Administrator Ernst & Young (EY) is fighting to maintain control at the turbulent Cyprus Club, as documents filed with the NSW Supreme Court detail financial and internal disputes and leadership battles.
The Cyprus Community of NSW Ltd, in Stanmore, is a high-profile organisation that supports Sydney’s Cypriot community.
Struggling under the burden of millions in debt, receivers were appointed to the club in late 2024. In February EY was tapped to take over the administration, with an exit target of 23 April.
EY has now applied to extend its tenure, which has been granted until October, after the application in early April was accompanied by an affidavit and over 200 pages of supporting documentation outlining the significant challenges in the club, providing insight into failures in governance and legal disputes.
The documentation included a letter alleging impropriety by both the board and EY, penned by a posse of members – including some whose membership had been suspended or had even been expelled.
EY’s Morgan Kelly issued a detailed response to the letter, containing reference to a dramatic information session held at the Cyprus Club on 14 March where uninvited interested parties attempted to force their opinions on the situation.
Former president Spyros Constantinou, who took up the role in 2019 as part of a committee to address the Club’s finances and estimated 5.5 million in debt, has since had his membership cancelled. He was one of those pushing for entry, and according to Kelly’s affidavit Constantinou became agitated when asked to remain outside, with his personal security allegedly warning that “things could turn violent”.
In a noteworthy departure from the policy of only allowing financial members to attend, the suspended and expelled (former) members were allowed entry, in an attempt to diffuse the tension.
Kelly’s submission outlined multiple issues that pre-dated EY’s appointment, citing difference in opinion on the club’s future and property portfolio, dissatisfaction with the Board and arduous legal proceedings that ate into funds that would become available for creditors.
The club paid $5.8 million to unlisted equity firm Cyprus Capital (CC), whose mission is to support the Cyprus Community, to clear secured debt. CC later questioned EY’s appointment and was reputedly uncooperative in refinancing discussions, which is said to have contributed to months of delays.
According to the affidavit the former president was amongst those who had backed a proposal by developer Platino that EY’s real estate team questioned, on the basis that some of those involved stood to gain financially from the deal, which the administrator suggested was designed for “self-interest” rather than to benefit the club.
While no misconduct was alleged, it was decided that the potential benefits could compromise impartial voting and that anyone who stood to gain would be not be part of the Property Steering Panel, which added further complexity to the proceedings.
An ongoing financial dispute over $1.1 million of the payment to Cyprus Capital is being held by the courts, as undetermined.
Kelly’s summary notes that this amount incorporates nearly $1 million in fees billed by the former receivers. But EY disputes the merit of the fees, given the former administrators had control of the club for several months, yet reportedly failed to secure valuations or run an Expressions of Interest campaign and did not contribute to resolving the club’s problems or aid in its recovery strategy.
The club had attempted its own (unsuccessful) sale process earlier in 2024, as vocal members voted on the club’s future.
Facing retaliatory accusations, Kelly dismissed any suggestion of bias or external influence and refutes any connection to those said to have played a role in EY’s appointment, noting that those making the claims have yet to provide any supporting evidence, despite several requests to do so.
EY remains tight-lipped on the final outcome, declining to comment further on the situation, however it remains positive on the possibility of a successful DOCA (Deed of Company Arrangement) to allow the Club to continue trading as it pays down debt.
Without a final DOCA that is amenable to creditors the administrators may have no option but to recommend the entity be wound up, resulting in the liquidation of club assets and a definitive, permanent loss of control by its vivacious members.
