|Alan Sullivan QC for City of Sydney Council|
Photo: SiN Images
The meeting, held on August 9, 2012, saw Streetscape avoid liquidation only after voluntary administrator Ozem Kassem used his casting vote as chair of the meeting to break a deadlock between creditors.
Some of those creditors, including known Obeid associates and former employees, voted in favour of a deed of company arrangement (DoCA) proposed by Moses Obeid. The DoCA promises a return to creditors of no more than 3c in the dollar.
Others, including major unsecured creditor City of Sydney Council, wanted Streetscape wound up and a liquidator appointed.
Kassem, as chairman of the meeting was holding creditor proxy votes directed in favour of the DoCA. To break the impasse he voted the proxies endorsing the DoCA.
During a hearing in the Supreme Court this week it was alleged by City of Sydney Council that Ms Burcham contacted Streetscape's former cleaner, Ms Mary Kit, on August 8, 2012, the day before the meeting.
The Council contends that Ms Burcham advised Ms Kit that the $690.00 debt owed to her by Streetscape would be paid in full outside of the terms of the DoCA if Ms Kit agreed to direct her proxy be voted for the DoCA.
Ms Burcham was described as a former employee of Streetscape and has herself been subpoenaed by the Council.
Ms Kit currently provides cleaning services to Obeid Corporation, which is the secured creditor of Streetscape.
The court heard that Ms Burcham met with a second creditor on August 8, a Ms Maria Costa.
The Council alleges she told Ms Costa the $1000 debt Streetscape owes to Costa Enterprises would be paid in full outside the DoCa terms if she agreed to direct her proxy in favour of the DoCA.
The allegations emerged during the hearing of an interlocutory application brought by Streetscape, which was opposing six of eight subpeonas issued to Streetscape creditors by the Council.
The subpoenas seek banking and telephone, invoice and payment and other records for the period from June 20, 2012 - the day before Obeid placed Streetscape into voluntary administration - to October 19, 2012 when the Council launched its challenge.
There is no suggestion at this stage that the allegations aired in court are true or that any of those identified in court attempted to solicit proxies in exchange for repayment of their debt, or that any subpoena recipients accepted such an offer.
As first defendant to the Council's application filed on October 19, 2012, Streetscape has filed a 10 page defense, in which it makes multiple admissions and denials. However the court did not release the points of claim to test which claims are admitted, which are denied.
Page seven deals with the alleged procurement of proxies. Streetscape admits only that Ms Kit and Ms Costa executed proxies either in favour of the VA and chairman Kassem, in support of the DoCA, or in favour of another creditor, Mr John McLeod, in support of the DoCA.
Streetscape either denied or did not admit any other point in the Council's claims dealing with the alleged procurement of proxies.
Streetscape’s lawyer, ERA Legal managing partner Daren Anderson, did not return calls or respond to emails.
Ms Burcham could not be contacted.
The Council is seeking an order from the courts declaring the DoCA void or, failing that, an order overturning the Kassem's casting vote.
During the hearing to determine the scope of the subpoenas Supreme Court Justice Paul Brereton suggested Kassem may have voted in favour of liquidating the company if he had known some proxy votes had been “procured”. Kassem, from specialist insolvency firm Cor Cordis, did not return calls or respond to emails.
Offering a maximum return of 3c in the dollar, the DoCA was unacceptable to City of Sydney Council.
It is Streetscape’s and Moses Obeid’s largest unsecured creditor with a disputed $13 million judgement debt outstanding and that's not including legal fees which amount to several million more.
At the August 9 meeting the Council proposed Streetscape be wound up and a liquidator appointed. Under the Corporations Act, liquidators have greater powers of investigation than voluntary administrators.
Examining the Streetscape creditors' affairs is, the council hopes, a prelude to a more thorough probe of Streetscape.
The matter returns to court in April.