North Shore Property Developments - Case Update

The Federal Court has dismissed an application to rescind a settlement agreement entered into by a property development company’s former liquidator, despite finding that the counterparty to the agreement presented the liquidator with a fabricated valuation report as to the value of the properties in question.

North Shore Property Developments was wound up in February 2015, and David Iannuzzi was appointed as liquidator. Prior to its liquidation, North Shore was controlled by John Haddad. In April 2010, it bought land in NSW, and between around August 2012 and late 2013, it developed a multi-level block of residential units on that land. In April-May 2024, North Shore sold certain of the units to 72-74 Gordon Pty Ltd., a company controlled by John Haddad’s brother, Eddy Haddad, for $400,000 each.

In February 2017, Mr Iannuzzi wrote to Eddy Haddad asserting that the units had been sold to 72-74 Gordon at an undervalue (which 72-74 Gordon denied) and demanding repayment of $7,550,000. In June 2017, a settlement conference was held. Eddy Haddad asserted that the prices 72-74 Gordon paid for the units were fair because they had significant construction defects which he had to rectify. He provided an appraisal purportedly prepared by Reston Real Estate which valued each of the properties at between $400,000 and $500,000.

A settlement deed was executed in July 2017 which provided for payment by 72-74 Gordon to Mr Iannuzzi of $32,500 and mutual releases between the parties. In September 2017, Robyn-Lee Erskine of Brooke Bird replaced Mr Iannuzzi as liquidator. Ms Erskine later brought an application to rescind the settlement on the basis that the settlement deed had been entered into in reliance on fraudulent misrepresentations relating to the Reston appraisal.

The Court found that the Reston appraisal—purportedly authored by a real estate agent in 2012—was in fact created by Eddy Haddad in 2017. However, there was no evidence that Mr Iannuzzi relied on the document when agreeing to the settlement. No direct evidence was provided from Mr Iannuzzi or his staff indicating that the document influenced the decision to accept the $32,500 settlement in lieu of pursuing undervalue claims relating to the unit sales.

The Court also considered alleged misrepresentations about construction defects that were said to have justified the low sale prices. Although defects existed, the Court ruled that the representations made were either opinions or qualified statements, not false representations of fact, and again found no evidence that the liquidator had relied on them.

As a result, the application was dismissed.

Read the decision HERE.

Professionals involved:

• David Pritchard SC of 3 St James’ Hall with Angus Macauley of 12 Wentworth Selborne Chambers (instructed by Piper Alderman) for Eddy Haddad and 72-74 Gordon 

• Scott Aspinall of Sixth Floor Selborne Wentworth Chambers (instructed by Norton Rose Fulbright) for the liquidator