THE Pets Paradise empire at the centre of a deadly puppy virus outbreak is close to collapse after its bank seized control and appointed corporate undertakers.
The bank's swoop follows legal action against another part of a retail kingdom controlled by Melbourne man Gary John Diamond, which left a $1.2 million legal bill unpaid.
The Bank of Melbourne, which is owed $11 million, yesterday appointed Deloitte as receivers to Pets Paradise, part of Mr Diamond's Paradise Retail Holdings group.
The Hallam-based corporate group includes both Pets Paradise and national cafe chain Billy Baxter's, which is also in financial trouble.
Receivers said company-operated Pets Paradise stores had been struggling for 18 months.
The national chain of 62 pet stores has not been helped by an outbreak of parvovirus, which causes bloody dysentery and vomiting, striking puppies sold from at least two Melbourne stores.
Deloitte spokesman Simon Rushton told The Age there was ''no link between any cases of parvovirus and the appointment of the receivers and administrators''. ''This is all about the underperformance of the group,'' he said.
It is not clear what effect the financial strain will have on pet stores operated by franchisees.
''The stores will continue to trade for the time being and animal welfare will be the highest priority,'' Mr Rushton said.
Last week the Federal Court in South Australia appointed provisional liquidators to one of the companies in the group, Billy Baxters (Franchising), after it failed to pay a franchisee $1.2 million in court-ordered damages.
Provisional liquidators are appointed to preserve the company's assets ahead of a hearing to wind up the company.
The franchisee claimed they were misled about how much money they could reap from a Billy Baxter's cafe on Glenelg Jetty, Adelaide.
Land title records show Mr Diamond's home, in the eastern Melbourne suburb Harkaway, is subject to a high-interest second mortgage taken out by his lawyers, Macpherson & Kelly. Interest on the $60,000 loan is charged at 20 per cent, with repayments due every month until next May.
Paradise Retail Holdings has not filed financial records since 2006, when it recorded a profit of $16.5 million.
Pets Paradise Southland was open for business yesterday, displaying two Labrador puppies inside its glass pens.
With BEN BUTLER and NATHAN PARTENZA
The story Trouble in Paradise as receivers take over pet group first appeared on The Sydney Morning Herald.