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September 5, 2016

Mehajer’s disqualification upheld


Controversial former Auburn City Council deputy mayor, property developer and tabloid headline-grabber Salim Mehajer’s disqualification from managing corporations for three years has been upheld by the Administrative Appeals Tribunal (AAT).

The AAT found that Mehajer’s management of SM Property Development Pty Ltd and SM Engineering and Constructions Pty Ltd together with his conduct in relation to their business and property, “fell far short of what is reasonably expected of a director”.

Mehajer appealed the Australian Securities and Investments Commission’s (ASIC) original decision to disqualify him to the AAT while at the same time successfully seeking a stay of ASIC’s decision as well as orders suppressing publication of his disqualification and AAT appeal.

It followed an investigation into the failures of the property development and construction companies after reports from liquidators of both companies were received.

ASIC found Mehajer’s inability to manage corporations to the standard expected of him caused the businesses to fail. Specifically, ASIC found:

  • Mehajer failed to ensure SMPD maintained adequate financial records, hindering the liquidator from making enquiries to determine whether payments made by SMPD to third parties were for a proper purpose
  • SMPD and SMEC failed owing $886,701 and $159,206, respectively to the Australian Taxation Office
  • Mehajer failed to ensure SMPD complied with its statutory obligation to lodge returns with the ATO, and Mehajer provided information to the liquidator of SMPD only after ASIC took criminal proceedings against him.

ASIC also found Mehajer’s conduct lacked commercial morality in that he allowed SMPD to collect GST of $315,192 from the sale of townhouses but failed to remit it to the ATO.

In affirming the original decision by (ASIC), the AAT stated that the disqualification was “appropriate to protect the public and to allow Mr Mehajer time to properly acquaint himself with the duties of a director of a company and his obligations to those with whom the company may transact”.

The AAT also found Mehajer “adopted a cavalier approach to his management of the companies, which included their responsibility to creditors, and his duties to ensure that the companies met their legal obligations”.

The AAT highlighted “the need for such a disqualification in the public interest as a means of protecting others from his incompetence”.

ASIC commissioner Greg Tanzer welcomed the AAT finding, saying: “ASIC’s power to disqualify directors of failed companies is an important preventative measure we use to safeguard the public interest.”

The AAT decision was subject to a suppression order that expired on September 2, 2016. Mehajer’s period of disqualification will cease on November 5, 2018.

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Founded in 1997, API is Australia's highest-selling property magazine.