Creditors are pursuing two of Salim Mehajer's companies for almost $100 million while the businesses have just $32,000 in the bank, the Supreme Court has heard, as the colourful property developer seeks to halt the appointment of administrators to the companies.
Lawyers for Mr Mehajer's companies Sydney Project Group Pty Ltd and S.E.T. Services Pty Ltd appeared in the Supreme Court in Sydney on Tuesday seeking urgent orders preventing administrators taking further action in relation to their assets.
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Creditors chase Salim Mehajer for $97 ...
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The property developer's lawyers say his companies only have $32,000 in the bank, as Mehajer tries to halt the appointment of administrators.
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Creditors chase Salim Mehajer for $97 million
The property developer's lawyers say his companies only have $32,000 in the bank, as Mehajer tries to halt the appointment of administrators.
Marcus Young, SC, for the companies, told the court the administrators were not validly appointed on June 16.
The court heard Mr Mehajer, the former deputy mayor of Auburn and the sole shareholder of the companies, held "a meeting with himself" in the early hours of June 16 to remove the director who went on to appoint administrators some 12 hours later.
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Mr Mehajer installed his sister Khadijeh "Kat" Mehajer in the place of Kenneth Lee, Mr Young said.
"At 5.30am in the morning?" Justice Paul Brereton said of the meeting.
"It was Ramadan and people have to get up early to eat breakfast," Mr Young said.
Mr Young said Mr Lee "couldn't appoint administrators" Michael Andrew Hogan and Christian Sprowles to the companies later that day as he was no longer a director.
"The fact is he wasn't a director and so the appointment can't stand," Mr Young said.
He said there were "quite powerful grounds to find" the administrators were not validly appointed.
Andre Zahra, for the administrators, said there was "no notification" to the administrators of the appointment of Ms Mehajer in the early hours of June 16 and the administrators were entitled to rely on the Australian Securities and Investments Commission register.
He said the Mehajers did not tell Mr Lee he had been removed as a director until "well after he had appointed the administrators" even though there appeared to be "no impediment" to them doing so after the 5.30am meeting.
But Mr Young said the fact that Mr Mehajer's resolution to remove Mr Lee was passed "is the important thing, and not what is recorded in the [ASIC] register".
Mr Zahra said the companies were in "fairly perilous financial circumstances" on June 16 and the administrators acted appropriately.
He added there were creditors pursuing the companies for more than $97 million and the businesses had "cash in the bank of about $32,000".
Receivers have already been appointed to both companies, the court heard.
He said the Mehajers were legally prevented or "estopped from contending the appointment [of administrators] is not valid".
Mr Zahra said Ms Mehajer had "no experience" managing companies and was potentially exposing herself to liability for insolvent trading.
"If that is a risk she wants to take, that is a matter for her," Justice Brereton said.
Justice Brereton said that for the purposes of the urgent application the court accepted Mr Mehajer met with himself at 5.30am on June 16, because Mr Zahra did not seek to cross-examine him on his evidence.
He made a temporary order preventing the administrators "taking any further step pursuant to their purported appointment as administrators" until Thursday, when the parties will return to court to seek final orders.
The court heard a creditors' meeting planned for Wednesday will not proceed in the interim.
Mr Mehajer is facing a string of legal battles, including electoral fraud charges. His Local Court trial was adjourned on Monday after the prosecution concluded its evidence and the parties will deliver closing submissions at a later date.