, Cambridge Management Services, which is owned by Johns Lyng’s Bright & Duggan.

Mr Vandermeer told the ABC that when he found an alternative solution for one-third of the cost, Johns Lyng immediately slashed 20% from the quote.

Johns Lyng’s statement says it has reviewed its quotation process, particularly in relation to that work, and “is satisfied our processes are robust and transparent”.  

It “has no influence in the management or procurement decisions of owners’ corporations” and its quotations are “supported by associated subcontractor quotations”.

“In all cases these are reviewed for competitiveness, quality, local trades and timeliness, and based on customer feedback, should it be received,” the statement says.

Steadfast owns a 2% stake in Johns Lyng, and Mr Vandermeer also found Steadfast’s Collective Insurance Brokers was appointed by the Johns Lyng-linked strata property manager, which itself holds a stake in the Steadfast brokerage.

The ABC investigation uncovered what it says was an “undisclosed agreement to kick back to Bright & Duggan an unknown percentage of the broker’s earnings”.

Steadfast’s CHU Underwriting was recommended as insurer by its brokerage.

Johns Lyng says it has “no ownership interest in Steadfast, Collective Insurance Brokers or CHU”.

Steadfast CEO Robert Kelly is a director at Johns Lyng, which says “Robert’s contribution to our board is invaluable”, as its major customers are insurance companies.

Bright & Duggan MD Chris Duggan says Collective Insurance Brokers – where he was a director until earlier this year – is a co-operative venture aimed at achieving economies of scale. Consumers benefit, he says, from a lower cost of insurance distribution than the industry standard of “plus 20% strata manager commission and equivalent broker fee seen in many alternative brokerage models”.

Bright & Duggan’s income from Collective Insurance Brokers averaged about 15% of the base premium paid by owners, “with efficiency commission payments contributing less than 2% of base premium”. Mr Duggan says his company “rebated” its insurance commissions to Mr Vandermeer’s owners’ corporation.  

“We believed the general relationship disclosure providing for up to 20% commission was compliant and sufficient by the standards at that time.”  

Mr Duggan told the ABC’s Four Corners the management contract provided to Mr Vandermeer was “incomplete” due to an “isolated administrative error”.

He says the “inference that an absence of proper disclosure has led to improper business conduct, including collusion is … [not] supported by the records or practices”.

Steadfast’s insurance brokerage also recommended Mr Vandermeer use finance from Steadfast’s premium funder IQumulate.

Asked why the funder ownership was not declared, Mr Kelly told the ABC: “There’s no necessity, I suppose, to do that.”

Mr Vandermeer said he easily found a cheaper deal from a non-Steadfast lender, but on that Mr Kelly told the ABC: “What you’re putting to me is not correct.”

IQumulate could not have become Australia’s second-largest premium funder “by being twice the price of everybody else”, Mr Kelly said.

Mr Vandermeer told the ABC he felt “cheated because of the lack of transparency.”

Johns Lyng says insurance commissions are not a significant revenue stream for its business and Bright & Duggan “has been leading the discussion about lifting standards and transparency of the strata management industry in Australia”.

“It is well placed to deal with, and benefit from, closer industry scrutiny and regulation,” the statement said. “Its focus on scale ... provides value.

“These efforts continue to generate optimal results for property owners, reinforcing Johns Lyng’s commitment to enhancing standards in the industry.”