Liquidator fails to overturn predecessor’s compromise

Compromise challenge fails

Brooke Bird’s Robyn Erskine.

Compromise challenge fails

Veritas Advisory principal David Iannuzzi.

Robyn Erskine, who last year replaced David Iannuzzi as liquidator of North Shore Property Developments, has failed in a legal bid that would’ve given her more time to challenge a generous seeming compromise entered into by her predecessor.

In Erskine v 72-74 Gordon Crescent Lane Cove Pty Ltd, in the matter of North Shore Property Developments Pty Ltd (in liq) [2018] FCA 109 we learn that Iannuzzi contacted 28 year old property developer Eddy Haddad, the brother of North Shore Property Developments’ director, John Haddad, in April 2017 demanding millions of dollars he said was the value of uncommercial transactions between North Shore Property Developments and Eddy Haddad’s company, 72-74 Gordon Crescent Lane Cove Pty Ltd, which was the defendant in these proceedings.

Several years earlier – conflicting accounts have been provided about exactly when – Eddy Haddad agreed to buy four apartments and four car spaces in the Lane Cove development from his brother for $400,000 each, the price apparently limited on the basis that the apartments leaked and their defects made them uninhabitable.

“On 18 April 2017, Mr Eddy Haddad received a letter from Mr Iannuzzi demanding payment of the sum of $7,550,000 said to have been the value of uncommercial transactions entered into between the company and the first defendant in relation to the sale of the four apartments and their related car spaces (these are not the four car spaces acquired under the 1 May 2014 contract).

“Mr Haddad disputed the claim but, ……. through his lawyers expressed his preparedness to consider a resolution of the matter without litigation.

“In responding to this claim, Mr Haddad’s lawyers pointed out that Mr Iannuzzi had incorrectly treated the car spaces related to the four apartments as apartments in their own right and attributed values to them accordingly.

“They also said that Mr Iannuzzi had not taken into account the fact that Mr Haddad had been required to undertake rectification work of the apartments at his own cost.

“The lawyers also said that the Owners’ Corporation at the Lane Cove development had made a claim for approximately $2 million in relation to defective building works. The implication of that statement is not made clear in the letter. In any event, Mr Haddad’s lawyers argued that the four apartments had been purchased by the first defendant at fair value at the time.

“Following settlement negotiations, Mr Eddy Haddad and the first defendant entered into a Deed of Release and Settlement with the company and Mr Iannuzzi as liquidator.

“In consideration of the payment of $32,500, the company and Mr Iannuzzi, as liquidator, unconditionally released Mr Eddy Haddad and the first defendant from the claims that had been made.”

Now $32,500 is quite a compromise when your first demand is for $7.55 million, even when you subtract the costs of fault rectification and the four car spaces incorrectly valued as apartments.

Clearly Erskine was of a mind to challenge the deed of release but unfortunately, she could bring so little evidence to this part of her application that she couldn’t persuade Federal Court judge David Yates to extend the time frame in which to bring a claim.

“The plaintiff is unable to point to any material fact or matter that would provide an extant and arguable reason to set aside the Deed of Release and Settlement,” Justice Yates said.

“I accept that, in that state of affairs, any claim under s 588FF(1) of the Act, as now foreshadowed, is devoid of any prospects of success.”

Further reading:

Liquidator Facing 10 Year Ban

About the Author

Peter Gosnell
Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

1 Comment on "Liquidator fails to overturn predecessor’s compromise"

  1. One of the things that came out of the recent AIIP conference in Canberra is the cost of public examinations and why is there not some thing as sharp and less expensive available to liquidators as there is for trustees under section 77C of the bankruptcy Act. If Roybn Erskin could have taken down depositions from the director Mr Haddad and the former liquidator on the $32k compromise and have that in evidence one would wonder how the judge would have ruled. We can sympolise as to why one does not go for a Public examination of these two chaps. The cost and time that it takes. Bring on more law reform.

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