The Company is a proprietor of property at Capel Sound, Victoria. It purchased the property with the intention of redeveloping the site as a holiday accommodation park.

In 2021, a Secured Creditor advanced loans of circa $12 million to the Company to enable repayment of existing secured debt, with the balance to be utilised in further developing the park and its infrastructure.

Unknown to the Secured Creditor, the Company had entered circa 31 peppercorn leases (usually reserved for not-for-profits, at significantly less than the market value) with third parties for terms of up to 99 years. The terms of the leases were onerous on the Company and had no benefit or return to the Company. The value of the Capel Sound property without the leases was estimated to be significantly more than if it were to be sold with the leases in place.

The Company defaulted on its obligations to the Secured Creditor, resulting in the appointment of Receivers and Managers in November 2022. There was not an avenue for the Receivers and Managers to sell the Capel Sound property whilst the peppercorn leases remained in place.

Cor Cordis was engaged to administer the liquidation of the Company. Tass took immediate steps to meet with the Company’s Director, the Receivers and Managers of the Company and conduct a site inspection of the property.

An immediate analysis of the leases took place to determine their benefit/detriment to the Company, its creditors, and other stakeholders. This analysis included reviewing the terms of 31 different leases, considering their terms, and considering the potential prejudice to the tenants of those leases if the leases were to be disclaimed.

A financial analysis also took place to determine the value of the Capel Sound property with and without the leases in place.

Given the complexities of case law involving leases, Tass instructed Counsel to provide an opinion with respect to the peppercorn leases. After considering the terms of the leases in detail, considering the potential prejudice to the tenants of those leases if the leases were to be disclaimed, and following advice obtained from Counsel, Tass made a recommendation to the Liquidator that it was in the best interests of the Company and its creditors to disclaim the leases.

Based on Tass’ analysis, recommendation and advice obtained, the Liquidator proceeded to disclaim the leases within three months of his appointment.

By disclaiming the leases, the value of the Capel Sound land increased substantially to the benefit of the Company, its creditors and the Receivers and Managers, who were free to take action to sell the property, free of any leases and ongoing litigation.

Cor Cordis was approached to act as a Receiver and Manager of an entity that owned real property in Queensland.

The real property was made up of land and an incomplete build, which, on appointment, had an ERV of c$ 2.5m. The upside in completing the build vs selling the property as is, was circa $2m. The exposure to the secured creditor exceeded $3m.

Taking steps to sell the asset and making funds available to the secured creditor as soon as possible. This would result in selling the property as is, and a shortfall to the secured creditor of c$500k.

Finalising the build, would result in a c$2m upside and payment in full to the secured creditor. However, this action would result in additional issues, including the time to complete the build, shortages in tradespeople in the QLD, who would ultimately fund the completion of the build, and the timing of getting a return to the secured creditor.

Tass was proactive in negotiating an outcome suitable to the Company, its Director, and the Secured Creditor

Immediate steps were taken to determine the ERV of the property in its current state, together with the costs required to complete the build and the upside in doing so to the secured creditor. These figures were presented to the secured creditor within two weeks of the appointment.

After that, Tass liaised extensively with the Company’s Director to present the same figures and work towards an outcome where a third party would fund the completion of the build. These upfront discussions were the catalyst for the Director agreeing, via a separate entity, to fund the costs required to complete the build.

Tass engaged with and dealt with the project manager weekly to ensure the completion of the build. Regular updates were provided to the secured creditor.

Actions taken by Tass, predominantly presenting facts to the secured creditor, and working with the Company’s Director to fund the build, resulting in the completion of the build within three months of the appointment.

Completing the build – which the secured creditor did not have to fund – resulted in a c$2m upside in the property’s value. The Company’s Director was able to leverage off the increased value of the property by procuring the finance necessary to pay the secured creditor in full.

The overall outcome was that the secured creditor was paid out in full, the Company was able to retain the property, and there were significant cost savings in the Receivership, given that steps to sell the property were avoided.

The bankrupt declared herself bankrupt and appointed the Official Trustee to administer her bankruptcy. At the request of a creditor, steps were taken to transfer the administration to Cor Cordis.

The initial scope of the appointment included investigating the bankrupt’s examinable affairs, assessing the bankrupt’s net interest in real property (the net interest in personal and company property exceeded $1.3m), and quarantining c$400k recovered following the appointment to distribute the aim of distributing funds to unsecured creditors by way of a dividend.

Following the appointment, the scope of the appointment extended to dealing with creditor claims seeking purported security over the bankrupt’s assets, which, if evidenced, would have resulted in the Estate giving up the c$400k to the detriment of the Estate and unsecured creditors. One such creditor initiated legal proceedings seeking Orders with respect to its purported security over the available assets and funds.

The result of the proceedings initiated was that the Bankrupt Estate was obligated to partake in the proceedings if it was going to quarantine the c$400k successfully.

Tass’ initial involvement included working with the creditor over various weeks to successfully facilitate the transfer of the administration to Cor Cordis.

Thereafter, steps were taken to investigate the bankrupt’s affairs and determine the pool of assets available to the Bankrupt Estate. Investigations were hampered given the bankrupt’s unavailability, and, in the absence of books and records, significant investigations took place with the aim of determining the asset pool of the Bankrupt Estate. This included communications and notices to purported creditors, reviewing underlying transactions and loan agreements, putting together an asset schedule based on searches conducted, and analysing transactions identified in bank statements obtained.

Tass managed all aspects of the appointment, including engaging with and instructing the appointee’s legal representatives with respect to material required for the legal proceedings.

At a mediation involving seven other parties to the proceedings, Tass was instrumental in negotiating an outcome that resulted in the Bankrupt Estate retaining the c$400k and recovering additional funds from the pool of assets for the benefit of the Estate. As part of the agreement reached, Tass procured undertakings from creditors purporting to be secured that they would not lodge a claim in the administration.

The result was that a significant pool of funds became available to pay unsecured creditors, and the rate of return to such creditors increased substantially due to the undertakings Tass was able to procure.

Prior to his bankruptcy, the Individual operated several companies in the fruit and vegetable industry. In trading these entities, the Individual provided personal guarantees, including a personal guarantee to a cross-collateralised debt to a major Bank of circa $16.5m.

Assets registered in the Individuals name were secured by the amount owed to the Bank, and the values of such assets were significantly less than the Bank’s exposure.

Following his bankruptcy, the only options available to the Individual (given he wanted to regain control of the group of entities) were to annul the Bankrupt Estate pursuant to Sections 74 or 153A of the Act. An annulment under s153A was not feasible, given the overall exposure to the Individual’s unsecured creditors.

The success or otherwise of the Individual’s composition relied on several factors, including:

• The quantum of funds the Individual could make available to the Estate.
• The outcome of the Trustee’s investigations of the Individual’s affairs and the delivery of such outcome in the Trustee’s Report to Creditors.
• Managing the expectations of various creditors, particularly the expectations of the petitioning creditor whose vote in the proposal was insufficient to influence the outcome.
• Managing the expectations of the major Bank that placed time constraints on the matter. i.e. the major Bank supported the Individual regaining control of the group of entities given that his background and management of the entities (post-annulment) would enable value to be added to the entities, thereby decreasing the major Bank’s overall exposure.

Tass met with the Individual numerous times to discuss the merits of the Individual presenting a composition to his creditors. Tass also held numerous meetings with the major bank to keep it appraised of the process throughout.

Finally, Tass prepared a detailed Report to creditors outlining investigations into the matter and the expected return in a bankruptcy vs what creditors would receive if the Individual’s composition were accepted.

This report was the catalyst for creditors accepting the Individual’s proposal. This resulted in an immediate annulment of his bankruptcy, and creditors received a cents in the dollar return on the amount owing to them, which they would not have received had the Individual remained bankrupt.

A major Bank was owed more than $10m by an Individual. The Individual’s personal liabilities exceeded $50m. Given the exposure to the Bank, Cor Cordis was approached by the Bank and the Individual to prepare a Report that identified and valued the Individual’s assets and creditors, identified claims that may be available, and estimated a possible return in the event of a possible Bankruptcy.

Tass’ experience was vital in ensuring a Report was prepared to the Bank’s specifications. Using his years of experience, Tass was able to target his request for books and records required to complete preparation of the Report. The Report was turned around within two months of the appointment.  

The result was a win-win. The Bank was able to use the Report prepared to negotiate an outcome with the Individual in relation to its exposure, thereby avoiding costs and uncertainty arising from a formal appointment (such as a Personal Insolvency Agreement or Bankruptcy).

The Individual was able to negotiate an outcome with the Bank in relation to the Bank’s exposure, and in doing so, was able to avoid the consequences that arise from a formal appointment.