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.

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.

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.

Federal Court dismisses Fiorentino's CALDB challenge

Pino Fiorentino

PINO Fiorentino is facing cancellation of his liquidator's ticket after Justice Michael Wigney ruled yesterday that the Sydney-based insolvency practitioner had failed to convince the court he was denied procedural fairness by the Companies Auditors Liquidators Disciplinary Board (CALDB).

Fiorentino applied to the Federal Court on February 5 this year after CALDB had two days earlier refused his application to adjourn a hearing brought on by the Australian Securities and Investments Commission (ASIC).

The corporate regulator wants CALDB to cancel Fiorentino's liquidator's registration over his handling of the insolvency of ERB International. Fiorentino has previously rejected ASIC's allegations. (See: Liquidator denies procuring proxies)

CALDB refused Fiorentino's adjournment application on the grounds that it had already adjourned the matter on several occasions since the first scheduled hearing of ASIC's application on October 21, 2013.

Further, Fiorentino wanted the adjournment so he could sue his professional indemnity insurance provider for refusing to fund the legal expenses associated with defending ASIC's application.

CALDB however was unwilling to accept that such an action would be concluded after six months - as was submitted by Fiorentino - or that further adjournments were justified.

"At the end of the day, the timing of hearings before the Board cannot depend on the vicissitudes of a respondent's private funding arrangements," CALDB said.

Page 13 of the Wigney judgement reveals that CALDB "has not yet made a decision in relation to ASIC's substantive application," the hearing of which concluded on February 6, 2014.

Given CALDB's oft-stated commitment to dealing expeditiously with matters brought before it, a decision may not be long in coming now Justice Wigney has published his reasons.

Fiorentino did not respond when contacted by SiN today so we are unable to report his reaction or whether he is considering other avenues of potential appeal. For detailed background see:

Liquidator denies procuring proxies

Insolvency veteran slapped with suspension

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Toppi seeking to bankrupt ex-bestie

Luxe Studios is now at 279 - 283 Liverpool Street
Photo: SiN Images

Paola Toppi's lawyers will appeal a judgement handed down in the Federal Circuit Court last week which further delays bankruptcy proceedings the Sydney restaurateur initiated last year against her former friend, the photographic agent Dolores Lavin.

Philip Beazley of Beazley Singleton Lawyers, confirmed yesterday that he will file an appeal on behalf of Toppi against the June 13, 2014 judgement of Nicholas Manousaridis.

The judge ruled last week that the period for compliance with a bankruptcy notice served on Lavin by Toppi and her husband Neil Cunningham on November 29, 2013 be extended for a fourth time to allow Lavin to make an application for special leave to appeal to the High Court.

Lavin is seeking to appeal the decision of the NSW Supreme Court of Appeal, which last month dismissed her application to have an earlier judgement ordering her to pay Toppi $871,016.56c overturned.

The earlier judgement, handed down on September 12, 2013, gave Toppi and Cunningham the green light to serve Lavin with the bankruptcy notice but by the time they did, Lavin had already filed an appeal. 

Since then, Lavin has applied to have the period for compliance with the bankruptcy notice extended three times while waiting for her appeal to be heard. In the course of obtaining extensions, Lavin has also won an order staying execution of the Supreme Court judgement. But the Court of Appeal dismissed her application on May 23, 2014. 

According to the Manousaridis judgement of June 13, the extensions in the notice compliance period have been essential in enabling Lavin to avoid committing an act of bankruptcy, an event which would potentially expose her to devastating loss.

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.

CALDB slugs Topp with six month suspension

SYDNEY insolvency operator Alan Godfrey Topp has been benched temporarily after failing to lodge hundreds of statutory notices and other documents with the corporate regulator.

Following an application from the Australian Securities and Investments Commission (ASIC), the Companies Auditors and Liquidators Disciplinary Board (CALDB) said it had ordered Topp's liquidator's registration be suspended for six months. According to the ASIC website, his status as an official liquidator is unaffected by the CALDB order.

In its November 2013 application, ASIC alleged that over a period of almost four years beginning in May 2009, Topp failed to lodge 321 documents, including 209 presentation of six monthly accounts, otherwise known as 524 forms. Of these 309 related to liquidations; the remaining 12 to administrations. 48 EX01 forms were also overdue along with 37 5011 or 1500 forms. The lodging lapses involved 61 companies.

ASIC notified Topp on April 4, 2013 that it had identified the compliance failures so it took just over 12 months for the process to reach the point where CALDB ordered the suspension.

CALDB, which heard the matter on April 7 this year, said Topp did not dispute the allegations, which were the subject of agreed consent orders between the parties. The panel also acknowledged that no dishonesty was involved and that Topp's plight had been exacerbated by insufficient resources and unspecified "personal issues".

Once his six month suspension is complete Topp will be restricted for a further six months to accepting appointments only as a joint liquidator.

As part of the agreed consent orders he is also required to pay ASIC's $2000 cost of the application as well as what promises to be hefty late lodgement penalty. Topp did not respond to a request for comment.

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See also: Insolvency veteran slapped with suspension