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| Ozem Kassem Image courtesy Cor Cordis |
Citing a lack of evidence and concerns that the companies may have exhibited "a lack of commercial morality," Justice Stephen Robb had invited the applicants to bring fresh evidence but the deadline for that passed this week, meaning Kassem and Juratowitch must continue liquidating two companies the judge said have neither assets nor liabilities.
"I am also not satisfied on the present evidence that I should make the orders sought, because of a real issue of whether the companies were used, or conducted their activities in a manner, which exhibited a level of commercial immorality that would justify refusal of the orders," the judge said in a recent judgment.
"There are grounds for questioning whether
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| Daniel Juratowitch Image courtesy Cor Cordis |
Justice Robb did concede that the initial reason for placing the companies into liquidation: "may have been the disallowance of a claim that the purchase of the Property did not involve a taxable supply, and that expectation was disappointed by the position adopted by the ATO."
And he emphasised that his concern in regards to agreeing to the application was an absence of sufficient evidence, "rather than any positive finding of the existence of conduct that would cause the court to exercise its discretion against making orders to terminate the windings up".
"However, the evidence suggests that both companies may have been seriously delinquent in relation to aspects of their taxation obligations. It is unfortunate that the apparent absolute confidentiality of the settlement agreement with the ATO impedes the illumination of this question."
Nassif's application - lodged in the Supreme Court of NSW in October 2015 - sought orders terminating the liquidations of Avenue Capital Investment Pty Ltd (ACI) and 82 - 84 Belmore Street Pty Ltd respectively. Nassif is ACI's sole shareholder. 82 - 84 Belmore is controlled by Holdmark Holdings, another Nassif-controlled entity.
82 - 84 Belmore was incorporated in August 2006 to undertake the development of a mixed residential and commercial precinct at 82 - 84 Belmore Street Meadowbank. It purchased the site from another Nassif entity, Holdmark Investments Pty Ltd. AIC was brought into being in April 2006 to undertake construction of the project.
On April 3, 2012, one day after Mr Michael Nicholas replaced Nassif as director of the two companies, Kassem and Jurotawitch were appointed via a creditors voluntary liquidation.
Their appointment came after the ATO determined that the acquisition of the site by 82 - 84 Belmore Pty Ltd did not constitute a 'going concern' transaction and was instead assessable as "taxable supply".
Further, Belmore was unable to claim any input tax credits in respect of the acquisition because a claim would have been outside the four year period in which they're permitted.
The ATO issued a creditor's statutory demand and while the precise sum is not revealed the various debts and interest accruing in relation to the two companies approximated $70 million.
Shortly afterward the liquidators were appointed two events of note occurred - Mr Nicholas passed away and the ATO commenced a comprehensive audit of Nassif's business empire.
Fast forward three years. By July 2015 Nassif and the ATO had reached a confidential settlement in regards to whatever sum had been deemed payable by him following the audit. Then in October the application to terminate the liquidations was filed, with Nassif's lawyers telling the court that the application was a condition of the confidential settlement.
However during the December hearing nobody could tell the judge why termination was a condition of the settlement, or whether it was insisted upon by Nassif, or by the ATO?
Kassem and Juratowich - who did not oppose the application - didn't know, though they stated in their reports to the creditors of the two companies that: "It is noted that whilst the terms of the settlement between the ATO and the wider group of companies are confidential, we have received confirmation that a key term of the heads of agreement as it relates to the Company is that both the Company and [Belmore or Avenue, as the case may be], will be required to have the liquidation of these entities stayed/terminated, resulting in control of each of these companies returning to the respective directors."
Nassif's lawyer, Marc Ryckmans however told the court that the settlement was not conditional on the judge making the orders sought. What seemed to matter was that the application be made. The judge however was mainly concerned with the evidence.
"I do not understand Mr Kassem’s evidence to establish that, as a matter of law, steps have been taken that have the effect that the companies are not indebted to the creditors who originally made claims against them," he said.
"His evidence goes no further than to say that, whatever proofs of debt were lodged, they had been withdrawn."
Shortly afterward the liquidators were appointed two events of note occurred - Mr Nicholas passed away and the ATO commenced a comprehensive audit of Nassif's business empire.
Fast forward three years. By July 2015 Nassif and the ATO had reached a confidential settlement in regards to whatever sum had been deemed payable by him following the audit. Then in October the application to terminate the liquidations was filed, with Nassif's lawyers telling the court that the application was a condition of the confidential settlement.
However during the December hearing nobody could tell the judge why termination was a condition of the settlement, or whether it was insisted upon by Nassif, or by the ATO?
Kassem and Juratowich - who did not oppose the application - didn't know, though they stated in their reports to the creditors of the two companies that: "It is noted that whilst the terms of the settlement between the ATO and the wider group of companies are confidential, we have received confirmation that a key term of the heads of agreement as it relates to the Company is that both the Company and [Belmore or Avenue, as the case may be], will be required to have the liquidation of these entities stayed/terminated, resulting in control of each of these companies returning to the respective directors."
Nassif's lawyer, Marc Ryckmans however told the court that the settlement was not conditional on the judge making the orders sought. What seemed to matter was that the application be made. The judge however was mainly concerned with the evidence.
"I do not understand Mr Kassem’s evidence to establish that, as a matter of law, steps have been taken that have the effect that the companies are not indebted to the creditors who originally made claims against them," he said.
"His evidence goes no further than to say that, whatever proofs of debt were lodged, they had been withdrawn."
The judge observed that a debt withdrawn does not constitute a debt compromised or a debt paid.
He said on the evidence the companies had no assets or liabilities. Why was Nassif incurring the cost of terminating the wind ups? Was it simply to comply with the terms of the ATO settlement?
In summing up the judge said he was not satisfied that terminating the wind ups would not resurrect debts or render the companies instantly insolvent.
Neither Nassif's lawyer or the liquidators responded to SiN's requests to shed light on these and other questions. Like will the liquidators continue with the deferred public examinations? You can read the judgment here.
Further reading: Liquidators agree to vacate examinations while ATO audits Sarkis Nassif and Holdmark Group
Neither Nassif's lawyer or the liquidators responded to SiN's requests to shed light on these and other questions. Like will the liquidators continue with the deferred public examinations? You can read the judgment here.
Further reading: Liquidators agree to vacate examinations while ATO audits Sarkis Nassif and Holdmark Group
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