Insolvency Law Update - Fiorentino to fight on as CALDB orders deregistration

Commercial Law
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It has been reported that Pino Fiorentino, whose registration as a liquidator was cancelled by the Companies Auditors and Liquidators Disciplinary Board (CALDB), will be fighting the decision in the AAT, seeking a review of the evidence presented by ASIC at the CALDB hearing.

The CALDB’s media release of 8 July 2014 announcing their decision shows that the - “CALDB found that Mr Fiorentino’s failings were significant and extensive.” ASIC’s allegations included that prior to the liquidation of the company concerned, ERB International Pty Ltd, Mr Fiorentino had been contacted by a director of ERB regarding whether ERB could transfer its business to a related third party and proceed to liquidation, leaving ERB with debts including a debt owed to the State Revenue Office, which ERB could not pay. A barrister retained by Mr Fiorentino and the director advised that this was not possible unless the sale of assets was for a proper commercial value. ASIC alleged that the transfer of assets for no cash consideration to a related third party controlled by ERB’s directors went ahead anyway, and shortly thereafter went into liquidation. The CALDB’s 208-page decision and reasons repeatedly refer to this as an alleged “phoenix transaction”. That media release states that the Panel of the CALDB was satisfied that Mr Fiorentino had failed to carry out or perform his duties as a liquidator adequately and properly, finding that Mr Fiorentino had -

  1. failed properly to investigate this sale of assets shortly prior to liquidation,
  2. entered into a Deed of Settlement and Release with the related third party mentioned above and the directors, giving up claims against them without properly assessing the relevant issues and obtaining legal advice,
  3. failed to provide notice of creditors’ meetings to persons who were or appeared to be creditors of ERB,
  4. accepted invalid proxies, using his position dishonestly with the intention of directly gaining an advantage for himself, ie approval of his remuneration without the need to go to court,
  5. failed to act in good faith in the best interests of ERB in relation to dealings with the State Revenue Office, and
  6. failed to provide adequate reports to creditors.

The CALDB’s written reasons show that Mr Fiorentino made extensive oral submissions at the Sanctions Hearing of 17 June 2014, which included submissions that there was relevant material which ASIC should have put forward to the Board, and that the Board had made its determination on assumed facts which were “totally incorrect”. Mr Fiorentino has also asserted (see SIN report, link above) that he had obtained an expert report from McGrathNicol which he was not given the opportunity to use at the earlier hearing in February. The CALDB’s media release can be read here, and the decision and reasons may be read in full here. It should be noted that Mr Fiorentino had been appointed joint liquidator of ERB in April 2008 together with Mr William James Hamilton, whose registration as a liquidator was suspended for 6 months by the CALDB in April 2014 for reasons arising out of the same liquidation. The decision involving Mr Hamilton raises interesting issues as to the extent to which a joint liquidator, who does not have the day-to-day conduct and control of the liquidation, should be held liable for any failures to carry out or perform adequately and properly the duties of a liquidator. Mr Hamilton had argued that he should not. The CALDB, however, had found that – “…for the purposes of the execution of the function of the office of liquidator, a joint liquidator who does not have the main carriage of the matter still has to have an adequate and proper involvement in the liquidation. How that is to be assessed will depend on the circumstances of each case, but the relevant question is whether the action taken by the second liquidator is sufficient to ensure that the inherent duties of the office are adequately and properly discharged.” The CALDB’s decision and reasons as to the 6 month suspension of Mr Hamilton’s registration of 3 April 2014 may be found here, and the media release here.

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Carrie Rome-Sievers Headshot

Carrie is a commercial law barrister practising with a focus on insolvency and corporations law, equity and trusts, fraud, contract and restitution.

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