Wednesday, 7 May 2014

Liquidator denies procuring proxies

SYDNEY liquidator Pino Fiorentino has strenuously denied allegations he procured invalid employee proxies and voted them in support of a resolution to approve his fees. 

"I never procured anything,” the registered and official liquidator told Sydney Insolvency News (SiN) during a break in a hearing before the Federal Court last week.

“I made a mistake. I didn’t check the proxies. There’s no way I told the director, ‘fill out the proxies and sign them yourself’,” he said.

Fiorentino's comments came as the Federal Court heard his application for a judicial review of a hearing held before the Companies Auditors and Liquidators Disciplinary Board (CALDB) last February.

In late January and early February this year CALDB rejected several applications by Fiorentino for an adjournment of a hearing brought before CALDB by the Australian Securities and Investments Commission (ASIC), which is seeking cancellation of Fiorentino’s liquidator’s registration.

The last adjournment application, made on February 2, proceeded without Fiorentino being present for the bulk of the hearing. Nor was he represented by legal counsel.

CALDB went on to refuse the adjournment application and on February 4 heard the ASIC application. Fiorentino is challenging CALDB’s refusal to grant the adjournment and the subsequent hearing of the ASIC application. At time of writing CALDB had not made its determinations and reasons public.

In an outline of Fiorentino’s Federal Court submissions obtained by SiN, the impact of the proceedings currently  before CALDB is described as “grave” because “ …. the orders sought by ASIC amount to no less than causing the permanent end to the career of the Applicant”. 

The ASIC application was formally brought before CALDB in 2013 following an investigation by the regulator into ERB International, which had owned the Ella Rouge Beauty salon chain.

ERB International was placed into liquidation on April 2, 2008. Fiorentino and his then partner Bill Hamilton were appointed joint liquidators, with Fiorentino having primary, day-to-day responsibility for the appointment. ASIC began investigating aspects of the liquidation in 2010.

In a Statement of Facts and Contentions (SOFAC) served on Fiorentino in June 2013, ASIC alleges breaches of the Corporations Act including sections 180 to 184.

As well as the allegations around procured proxies, the court heard that the SOFAC alleges breaches in relation to a Deed of Settlement and Release entered into by the liquidators in January 2009.

The deed saw ERB International’s former directors released from all potential claims by the liquidated company and liquidators in exchange for $60,000.

ASIC argues that the liquidators should not have entered into the deed when they did and based on the information they had.
Fiorentino is challenging CALDB's jursidictional right to rule on the deed allegations. 

The court also heard that the SOFAC alleges that the liquidators failed to investigate asset transfers made by the directors prior to their appointment. 

Fiorentino told SiN that ASIC had "lucked out" when it discovered bank accounts that were not included in the books and records of ERB International that were ;made available to the liquidators.

The contents of the SOFAC were aired by barrister Peter Russell, who represented ASIC and CALDB at last week’s review hearing.

In relation to the suspect proxies Russell told the court proxies representing employees of ERB international were all signed by one of the company’s directors.

Further, Russell said there was evidence that Fiorentino had arranged for the proxies to be delivered to him.

“He procured these proxies, which we argue were prima facie invalid,” Russell told Federal Court Justice Michael Wigney. Fiorentino categorically denies procuring the proxies.

Russell also prosecuted ASIC’s application at Bill Hamilton’s hearing before CALDB in November 2013.

Last month CALDB suspended Hamilton’s registration for six months in relation to his role as secondary liquidator of ERB International. A copy of its determination obtained by SiN shows ASIC unsuccessfully sought to have Hamilton’s liquidator’s registration cancelled.

Fiorentino’s application to the Federal Court is an attempt to have CALDB’s hearing of the allegations against him declared void.

He is seeking orders restricting CALDB from issuing any decision resulting from that hearing and he wants all references to sections 180 to 184 of the Corporations Act deleted from the SOFAC.

“The SOFAC creates, in the submission of the applicant, what amounts to “unanswerable” pleading – there are significant difficulties imposed upon the Applicant by the second respondent (ASIC) insofar as he is being forced to interpret exactly what is being alleged against him,” the submissions outline said.

The outline of submissions document further argues that CALDB denied Fiorentino natural justice and procedural fairness when it proceeded with the hearing despite the fact he was neither present or had legal representation. CALDB is also accused of improperly exercising its powers.

Initially CALDB was scheduled to hear the ASIC application on September 12, 2013 but that date had to be vacated after Fiorentino’s professional indemnity insurer declined to cover the legal expenses associated with preparing his defence.

The upshot of the insurer’s decision in mid-2013 was that Fiorentino’s legal advisors – barrister Tim Rickard and Swaab Attorneys – withdrew their services.

He applied for another adjournment and the hearing date was moved from October 18 to November 18. Rickard, now back on board representing Fiorentino, told the court last week that it wasn’t until 6.00pm on November 15, 2013 that the insurer agreed to provide indemnity cover for the legal expenses. The insurer's decision meant it had the right to elect the legal advisors who would act for Fiorentino.

Given ASIC had indicated that there was to be extensive cross-examination of witnesses, CALDB agreed to another adjournment to allow Fiorentino’s legal team more time. A new hearing date was scheduled for February 3, 2014. Then two days before Christmas, the insurer withdrew the indemnity.

The court heard that it wasn’t until mid-January that Fiorentino and his advisers were able to attempt to change the insurer’s position. When it refused, Fiorentino again applied to CALDB for an adjournment, first on January 30 and again on January 31. He was refused.

He applied again on February 3, arguing he would need time to prepare so he could represent himself, a position he had stated previously. Alternatively, he also argued that a six month adjournment be granted so he could pursue a claim against his insurer.

CALDB refused the adjournment application and on February 4 it finally heard ASIC’s application. Fiorentino filed his application for a judicial review on February 5, 2014. CALDB and ASIC declined the opportunity to comment for this story. Justice Wigney has reserved his judgement.

Meanwhile, ERB International, which was de-registered at the request of Fiorentino and Hamilton on January 24, 2010, has been resurrected.

On November 4, 2013 Fiorentino applied in the Supreme Court of NSW to have the company exhumed from the cemetery of de-incorporated entities.

On March 10, 2014 Supreme Court Justice Paul Brereton ordered ERB International Pty Ltd (In Liquidation) be reinstated. Simon Cathro and Phillip Campbell-Wilson of Ernst & Young have been appointed joint liquidators.

See also: Insolvency veteran slapped with suspension

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