Receivers in the firing line over sale delay

BPS Resolved’s Dave Sampson.
Mackay Goodwin’s David Hurst.

Dave Sampson and David Hurst have copped a spray in a judgement as a frustrated lender seeks discovery from the pair in their capacities as receivers of development property at Castle Hill owned by Cecil Developments Pty Ltd (Cecil).

In Globe Capital Administration Pty Ltd v Cecil Developments Pty Ltd atf the Cecil Developments Unit Trust (Receivers and Managers appointed) [2023] NSWSC 574 Sampson and Hurst are depicted as possibly conspiring with one secured lender to the detriment of another.

The possibility was dismissed by the court but the judgement fails to mention that Sampson retired as receiver of Cecil in July 2022 when Hurst upped stakes and left BPS Resolved to join ex-BPS partner Mitchell Ball at Mackay Goodwin.

In switching to Mackay Goodwin Hurst took the job with him so any complaints about alleged delay are no longer Sampson’s to deal with.

The discovery application brought by Globe Capital Administration Pty Ltd (Globe) came about in part because the Castle Hill properties have been pledged as security for loans from two lenders.

Gemi 168 Pty Ltd, part of Justin Epstein’s stable, advanced loan funds to Cecil on security to aid Cecil’s development of the Castle Hill properties. Gemi became the first mortgagee of the land.

Globe also loaned money to Cecil, initially on an unsecured basis.

When Cecil defaulted on its obligations Globe commenced proceedings which were ultimately settled by entry into a deed of settlement in 2020 which made provision for the grant to Globe of a second mortgage over the Castle Hill properties.

The deed envisaged a settlement sum of $17.5 million plus GST and required Cecil “to do all things reasonably necessary to facilitate registration of Globe’s second mortgage, and to agree to the entry of judgment upon any further default by Cecil”.

According to the judgment’s author, NSW Supreme Court judge Michael Slattery, Globe’s second mortgage remains unregistered.

Globe slapped a caveat on the Castle Hill properties in May 2021 shortly before Cecil defaulted on its obligations under the settlement deed.

Globe then enforced judgment for $19.25 million in respect of the previously settled proceedings and in August 2021 appointed Simon Cathro as receiver, galvanising Epstein and his mates at Gemi into action.

A month after Globe appointed Cathro, Gemi appointed Sampson and Hurst receivers and managers to the Castle Hill properties under its first mortgage. Shortly after their appointment they told Cathro that Cecil owed Gemi almost $63 million.

The same day Sampson and Hurst were appointed Cecil’s sole director, Marles Zhu appointed Ball and Mackay Goodwin principal Dominic Calabretta as voluntary administrators (VAs) of Cecil.

The appointment of Sampson and Hurst froze Cathro’s efforts to market and sell the Castle Hill properties.

According to the judgment they obtained appraisals from real estate agents in about December 2021 and entered into an agency agreement with a real estate agent, Colliers, six months later, on 11 April 2022.

Despite this the Castle Hill properties have not yet been publicly marketed for sale, Cecil has not yet undertaken the steps necessary to register Globe’s mortgage and neither Gemi or the receivers have been overly cooperative in responding to Globe’s regular requests for updates in respect of the progress of the marketing and sale campaign.

Gemi, Sampson and Hurst cited confidentiality restraints but with Gemi earning default penalty interest of $35,000 per day Globe only sees a secured creditor getting fed while other creditors wait for their first bite from a diminishing buffet.

That resistance to Globe’s requests precipitated the discovery application to the court in November 2022 for orders that Gemi, Hurst and Sampson divulge any and all relevant information in their possession including in relation to Gemi’s mortgage and the receivers’ progress in respect of obtaining valuations and their conduct of the marketing and sale campaign. Sampson however had already retired by this time.

Globe says it wants the information so it can make an informed view about commencing proceedings in respect of the alleged delay, given how beneficial that delay supposedly is for Gemi.

The respondents resisted the application on various grounds but Globe came away with most of what it wanted and the parties are to return to the court on June 9.

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