Monday 28 July 2014

EXCLUSIVE: Liquidator's fall exposes Ella Rouge founders to phoenix allegations

THE founding directors of the Ella Rouge Beauty chain allegedly engineered a phoenix company transaction in 2008 because demands for unpaid payroll tax, workers compensation and other debts threatened to destroy their business.

According to the recently released findings of a liquidator's disciplinary hearing, in early 2008 Mr Ali Hammoud and his wife Ms Manel Issa-Hammoud completed the transfer of assets worth approximately $4 million from their company Ella Rouge Beauty (ERB) to a second company they controlled, Beauty World International (BWI).

The transfer of ERB's assets to a related party via a Business Sale Agreement took place on or around March 28, 2008 but was subsequently backdated to February 28. At the time of the transaction, BWI was the trustee of the Hammoud's Shanel Family Trust. On March 28, ERB changed its name to ERB International Pty Limited.

On April 2, the directors placed ERB International into liquidation, appointing Pino Fiorentino and Bill Hamilton of Hamiltons Chartered Accountants as joint liquidators, with Fiorentino having primary, day-to-day responsibility. The following day, they registered a new company, Ella Rouge Beauty Pty Ltd. This would go on to replace BWI as trustee of the Shanel Family Trust.

In a visualization of their corporate interests provided by Encompass Corporation Ali Hammoud and Manel Issa (Hammoud) were confirmed as  sole directors and shareholders of ERB and BWI at the time the transfer, name change and liquidation were effected.

The Australian Securities and Investments Commission (ASIC) - which has confirmed to Sydney Insolvency News that its investigation into ERB International is ongoing - has alleged that the Business Sale Agreement amounted to a phoenix transaction, which left an insolvent ERB with no valid claim against BWI and debts of approximately $800,000, owed to the Office of State Revenue (OSR), GIO, and specialist workers compensation claims manager Gallagher Basset.

In spite of the allegations, it should be noted that no findings of wrongdoing have been made against Ali and Manel Hammoud. Neither replied to multiple requests for comment.

The allegations have surfaced following a lengthy investigation by ASIC into the conduct of the company's liquidators.

Friday 11 July 2014

Fiorentino to fight on as CALDB declares failings "significant and extensive"

Pino Fiorentino
PINO Fiorentino will seek to overturn a decision by the Companies Auditors and Liquidators Disciplinary Board (CALDB) that has seen him stripped him of his liquidator's registration.

CALDB said in a statment: "The serious and extensive nature of the failings was such as to warrant cancellation of Mr Fiorentino’s registration."

Those "failings" relate to Fiorentino's handling of the affairs of ERB International, to which he was appointed primary liquidator in April, 2008.

According to CALDB the failings "involved a number of different aspects of the liquidation of ERB and involved dishonest use of position, failure to act in good faith in the best interests of ERB and its creditors, lack of competence and failure to comply with statutory provisions." CALDB reached its decision on June 24, 2014, ordering that the deregistration take effect after 14 days.

But Fiorentino told SiN he would ask the Administrative Appeals Tribunal (AAT) to review the evidence used by the Australian Securities and Investments Commission (ASIC) in its application to CALDB.

"This decision by CALDB is totally flawed," he said. "I want the court to make an order that until the review of the evidence by the AAT, it is not right for them to draw conclusions from wrong facts."

Fiorentino also said he's been denied a fair hearing. He said he had paid Tony McGrath of McGrathNicol $30,000 for an expert witness report and had not been given the opportunity to use it at the hearing on February 4, 2014, which took place without him because he refused to participate unrepresented by legal counsel.

Friday 4 July 2014

Albarran and Pleash prepare to defend DoCA allegations

Richard Albarran
Photo: Hall Chadwick
WHEN insolvency practitioners recommend a Deed of Company Arrangement (DoCA), it's generally based on their expectation that applying the oil of deed administration will facilitate a troubled company's passage to resolution.

For Blair Pleash and Richard Albarran however, no amount of commercial and accounting acumen has been sufficient to free up seized property developer Joe & Joe Developments.

Since the Hall Chadwick partners were appointed voluntary administrators to Joe & Joe on February 9, 2009, they and their solicitors have generated about $1.4 million in fees administering the company, which remains subject to the terms of a DoCA designed to achieve what the company’s owners couldn’t - concluding on mutually agreeable terms - their commercial and residential property development at Narrabeen on Sydney’s northern beaches.

Blair Pleash
Photo: Hall Chadwick
Pleash and Albarran became Joe & Joe’s deed administrators on March 31, 2009 but the company’s two shareholder families were locking horns as early as 2008. 

Those frustrations came to a head when one family – the Kossaifis – initiated winding-up proceedings in the NSW Supreme Court.

Liquidation posed a threat to the livelihood of members of the other shareholder – the Elias family – who are builders, and following attempts at mediation the matter was brought to Hall Chadwick in early 2009.

More than five years on, the families remain at loggerheads, Joe & Joe is still subject to the terms of its DoCA  and the mounting costs have so enraged the Elias family that it is suing Pleash and Albarran in the NSW Supreme Court, alleging the two have managed the affairs of Joe & Joe in a way prejudicial to the company’s creditors and its members. The Hall Chadwick duo reject the allegations.