Cor Cordis forced to adjourn vote on Dyldam deal

A compromise that would’ve seen Ozem Kassem and Jason Tang secure $750,000 to cover their fees and expenses was derailed yesterday when the Australian Tax Office (ATO) demanded that the Cor Cordis partners adjourn the meeting of creditors of Project 1876 Pty Ltd.

Voting on the proposal had been scheduled for 11:00am today but SiN understands that the ATO – to which Project 1876 owes $9,238 million in unpaid income tax, BAS liabilities, interest and penalties – informed the liquidators yesterday that it wanted the meeting adjourned.

At this stage it’s unclear what prompted the ATO’s action. Kassem and Tang were appointed voluntary administrators (VA) of Project 1876 on July 1, 2013 and subsequently were appointed liquidators on August 6, 2013. The company’s key asset was a registered first ranking mortgage over the Entrada commercial property on the corner of Church and Victoria Streets, Parramatta.

At the time the building was held by a related entity, Plaza West Pty Ltd. Both companies formed part of the web of corporate entities controlled by Dyldam Developments chief Sam Fayad and co-founder Joseph Khattar, who were former directors of Project 1876. The men resigned on April 29, 2013 but remained as shareholders. Fayad’s wife Maria remained as sole director.

According to reports to creditors Kassem and Tang identified various anomalies despite having limited success obtaining books and records and other documents from the shareholders, the former and current directors or their advisors.

The most significant irregularity was a potential voidable transaction involving the transfer of more than $12.2 million to Sam Fayad, Khattar and associates of Project 1876’s shareholders. The money came from more than $22 million realised by Plaza West when it sold the Entrada building in May 2013.

The transfer, which took place on July 9, 2013, was seemingly in breach of Project 1876’s rights under its mortgages. While the shareholders of Project 1876 have told the liquidators they were entitled to the funds under priority entitlements agreed to when they lent money to the company in 2002, the disbursements took place nine days after Kassem and Tang were appointed VAs.

In their report to creditors on October 27, 2016 the liquidators said: “neither the director nor any other party had advised us of the Company’s interest in the Plaza West property as secured by the Mortgage at that time”.

Putting aside for a moment the question of why a registered liquidator would need to be told by potentially conflicted parties what assets a company might have, this statement does not seem to take into account the knowledge of Project 1986 that Kassem must have had as court-appointed liquidator of another Dyldam associated entity called National Highrise Investments.  For clarity’s sake it should be noted that Tang is not the joint liquidator of National Highrise Investments. That role belongs to Cor Cordis Melbourne partner Bruno Secatore.

Through their lawyer Charly Tannous Kassem and Tang said that they had been unaware the proceeds of the sale of the Entrada building had settled and that the money had landed in the trust account of the conveyancing solicitor who handled the sale two days after they were appointed.

“At the time the proceeds of the sale were received and disbursed by Robert Bounassif, the then administrators were not aware of the receipt by Mr Bounassif and did not consent to the disbursement of the proceeds by Mr Bounassif,” Tannous said in an email response to a series of questions.

Fair enough. This gels with what’s in the creditors reports. But in the same response, Tannous also confirms: “Our clients were aware, in their capacity as liquidators of National Highrise Investments that Project 1876 Pty Ltd had an entitlement to be repaid its loan to Plaza West. However, our clients (then administrators of Project 1876 Pty Ltd) were not aware of the receipt and disbursement of the funds as outlined above,” he said.

In the October 27, 2016 report to creditors the liquidators say that at the time of their appointment as VAs to Project 1876 they were unaware that the Company had an interest in the Plaza West property secured by a registered mortgage.

It’s hard to imagine Kassem not knowing about the various claims on Plaza West’s assets given he was trying to make a claim against Plaza West for his fees on National Highrize but the seeming contradiction might be attributable to the timing around when Project 1876 took over the registered mortgage from the former lender, Bankwest.  It’s all a bit of a mystery. Kassem was appointed liquidator of National Highrise Investments in 2011.

Also clouding the question of what was known by whom and when was it known is an email obtained by SiN sent by Bounassif on July 4, 2013. In it he confirms to the recipients that settlement of the Entrada sale took place on July 3 and that on settlement Plaza West had “paid in full all outstanding Land Tax charges, strata Levies, council rates and Water rates in relation to the property.”

Among those cc’d into the email was then Cor Cordis manager Sam Henderson at email address [email protected] Tannous told SiN this morning that his clients were not aware of the existence of the email and that a review of Henderson’s accounts, which must’ve taken place overnight, had found no trace of it. He suggested that the email was “fabricated”.

Henderson no longer works for Cor Cordis and there is nothing to show when or even if he became aware of the July 4, 2013 email from Bounassif prior to the funds being transferred on July 9. His connection to the Entrada property however goes back before he joined Kassem and Tang at Cor Cordis to when he was at Jirsch Sutherland because Rod Sutherland and former partner John Kukulovski were the liquidators of Plaza West prior to it entering into the deed of company arrangement (DoCA) from which it ultimately sold Entrada.

In their most recent report to creditors Kassem and Tang recommended that creditors either fund the proceedings they’ve commenced against Sam and Maria Fayad, Khattar and related parties or accept the Dyldam parties’ compromise and deed of release. Acceptance would see the ATO get barely a cent if that of the more than $9 million it’s owed.

On the other hand, acceptance would see Kassem, Tang and their lawyers get paid in full and enable Project 1876’s shareholders to keep millions of dollars in exchange for four payments totalling $750,000. Failure to fund the liquidators will likely see the legal proceedings against the Project 1876 shareholders lapse, the liquidators said.

The ATO has previously rejected an application for funding from the liquidators to run public examinations of the company’s directors, former directors, shareholders and others. The liquidators also prepared a supplementary report for ASIC following a request from the regulator, but there is no reference in the latest report to creditors to indicate if they sought to obtain a grant from the Assetless Administration Fund (AAF) to bankroll examinations. Nor is there any reference to any consideration given to approaching commercial litigation funders. The ball is in the ATO’s court and the circumstances surely call for an uncompromising response.