The Supreme Court of New South Wales has delivered its decision on the validity of the appointment of administrators of the Cyprus Community of NSW Ltd.
Following hearings on 10 and 11 December 2024, The Honourable Justice Ashley Black upheld the appointment of voluntary administrators, dismissing claims from a creditor and secured lender who sought to overturn the decision.
The ruling, handed down on 18 December 2024, marks a significant moment for the organisation as it navigates its financial future.
A complex financial dispute
The Cyprus Community of NSW Ltd, a long-standing cultural organisation, was placed into voluntary administration on 16 September 2024, as the board cited concerns over its financial position. Facing significant debts, including a multimillion-dollar loan due in February 2025, the board argued that administration was necessary to prevent insolvency.
However, this decision was challenged by Cyprus Capital Ltd and its Directors Dr Con Costa and Dorothy Bassil, who had previously sought court injunctions that blocked the organisation from holding members’ meetings to approve property sales.
On 29 November 2024, Cyprus Capital director Dr Costa issued a media release announcing that legal action had been launched to challenge what he called the “improper” appointment of administrators to the organisation. The statement underscored the plaintiffs’ belief that the administration was unnecessary and claimed it was orchestrated to bypass proper member involvement in critical decisions, such as the future of the organisation’s valuable real estate assets.
Central to the case was the organisation’s ownership of valuable real estate in Stanmore, including land with a potential redevelopment value of up to $75 million. Despite these assets, the organisation was unable to access the funds due to the injunctions and governance barriers that had been created. Without member approval, critical property sales or redevelopment could not proceed, leaving the organisation unable to address its financial shortfalls.
Dr Costa and Cyprus Capital claimed that the board acted improperly in appointing administrators and argued for a new members’ meeting to elect a different board with the plaintiffs’ lawyers being the chair of the members’ meeting.
However, the administrators and directors countered that financial pressures, ongoing legal disputes, and governance challenges made administration the only viable option to ensure the organisation could meet its obligations.
Appointment of Receivers
In addition to the administrators, Cyprus Capital Ltd, one of the major creditors, appointed receivers from Olvera Advisors on 14 October 2024. This move transferred control of the community’s key assets, including the Cyprus Club and surrounding properties, to the receivers, who are tasked with selling the community’s property to repay a secured debt owed to Cyprus Capital Pty Ltd.
The appointment of both administrators and receivers has created a complex dynamic, with both parties managing the club’s assets simultaneously.
Court decision and Implications
Following the court hearings this month, Justice Black ruled in favour of the administrators, finding that the board’s decision to appoint them was reasonable under the circumstances.
The court determined that while the organisation was not immediately insolvent, it was likely to become insolvent in early 2025 without urgent intervention. The ruling highlighted the organisation’s inability to sell or redevelop its properties due to the injunctions and the lack of member approval.
The court also rejected claims that the administrators’ appointment was made for improper purposes, instead recognising it as a responsible measure to stabilise the organisation’s finances.
With this decision, the administrators, Morgan Kelly and David Kennedy, can now continue their efforts to restructure the organisation and prepare a plan for its creditors and members.
Costs order
The court ordered that the plaintiffs, Dr Con Costa and Cyprus Capital Ltd, must pay the legal costs of the administrators and the Cyprus Community of NSW Ltd. This includes the costs of both the primary proceedings and the cross-claim.
The outcome means the Cyprus Community of NSW Ltd will remain under administration as it seeks to resolve its financial and governance challenges.
