Christmas spirit was in limited supply at the meeting of creditors of bankrupt builder Tony Saaib late last year, and that’s perhaps understandable.
Convened on December 23, 2022 creditors had assembled to consider just one resolution. The removal of the trustee of Saaib’s bankrupt estate and his replacement with rivals joint and several.
“I advise that the Indemnity is not payable unless, and until, such a time I have determined that there is unlikely to be any recoveries from the assets disclosed in the Bankruptcy Form.” Liam Bailey.
From the start feelings had been high. But when the lawyers packing proxies worked up a sweat emotions threatened, as they always do, to override judgment. Perhaps it was a good thing so many attended virtually.
Attempting to keep the lids on in this hell’s kitchen was meeting chairman and the target of the resolution, Liam Bailey of O’Brien Palmer.
Bailey had taken the appointment as Saaib’s trustee after being referred the job by John Brickwood of Corporate Structure Group (CSG).
Trying to unseat him on that last Friday before the holy day off was the Owners Corporation of a Marrickville townhouse development that in April 2022 won judgment in the NSW Court of Appeal against Saaib for defective building works to the tune of $3.425 million.
When the High Court refused Saaib’s application for leave to appeal in September 2022 the builder sought bankruptcy protection.
It didn’t take long however for the Owners Corporation, as the largest creditor by value by far, to decide that it wasn’t going to cop any trustee who’d been engaged by the bankrupt.
Shortly after Bailey’s appointment the Owners Corp began seeking details of any proofs of debt received by the trustee, particularly in respect of related parties.
Understandably, Bailey wasn’t inclined to divulge such information at such an early stage of the administration but his refusal only antagonised the Owners Corporation. And then there was his DIRRI.
Dated November 9, 2022 the DIRRI discloses that Brickwood’s firm is an occasional referrer to O’Brien Palmer. Nothing to see there.
What is curious however is the involvement of the bankrupt’s daughter in the pre-appointment meetings and her proposal for a conditional deed of guarantee and indemnity for Bailey’s remuneration and disbursements in the sum of $50,000.
In the DIRRI Bailey states: “I advise that the Indemnity is not payable unless, and until, such a time I have determined that there is unlikely to be any recoveries from the assets disclosed in the Bankruptcy Form.”
Now the only asset of significance disclosed by Saaib is a property in Mulgoa he currently occupies.
He said the property had an estimated market value of approximately $4,500,000 and is subject to a mortgage with the Commonwealth Bank of Australia Limited (“CBA”), the balance of which was approximately $2,300,000.
Bailey told creditors in his first report that Saaib had advised that his former spouse, Ivonne Moussa Slaimen, was a co-owner of the Property.
That doesn’t appear to gel with a title search of the NSW Land Registry Services database which Bailey said revealed that Saaib is the sole registered proprietor of the Property.
Nevertheless, the ex-wife lawyered up and as Pure Legal’s Chris Perry told the meeting on December 23, if her client’s offer to buy out her ex was refused and Bailey replaced, “her client would withdraw her offer to purchase the Property equity, and will instead use these funds to commence legal proceedings to enforce her claim on the Property in the Family Court”.
Creditors had already been advised by Bailey that if the Family Court ruled in the ex-wife’s favour, there’d likely be no recovery for creditors. And that’s what makes the conditions attaching to the indemnity the bankrupt’s daughter offered curious.
Bailey rejected any suggestion of impropriety when iNO contacted yesterday him saying: “I have never accepted an indemnity conditional on making a finding that is favourable to a related party of a debtor and it would be slanderous of you to suggest otherwise.”
That however wasn’t what iNO asked. How could we? The indemnity isn’t enlivened to the point where the trustee can choose to accept or decline it until and if a specific and future event occurs.
We had asked Bailey if he had any misgivings about accepting an appointment that came with a such potentially problematic indemnity attached.
It was the optics iNO was interested in, and Bailey’s opinion of them, particularly in light of the conditions and threats attaching to the ex-wife’s offer. We clarified this in a second email and Bailey responded after COB.
“My indemnity is enlivened by the non-receipt of assets into the estate to meet my creditor approved remuneration which is an entirely normal condition to impose on the provision of a consent to act where it is unclear whether sufficient assets exist to be realised to meet the costs of the estate’s administration. No, I do not have any concerns as to the optics.”
The outcome of the meeting in the meantime saw the resolution fail because while the creditors with more than 90 per cent of the value voted to remove Bailey, the majority in number were against it and on the advice of his lawyer Ashok Yogachandra Bailey declined to use his casting vote.
Yogachandra and the Owners corp’s brief David Farrar also exchanged pleasantries during the meeting and, in there aftermath Farrar filed proceedings in the Federal Court seeking orders removing Bailey and installing Hall Chadwick duo John Shanahan and Matthew Vines.
At this stage Bailey has yet to file a defence but orders made yesterday required him to deliver to Farrar and his client “any written document recording the indemnity given by Tony Saaib’s daughter, Ms Joanna Massoud, in favour of the respondent and referred to in the respondent’s Declaration of Independence, Relevant Relationships and Indemnities dated 9 November 2022, together with any document recording any variation, by 4.00 pm AEDT on 9 March 2023.”
It will be interesting to see how a court will react to this type of situation. The Owners Corporation is the aggressor is likely to foot the bill for any trustee. Whichever way the matter is to be considered the issue will have to be litigated either in the Supreme Court or, most probably the Division 2 Court as it has jurisdiction both in bankruptcy and also under the Family Law Act 1975.