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| Sarkis Nassif with former Governor of NSW Marie Bashir Photo: Holdmark Property Group |
Consent orders to vacate five days of examinations into the affairs of 82 - 84 Belmore Street Pty Ltd were made last week, despite Justice Ashley Black previously rejecting an application by Nassif and others to have the examination summons stayed or set aside.
Cor Cordis partners Ozem Kassem and Daniel Juratowich allege the company sold properties to related parties at depressed values and neglected to pay sales tax on apartment sales valued at $173 million.
Sarkis Nassif responded to SiN's enquiries through his solicitor Marc Ryckmans of Somerset Ryckmans.
"Mr Nassif completely rejects the claims made by the liquidators," Ryckmans said.
"We note that there are proceedings currently on foot in which my clients have traversed by way of denial each of the allegations raised by the liquidators of 82-84 Belmore Street Pty Ltd (in Liquidation).
"In particular the liquidators have alleged that certain units were transferred to related entities at undervalue. This particular allegation is strenuously rejected and my clients assert that all units were transferred at values determined by independent expert valuers."
The issue of sales tax is pertinent because the Australian Tax Office (ATO) - potentially the only significant creditor of the company apart from the liquidators - is in the middle of an extensive audit of Nassif and his Holdmark Property Group.
"So far as concerns the ATO, Mr Nassif and his group of companies is a substantial developer. Its current advisers are presently working with the Australian Taxation Office and those discussions remain confidential," Ryckmans said.
Initially Kassem and Juratowitch opposed the set aside application, arguing that another opportunity to hold the examinations might not present itself before April 2015 when the three year statute of limitations on challenging transactions on the basis that they may be uncommercial expires.
But a statement from the liquidators' lawyer indicates that compliance with notices to produce documents - combined with an unspecified "commercial settlement" between the liquidators and Nassif - was sufficient for them to back off.
"In this matter, the Liquidators had been frustrated by a lack of accurate books and records of the Company, which would have detailed the circumstances of the significant related party transactions," Sage Legal's Charly Tannous said.
"A substantial amount of work has been undertaken by the liquidators in consultation with the ATO, prior to the issuing of the Examination Summons and the Orders for Production, especially given the significant resources available to Mr Nassif to challenge any proceedings the Liquidators were to bring.
"The proceedings before Justice Black related to an Interlocutory Application filed on behalf of Mr Sarkis Nassif and other parties to set aside Orders for Production and the Examination Summons issued to them.
"As a result of the Liquidators' successful defence to the Interlocutory Process, a number of parties produced documents in compliance with the Orders for Production which were substantial and the equivalent of approximately 30 Lever Arch Folders.
"These were produced all the way up to Friday 5 December 2014, the last business day before the commencement of the examinations. Furthermore, a claim for privilege was also made over at least 500 documents on that Friday.
"Negotiations were also ongoing with Mr Nassif in relation to adjourning the examinations to a later date to enable him to have further negotiations with the Australian Taxation Office as mentioned in Black J’s decision.
"A commercial settlement was reached between the Liquidators and Mr Nassif to enable the examinations to be adjourned to a later date.
"In light of the substantial amount of material that was produced at (effectively) the last minute, it was appropriate for the Liquidators to agree to adjourn the examinations.
"A review of the material produced by various parties enabled us to form the view that the substantive proceedings could be commenced notwithstanding the examinations being adjourned to April 2015. Accordingly, the Liquidators and the Company are not prejudiced by the adjournment of the Examinations."
82 - 84 Belmore Street Pty Ltd was part of the Nassif family's Holdmark Property Group. It was placed into members voluntary liquidation in April 2012 following the completion of a large residential and commercial development at Meadowbank in November 2010.
According to Justice Black's judgment, the liquidators want to test the findings of colleague Mark Hutchins, who has had day-to-day carriage of the investigation into the company's affairs. The judge was careful to point out that Hutchins' conclusions do not amount to proof.
"Mr Hutchins ....... leads evidence that indicates the scale of the relevant development, involving the sale of 348 units, with a total sale price in excess of $163 million, and he refers to sales to related parties at which, on his understanding (in evidence which was admitted as limited to his understanding), was at an undervalue," Justice Black said.
"Mr Hutchins sets out, at some length, the relationships between the relevant individuals who are examinees and the companies within the Holdmark Group and also refers to the position as to caveats which have been lodged by the liquidators over several units.
"Mr Hutchins also gives evidence as to the position of the Australian Taxation Office (ATO) which has, as I noted above, lodged a proof of debt for $1.285 million and then indicates (in evidence also admitted as evidence of his understanding only) that the liquidators' investigations have led the liquidators to believe that the Company did not pay tax in respect of sales of units exceeding $173 million in value.
"I am conscious, of course, that that is not proof of the relevant fact, but that understanding itself indicates why a liquidator might well understand that the proper performance of his duties required the conduct of liquidators' examinations in a matter of this kind," Justice Black said.
"Mr Hutchins also refers to different calculations of liability for income tax of the Company by its accountant, of $1.9 million, and by the liquidators in excess of $10 million. He refers to service of a clearance notice by the ATO indicating an estimated claim of $32 million although Ms Nolan (for the applicants) points out, and I accept, that this service of that notice is not proof of the fact," Justice Black said.
It should be noted that Nassif also disputes the ATO's claim, which is being contested as the tax office continues the audit it commenced in 2013.
Nassif argued that given the dispute with the ATO could result in there being no creditors prepared to claim in the liquidation, the liquidators' were not justified in incurring the costs of the examinations. Questions SiN put to the liquidators about the size of their fees - estimated by Nassif's advisors at at least $300,000 - were not responded to.
Meanwhile the ATO has obtained undertakings from Nassif and "associated parties" agreeing not to dissipate assets.
Read the full judgment
Cor Cordis pair forced to liquidate developer's delinquents
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"We note that there are proceedings currently on foot in which my clients have traversed by way of denial each of the allegations raised by the liquidators of 82-84 Belmore Street Pty Ltd (in Liquidation).
"In particular the liquidators have alleged that certain units were transferred to related entities at undervalue. This particular allegation is strenuously rejected and my clients assert that all units were transferred at values determined by independent expert valuers."
The issue of sales tax is pertinent because the Australian Tax Office (ATO) - potentially the only significant creditor of the company apart from the liquidators - is in the middle of an extensive audit of Nassif and his Holdmark Property Group.
"So far as concerns the ATO, Mr Nassif and his group of companies is a substantial developer. Its current advisers are presently working with the Australian Taxation Office and those discussions remain confidential," Ryckmans said.
Initially Kassem and Juratowitch opposed the set aside application, arguing that another opportunity to hold the examinations might not present itself before April 2015 when the three year statute of limitations on challenging transactions on the basis that they may be uncommercial expires.
But a statement from the liquidators' lawyer indicates that compliance with notices to produce documents - combined with an unspecified "commercial settlement" between the liquidators and Nassif - was sufficient for them to back off.
"In this matter, the Liquidators had been frustrated by a lack of accurate books and records of the Company, which would have detailed the circumstances of the significant related party transactions," Sage Legal's Charly Tannous said.
"A substantial amount of work has been undertaken by the liquidators in consultation with the ATO, prior to the issuing of the Examination Summons and the Orders for Production, especially given the significant resources available to Mr Nassif to challenge any proceedings the Liquidators were to bring.
"The proceedings before Justice Black related to an Interlocutory Application filed on behalf of Mr Sarkis Nassif and other parties to set aside Orders for Production and the Examination Summons issued to them.
"As a result of the Liquidators' successful defence to the Interlocutory Process, a number of parties produced documents in compliance with the Orders for Production which were substantial and the equivalent of approximately 30 Lever Arch Folders.
"These were produced all the way up to Friday 5 December 2014, the last business day before the commencement of the examinations. Furthermore, a claim for privilege was also made over at least 500 documents on that Friday.
"Negotiations were also ongoing with Mr Nassif in relation to adjourning the examinations to a later date to enable him to have further negotiations with the Australian Taxation Office as mentioned in Black J’s decision.
"A commercial settlement was reached between the Liquidators and Mr Nassif to enable the examinations to be adjourned to a later date.
"In light of the substantial amount of material that was produced at (effectively) the last minute, it was appropriate for the Liquidators to agree to adjourn the examinations.
"A review of the material produced by various parties enabled us to form the view that the substantive proceedings could be commenced notwithstanding the examinations being adjourned to April 2015. Accordingly, the Liquidators and the Company are not prejudiced by the adjournment of the Examinations."
82 - 84 Belmore Street Pty Ltd was part of the Nassif family's Holdmark Property Group. It was placed into members voluntary liquidation in April 2012 following the completion of a large residential and commercial development at Meadowbank in November 2010.
According to Justice Black's judgment, the liquidators want to test the findings of colleague Mark Hutchins, who has had day-to-day carriage of the investigation into the company's affairs. The judge was careful to point out that Hutchins' conclusions do not amount to proof.
"Mr Hutchins ....... leads evidence that indicates the scale of the relevant development, involving the sale of 348 units, with a total sale price in excess of $163 million, and he refers to sales to related parties at which, on his understanding (in evidence which was admitted as limited to his understanding), was at an undervalue," Justice Black said.
"Mr Hutchins sets out, at some length, the relationships between the relevant individuals who are examinees and the companies within the Holdmark Group and also refers to the position as to caveats which have been lodged by the liquidators over several units.
"Mr Hutchins also gives evidence as to the position of the Australian Taxation Office (ATO) which has, as I noted above, lodged a proof of debt for $1.285 million and then indicates (in evidence also admitted as evidence of his understanding only) that the liquidators' investigations have led the liquidators to believe that the Company did not pay tax in respect of sales of units exceeding $173 million in value.
"I am conscious, of course, that that is not proof of the relevant fact, but that understanding itself indicates why a liquidator might well understand that the proper performance of his duties required the conduct of liquidators' examinations in a matter of this kind," Justice Black said.
"Mr Hutchins also refers to different calculations of liability for income tax of the Company by its accountant, of $1.9 million, and by the liquidators in excess of $10 million. He refers to service of a clearance notice by the ATO indicating an estimated claim of $32 million although Ms Nolan (for the applicants) points out, and I accept, that this service of that notice is not proof of the fact," Justice Black said.
It should be noted that Nassif also disputes the ATO's claim, which is being contested as the tax office continues the audit it commenced in 2013.
Nassif argued that given the dispute with the ATO could result in there being no creditors prepared to claim in the liquidation, the liquidators' were not justified in incurring the costs of the examinations. Questions SiN put to the liquidators about the size of their fees - estimated by Nassif's advisors at at least $300,000 - were not responded to.
Meanwhile the ATO has obtained undertakings from Nassif and "associated parties" agreeing not to dissipate assets.
Read the full judgment
Cor Cordis pair forced to liquidate developer's delinquents
Email SiN
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