But the millionaire’s playground in the Caribbean has become the setting for a bitter dispute between men from two of Australia’s richest families: Rodric David, whose dad is former grocery magnate John David, and Charif Kazal, whose family runs a string of high-profile restaurants and cafes in The Rocks and
Circular Quay.

At its heart was a $1 deal that gave companies controlled by the two businessmen a major interest in the money to be made from the tonnes of household rubbish recycled at Eastern Creek.

It ended last month when the Grand Court of the Cayman Islands found that Mr David, 41, had tried to steal the company from Mr Kazal. Then last week in NSW, the Independent Commission Against Corruption found that Mr Kazal, 38, had lied to it in an unrelated corruption probe, a decision that is being appealed.The main witness against Mr Kazal at the ICAC was his former mate and business partner Mr David.

“Acrimonious” is the way Justice Andrew J Jones in the Cayman Islands described their relationship in his judgment handed down last month.The relationship between the two men flourished in the late 2000s with joint interests in the United Arab Emirates, where the Kazal family’s interests include making introductions for Australia companies wanting to do business with the UAE.

Mr David’s father is a former grocery magnate who was once on the BRW Rich List and a director of a company, Arena, that used to manage the Sydney Entertainment Centre.It was John David who introduced Mr Kazal to his son in 2007. Rodric David was a property developer and Mr Kazal has said the two men became like brothers.

Rodric David and Mr Kazal set up a web of companies in the tax haven of the Cayman Islands, including Emergent Capital Limited, which owned 80 per cent of the shares of Global Renewables Limited. Global operates the plant at Eastern Creek which processes household waste, either turning it into compost or sending it to landfill. Global had bought the facility for a nominal $1 in 2008 because the plant was making a loss of about $5 million a year.

But Mr David and Mr Kazal, both directors of ECL, disagreed on how much money needed to be put in to keep the company going, according to the Cayman Islands court.In January last year, Mr David called a directors’ meeting. While the directors usually communicated by email, on this occasion Mr David sent details of the meeting to the directors via registered mail to a post office box in Abu Dhabi shared by Mr Kazal. In court he said that he never expected the letter to be received, Justice Jones said.

Justice Jones said Mr Kazal had accused Mr David of being a “corporate thief”. The judge found Mr David had “contrived” to get rid of the Kazal involvement in ECL and take it over himself.

The judge said that ECL, which at one point was worth up to $12 million, is in liquidation and Justice Jones ordered the record show the company is jointly owned by interests of Mr David and Mr Kazal.

Meanwhile, the men had also fallen out over business interests in Abu Dhabi, which is how they came to be on opposite sides before the ICAC.In May 2007, they were part of a group that flew to Abu Dhabi on a business trip aiming to cash in on the booming construction and property management market. There were also plans to move into waste management in the UAE.Among the group was Andrew Kelly, then a senior executive with the Sydney Harbour Foreshore Authority. The authority leased a number of heritage-listed properties in The Rocks to Mr Kazal’s brother Karl which are run as restaurants, including The Rocks Cafe.

In July last year, the ICAC began investigating a complaint that Mr Kelly had been involved in a business relationship with Karl and Charif Kazal while also dealing with their leases through the SHFA.Mr Kelly, who ended up working for Emergent Capital Limited, told the ICAC that it had been Mr David who invited him on the trip and paid cash for his $11,000 UAE trip. Mr David denied that.

Mr David said that it had been Charif Kazal who footed Mr Kelly’s bill, which was in turn denied by Mr Kazal.

The ICAC dismissed all allegations that Karl Kazal obtained the leases as a result of favours shown to Mr Kelly and cleared him and his properties of any wrongdoing.

It found that Charif Kazal had lied to the ICAC when he denied paying for Mr Kelly’s trip. The ICAC made a finding of corrupt conduct against Mr Kelly for failing to tell his bosses at the SHFA that he may have a conflict of interest because of his links to Charif Kazal.

Rodric David could not be contacted yesterday.

Karl Kazal’s lawyer Lesly Randle said he was pleased his properties had been exonerated by ICAC and that he “looked forward to putting the unpleasant proceedings behind him”.

Global Renewables said that it no longer has any involvement with ECL.

Janet Fife-Yeomans
From: The Daily Telegraph
December 26, 2011 12:00AM

Whilst the Commission found that Mr Kelly should have disclosed a potential conflict of interest, it found there was no evidence that the action taken in relation to the Kazal leases was influenced by his relationship with them.

The Commission stated in its report that there was “no cogent evidence that Kazal business interests were unfairly favoured by SHFA.”

The Commission also reported that SHFA’s CEO, Dr Lang, could not find anything to suggest the Mr Kelly had been inappropriately influenced in authorising the recommendations being put before the SHFA Board.

Further, whilst the Commission found that there were interactions with the Kazals throughout this period, there were no findings with regard to interactions or dealings with the Kazals with regards to the 100 George Street property as has been suggested by the Sydney Morning Herald and 2GB who accused Mr Kelly of providing leases in exchange for favours.

This finding acknowledges that the allegations of “special treatment” made by the Sydney Morning Herald and 2GB were false and without foundation, and have been hugely damaging to Mr Kelly’s reputation and his ability to find work. Somerset Ryckmans has commenced defamation proceedings on behalf of Mr Kelly against Fairfax and 2GB.

Mr Kelly would also like to thank his family and friends for their support over this difficult period and he looks forward to again being able to pursue his career having established that the allegations made by the Sydney Morning Herald and 2GB were false and without foundation.

Media contact: Jacob O’Shaughnessy  0421 617 861

Contact solicitor: Zoe Bojanac

Read more…

The Daily Telegraph - Amy Dale - ‎Jul 24, 2011‎

The Rocks … ICAC has begun hearing evidence into the relationship between Andrew Kelly, a former executive with Sydney Harbour Foreshore Authority and the Kazal family who lease property in The Rocks. Picture: Ross Schultz Source: The Daily Telegraph …

Leasing boss Andrew Kelly denies trip with property developer was a conflict …

NEWS.com.au - ‎Jul 24, 2011‎

A NSW GOVERNMENT executive has denied that a lavish trip to the Middle East with a powerful property developer was in conflict with his job, but says he didn’t tell his boss about it. The NSW Independent Commission Against Corruption (ICAC) is …

ICAC inquiry into harbourside leases opens

The Daily Telegraph - Amy Dale – ‎Jul 24, 2011‎

The Rocks … ICAC has begun hearing evidence into the relationship between Andrew Kelly, a former executive with Sydney Harbour Foreshore Authority and the Kazal family who lease property in The Rocks. Picture: Ross Schultz Source: The Daily Telegraph …

Inquiry into harbourside leases opens

Sky News Australia - ‎Jul 24, 2011‎

A senior NSW official involved in leasing Sydney properties built up a rapport with a property developer, a corruption inquiry has been told. The NSW Independent Commission Against Corruption is investigating allegations that former Sydney Harbour …

Trip with developer OK – leasing boss

BigPond News - ‎Jul 26, 2011

A NSW government executive has denied that a trip with a property developer was in conflict with his job. A NSW government executive has denied that a lavish trip to the Middle East with a powerful property developer was in conflict with his job, …

ICAC probes property baron over emails

ABC Online - ‎Jul 28, 2011‎

A member of Sydney’s Kazal family has told the New South Wales corruption watchdog he cannot recall deleting emails from a State Government official who leased him four multi-million-dollar properties. The Independent Commission Against Corruption is …

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DISCLAIMER

Links to external web sites and publications are provided for your convenience only and the information and/or opinions expressed therein do not necessarily reflect the views of Somerset Ryckmans. Information provided from external web sites and publications should be carefully evaluated for its source, accuracy, currency, completeness and relevance for your purposes.

Mr Andrew Kelly, a former senior employee of the Sydney Harbour Foreshore Authority, has commenced defamation proceedings against Fairfax Media Publications and Fairfax Digital today in the Supreme Court of New South Wales, represented by Somerset Ryckmans Lawyers.

Mr Kelly claims he was seriously defamed in a number of articles published in the Sydney Morning Herald the first of which, entitled ‘Secret favours greased Rocks deal ’ was published on 1 September 2010. Damages are also being claimed in relation to subsequent articles published by Fairfax.

“The articles published in the Sydney Morning Herald have caused considerable pain and embarrassment to my family and friends as well as preventing me from retaining employment in government, which has been my career for the past 25 years,” said Mr Kelly.

“The Sydney Morning Herald article lacked balance and the journalist failed to give me the opportunity to respond despite being able to contact me at the time.”

“I strongly refute all of the allegations made in these articles, at no point did I act dishonestly or against the public interest during my time working with the Sydney Harbour Foreshore Authority, and I now intend to show this in a court of law.”

“At no time did I receive incentives from the Kazal family or anyone else in exchange for leasing or other favours as was suggested by the Sydney Morning Herald.”

“I have been left with no other option in this matter other than to clear my name through the courts,” he said.

The matter is listed before the Supreme Court on 3 February 2011.

In a David-and-Goliath battle, a former Macquarie proprietary trader, Maghnus Byrne, is suing the big doughnut for $750,000 in damages he reckons he suffered when the bank withheld his profit-share bonus after his contract was ”terminated”.

The case in the NSW Supreme Court threatens to embolden many other Macquarie types scattered around the globe whose contracts were terminated when it took a razor to its labour bill in the aftermath of the global financial crisis.

Byrne first got a job with Macquarie in Hong Kong in 2001. Over the next seven years he diligently worked his way up the ladder to eventually earn the lofty title of ”associate director, equity derivatives trader”.

Along the way, he earned pay rises and bigger bonuses under the profit share scheme. In his last year his salary was raised to $HK1.4 million ($200,000) and he was due for $HK15 million in profit-share bonuses. He even claims he received an ”extremely positive” performance review two months before he was sacked.

But in November 2008 a Macquarie bigwig and sportscar lover, Kim Burke, sent him a letter terminating his contract.

Macquarie uses the bonus pool to retain good staff. Bonuses are paid over five years to ensure they don’t end up scoring big bonuses and then running for the door. If they do leave, the bankers forfeit their profit share.

But in Byrne’s case, he claims he is entitled to his share of the bonus pool because the bank dumped him and not the other way around. It’s a point Macquarie doesn’t accept.

Ultimately the courtroom fight will be over the wording of the bonus pool policy.

Byrne has shown inside and outside the ring that he can pack a punch. In late 2007 he swapped his suit for satin boxers to swing a few punches at other bankers in a charity fight called the Hedge Fund Fight Night.

The first round in his latest skirmish is scheduled for court on April 9.

The plaintiffs were appointed voluntary administrators of the Black Stump Group which comprised nine companies. During the period of administration the administrators formed the view that the Group’s affairs were hopelessly intermingled such that it was not possible, except at great expense, to identify the assets and liabilities of each company within the Group. As a consequence the administrators recommended that the companies be wound up and in their report to creditors they advised creditors that they intended to apply for orders pooling the assets of the companies for the purposes of the liquidations.

At the second meetings of creditors, the administrators again informed creditors of their intention to seek pooling orders from the Court. Although no formal resolution was passed by creditors at the meetings, no creditor objected to the pooling arrangement.

Following the winding up of the companies the administrators made an application to the Supreme Court for pooling orders. Prior to making the application the administrators again notified creditors by letter of their intention to seek pooling orders. The notice accompanying the letter stated that “any creditor who is opposed to the pooling application must indicate their opposition in writing to the liquidators.” No creditor objected.

The Court at first instance identified five possibilities for giving effect to the pooling arrangement. They were: 2

1. a scheme of arrangement between each company and its creditors under Part 5.1;

2. a compromise under s477(1)(c) of the Act which is made applicable to voluntary winding up by s506(1)(b);

3. an arrangement under s510 between a company in liquidation and its creditors;

4. resort to the extensive jurisdiction created by s447A, where applicable; and

5. a deed of company arrangement under Div 10 of Pt 5.3A where Pt 5.3A administration is in progress.

The plaintiffs made their application pursuant to a sixth possible route, namely, sections 477(1)(c), 506(1)(b) and 511(1) and (2). Barrett J. found that a liquidator could resort to the s477(1)(c) power made applicable by s506(1)(b), but held that s477(1)(c) was not binding on any creditor who did not actively assent to the proposed compromise or arrangement. In respect of s511 Barrett J. held that the section could only be of relevance if the creditors had given their unanimous assent to the pooling arrangement.

Although the liquidators had notified the creditors on several occasions of the pooling proposal, Barrett J. did not consider the notifications to be a sufficient basis to imply unanimous creditor consent and concluded that without such unanimous consent, in the terms of s511(1)(a), there was no question arising in the winding up, a positive determination of which by the Court would cause the creditors’ legal rights to be varied. He therefore dismissed the liquidators’ application.

On appeal, Justice Barrett’s decision was upheld. Young CJ in Eq. held that the Court has no power to order the pooling of assets in a winding up, no matter how commercially expedient such an action may appear to be. Whilst recognising that there are a number of ways to achieve pooling, Young CJ. found that “what has happened is not one where one can say that there has been consents or assents by any of the creditors to waive or vary their rights. Nor has there been the facts which would show that there has been a compromise or arrangement between the creditors and the liquidators.” The Court of Appeal held that although the liquidators advised creditors on three occasions in broad outline that they intended to make an application for pooling and did not receive any objection to such notices, this did not constitute sufficient waiver or assent from the creditors. Without unanimous creditor assent, it was the Court’s opinion that the liquidators’ application must fail. It is relevant to note that ASIC, who appeared as amicus curiae on the application considered that the notices were sufficient to properly inform creditors of their rights in relation to the pooling application such that a lack of objection to pooling must really have equalled assent.

The decision of Young CJ. sits uneasily with earlier pronouncements he made in two other decisions. In Re Charter Travel Co Ltd (1997) 25 ACSR 337 his Honour indicated the availability of an additional course to the five procedural possibilities identified by Barrett J. That course relies on s511(1)(a) being the ground under which the plaintiffs had made their application. His Honour relevantly said: “It would be possible for the Court to advise a liquidator in a court winding up that he should consolidate debts, but it would be unlikely that the court would do so unless every creditor agreed or a regime was put in place for creditors to object.”

His Honour went on to state: “if no creditor objects and it is impracticable to keep the assets and liabilities of different companies separate, and the consolidation is for the benefit of creditors generally, then the court might advise the liquidators concerned that they would be justified in consolidating the administration. Again there would be cases where the consolidation could be considered as a compromise between the two liquidators and the various creditors of the companies under section 477(1)(c) of the Corporations Law.”

Perhaps most significantly, Young CJ. opined: “So long as there is a power under the Corporations Law or otherwise available to the Court, the Court is anxious to see that liquidations are conducted with commercial efficiency and will not allow any technical rules to frustrate that attempt.”

In attempting to pool the assets in the Black Stump liquidations, the liquidators were concerned to achieve an outcome falling squarely within the legal principles identified by Young CJ. in Re Charter Travel including the Court’s anxiety to see that liquidations are conducted with commercial efficiency. This latter objective reflects the broader principle that Courts are anxious to ensure the quick, just and cheap disposal of litigation.

In Black Stump, both the Court at first instance and the Court of Appeal recognised the general merits of a pooling order and yet felt constrained to make such an order as the application did not strictly fall within one of the five gateways identified by Justice Barrett. 4

This was despite the fact that both the Court at first instance and the Appeal Court recognised that “in a general sense the situation appears to be one which would benefit from some sort of consolidation and pooling.” (per Barrett J.) Similarly, Bryson JA in the Court of Appeal held “I feel a strong impulsion to find a pragmatic solution to the situation of the companies and their liquidators…” Whether the Court indeed had the power to order pooling or not also seemed uncertain to Bryson JA who held: “It is not clear that the Court has any such power. I do not have a clear view to the contrary effect, that is, that there is no such power.”

It is somewhat anomalous that the Court of Appeal should have applied a strict, literalist interpretation of section 511 as a potential gateway to obtaining a pooling order, having regard to his Honour’s earlier liberalist approach referred to in Re Charter Travel. Whilst the Court was focused on the need for unanimous assent, the Court failed to consider the alternative possibility, namely, a regime for objection. In Black Stump such a regime clearly existed.

The concept of a regime for objection was not adverted to at all by the Court in Black Stump. This concept indeed sits more comfortably with decisions such as Dean Willcocks –v- Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209. In that case the court ordered pooling in a winding up by resort to the extensive jurisdiction created by section 447A, notwithstanding that s447A generally is of no application to a company in liquidation as opposed to voluntary administration. Further the court made the pooling orders despite the lack of consent having been obtained from one major creditor.

s447A was held to be applicable in Soluble Solution because creditors had passed a resolution during the voluntary administration approving pooling. No such resolution was passed in Black Stump. But one has to question why this should matter. The fact that a resolution was passed does not indicate unanimous consent but merely that a majority of creditors attending in person or by proxy, both in number and value, voted in favour of the resolution. It is also suggested that despite there being no formal resolution in Black Stump, it remained open for both the Court at first instance and the Court of Appeal to have ordered pooling by resort to s447A on the basis that no creditors objected to such a course when the issue was raised at the second creditors’ meetings. Furthermore it was open for the court to have adopted a similar safeguard as they did in Soluble Solution which was to order the liquidators to serve all creditors with notice of the pooling order and to permit any creditor to approach the court to discharge the order. 5

Whether Soluble Solution even remains good law is now in doubt as a result of the court’s decision in Black Stump. In Black Stump, Young CJ questioned whether 447A can be used where companies are no longer in administration. His Honour held: “There were a lot of other matters which were canvassed before us, such as whether s447A can come into play, even though the company has passed into liquidation. Generally my view is that one cannot utilise s447A for making retrospective orders except for the rather odd situation such as in Australasian Memory Pty Ltd v Brian (2000) 200 CLR 270, but it is not necessary to go into that at all.”

It is unfortunate that the courts chose to adopt such a restrictive approach to the application that was before them in Black Stump particularly having regard to past judicial authority approving pooling. As a matter of commercial practicality, had the court adopted the Soluble Solution approach by making orders under s447A, or alternatively exercised its powers under s511 in light of the comments made in Re Charter Travel the liquidators would have been able to quickly pay a dividend to unsecured creditors without the need to now unnecessarily incur further cost and expense to the detriment of unsecured creditors in bringing about a pooling arrangement by adoption of the rather cumbersome method laid down in Re Switch Telecommunications Pty Ltd; ex parte Sherman (2000) 35 ACSR 172.

It is worthwhile speculating whether any creditors will ultimately object to the making of pooling orders. Only time may prove the adage that sometimes not saying “No” really does mean saying “Yes”.

The decisions in Black Stump clearly demonstrate the need for urgent law reform to permit liquidators to pool in appropriate cases. It is therefore timely to note that on 13 November 2006 the draft Corporations Amendment (Insolvency) Bill 2007 and Corporations and ASIC Amendment Regulations 2007 were released by the Parliamentary Secretary to the Treasurer, the Honourable Chris Pearce MP, for public comment.

To facilitate the external administration of corporate groups, the draft legislation introduces a statutory ‘pooling’ mechanism. This will provide for pooling in a winding up which can be made:

(a) by the liquidator with the unanimous consent of eligible unsecured creditors; or

(b) by the liquidator approaching the court for a pooling order without first seeking the creditors’ consent. 6

Given the present difficulties involved with pooling in liquidations the introduction of the draft legislation amending the existing insolvency laws will no doubt be greeted positively by liquidators of insolvent corporate groups.

Written by Marc Ryckmans

Section 9 of the Corporations Act specifically provides that the term ‘director’ includes not only a person who is properly appointed to the position of director but also a ‘defacto’ or ‘shadow’ director. A ‘shadow’ director means a person in accordance with whose instructions or wishes the directors of a company are accustomed to act.

The law imposes onerous duties on company directors and there are significant penalties for directors who fail to properly discharge their duties and obligation. In particular, directors can be held liable for insolvent trading. In the context of an administration, the risk is greatly increased…

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