Dyldam Developments - Case Update

Another week, another decision in the administration of prominent Sydney-based apartment developer Dyldam Developments.

Last week, we wrote about how the Federal Court of Australia approved a settlement reducing the available deed fund and deviating from the terms approved by creditors. The settlement was entered into with the liquidators of a related entity, Special Gold. Sam Fayad, a director of both Dyldam Developments and Special Gold, was accused of using Special Gold’s funds to pay a DOCA contribution in the Dyldam Developments administration, breaching his fiduciary duty to Special Gold.

Now, the Court has formally ruled that Special Gold’s directors, Sam Fayad and his son Fayad-Lee Fayad, orchestrated a scheme to strip the company’s assets, breaching their statutory and fiduciary duties. The transaction that was the subject of the scheme was a 2020 sale of a property in Parramatta for nearly $74 million. The proceeds were subject to a freezing order but were misused by Sam and Fayad-Lee through a complex web of payments to related entities. The Court found that these payments, many of which were made without any discernible benefit to Special Gold, left the company unable to meet its tax obligations, incurring penalties and interest exceeding $30 million.

The Court also held that Sam and Fayad-Lee caused Special Gold to enter a Group Tax Debt Deed in 2019, exposing it to over $31 million in joint liabilities for group companies’ tax debts, while its own liability was less than $1 million. The Court determined this was not in Special Gold’s best interests and constituted a breach of duty. The conduct of Sam and Fayad-Lee was found to form part of a broader “dishonest and fraudulent scheme” to benefit the Fayad family and associated companies at the expense of Special Gold and its creditors.

Sam and Fayad-Lee were ordered to pay over $44 million. Remon Fayad, Sam’s other son, and another related entity were also found liable for knowingly assisting in the breaches and knowingly receiving misappropriated funds, with Remon ordered to pay over $7 million and the related entity ordered to pay nearly $14.5 million.

Read the decision HERE.

Professionals involved:

• Jeremy Giles SC of 7 Wentworth Selborne with Michael Rose of 9 Wentworth Chambers and Fabian Di Lizia of 5 Wentworth (instructed by ERA Legal) for Special Gold

• Doran Cook SC of 9 Wentworth Chambers with Andrew Emmerson of Eight Selborne (instructed by Johnson Winter Slattery) for Dyldam Development

• Ben Katekar SC of New Chambers with Rebecca Hughes of New Chambers (instructed by Bird & Bird) for the Second, Third and Fourth Defendants

• James Pope of Pope & Spinks for the Sixth, Seventh and Eighth Defendants

• Stephen Ipp of Greenway Chambers (instructed by Corrs Chambers Westgarth) for Persephone Company Pty Limited (Receivers and Managers Appointed)