FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Iannuzzi (No 2) [2019] FCA 1818

ORDERS

BY CONSENT, THE COURT ORDERS THAT:

1.    The defendant's name be removed from the register of liquidators maintained pursuant to the Corporations Act 2001 (Cth).

2.    The defendant be restrained for a period of 10 years from applying to be a registered liquidator under the Corporations Act 2001 (Cth).

3.    The defendant be restrained for a period of 10 years from applying to be registered as a trustee in bankruptcy and from accepting appointment as liquidator, provisional liquidator, voluntary administrator, administrator of a deed of company arrangement, or as a receiver or other controller of property of any corporation, as that term is defined in s 57A of the Corporations Act 2001 (Cth).

4.    The defendant pay the plaintiff’s costs of the proceeding as agreed or assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

Table of Contents

Introduction

1    The Commissioner of Taxation seeks a number of orders, including orders that the defendant’s name be removed from the register of liquidators maintained pursuant to the Corporations Act 2001 (Cth) (the Act) and that he be restrained for a period of 10 years from applying to be a registered liquidator or any other insolvency practitioner.

2    The orders are sought under s 536 of the Act as it was at the time of filing of the originating process in August 2017. Equivalent provisions are now to be found in s 90-10 of Schedule 2 to the Act. See Commissioner of Taxation v Iannuzzi [2018] FCA 1053 at [6] per Perram J, an earlier judgment in this matter, for an explanation of the applicability of s 536 rather that s 90-10 of Schedule 2 in the present case.

3    In the earlier judgment, Perram J ordered that the Commissioner’s interlocutory application for an inquiry under s 536 of the Act be heard at the same time as the hearing for final relief. Perram J also dismissed an objection that if upheld would have excluded much of the Commissioner’s evidence. Leave to appeal against the judgment of Perram J was refused by the Full Court: Iannuzzi v Commissioner of Taxation [2019] FCAFC 39.

4    On 1 May 2019, I ordered that an inquiry be heard for three days commencing on 17 July 2019. The inquiry was to embody the second of the three stages of a proceeding under s 536 as identified in BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; 79 ACSR 558 per Barrett J at [42]-[45] and adopted in this Court in Australian Securities and Investments Commission v Dunner [2013] FCA 872; 303 ALR 98 per Middleton J at [14]-[15]. That is to say, the inquiry would be structured so as to be adversarial in nature, with the liquidator enjoying all the usual safeguards and protections, and the task of the court would be to make a judgment on the liquidator’s conduct.

5    Shortly before the hearing, the defendant made a series of admissions in relation to the conduct alleged by the Commissioner. On the strength of those admissions, on the first day of the hearing the parties sought orders by consent in the following terms:

1.     The defendant’s name be removed from the register of liquidators maintained pursuant to the Corporations Act 2001 (Cth).

2.     The defendant be restrained for a period of 10 years from applying to be a registered liquidator under the Corporations Act 2001 (Cth).

3.     The defendant be restrained for a period of 10 years from applying to be registered as a trustee in bankruptcy and from accepting appointment as liquidator, provisional liquidator, voluntary administrator, administrator of a deed of company arrangement, or as a receiver or other controller of property of any corporation, as that term is defined in s 57A of the Corporations Act 2001 (Cth).

4.     The defendant pay the plaintiff’s costs of the proceeding as agreed or assessed.

6    Section 536 was a statutory embodiment of the court’s power to supervise its officers, which extended to all liquidators whether appointed by the court or otherwise. The interests which are said to be served by s 536 of the Act are public and relate to upholding the honest and efficient administration of the estates of companies subject to winding up: Kennards Hire Pty Ltd v RMGA Pty Ltd [2010] NSWSC 1387 per Barrett J at [37].

7    The court must first be satisfied that there is a proper basis for the orders, and cannot proceed merely on the basis of the parties’ consent: Australian Securities and Investments Commission v Ariff [2009] NSWSC 829 per Bergin CJ in Eq at [30]; BL & GY per Barrett J at [46]–[49].

8    Given the admissions outlined in detail below and further conclusions that I have reached, I am satisfied that the action that the Court should take is in the terms of the consent orders that are sought by the parties. My reasons for being so satisfied follow.

Background

9    The defendant, David Nicholas Iannuzzi, has been a registered liquidator of companies under the Act since 29 October 2012 and an official liquidator since 14 February 2013. Mr Iannuzzi has also been a professional member of the Australian Insolvency & Turnaround Association since 2009.

10    Mr Iannuzzi was the sole director of Veritas Advisory Pty Ltd. Amongst other financial services, Veritas carried on a business of providing insolvency related services. Prior to his death on 16 June 2015, Murray Roderick Godfrey (Mr Godfrey) was also a director of Veritas. Included among the staff of Veritas were Mr Steve Naidenov (Mr Naidenov) and Ms Louise Thomson.

11    Up until 20 December 2011 when it went into creditors’ voluntary liquidation, there was a company called Banq Accountants Pty Ltd (Original Banq) that traded as Banq Accountants. Original Banq had three directors: Ivana Cassaniti, Faouzi aka Fred Khalil and Gino Cassaniti. The liquidator of Original Banq was Mr Godfrey with assistance from his then employee, Mr Iannuzzi.

12    Banq Accountants and Advisors Pty Ltd, also trading as Banq Accountants, was registered on 13 July 2009 and carries on a business of providing accountancy related services to its clients and is a registered company tax agent. Banq has a single director, Fred Khalil, who is a registered individual tax agent.

13    Mr Iannuzzi had a referral relationship with Banq. Banq would provide Mr Iannuzzi’s contact details to a director, debtor or creditor for the purposes of that person seeking specialist insolvency advice that might result in an appointment as liquidator or administrator. Banq successfully referred Mr Iannuzzi to act as a liquidator in a creditors’ voluntary liquidation in relation to at least 28 companies.

14    Mr Iannuzzi also had a referral relationship with Mr Vince Macri of VL Macri Lawyers (Mr Macri) who is an associate of Banq’s and a provider of legal services to Banq.

15    As will be outlined in greater detail below, Mr Iannuzzi was appointed as a liquidator of seven groups of companies, comprising 23 separate companies, between approximately mid-2014 and September 2017. During this time, Mr Iannuzzi repeatedly fell short of the standards that would ordinarily be expected of him as a competent registered liquidator, and in particular failed to exercise reasonable care and diligence in the conduct of the relevant external administrations.

The statement of admissions made by Mr Iannuzzi

16    Mr Iannuzzi’s admissions are contained in a document headed “Statement of Agreed Facts”, named in that way presumably because at the time it was prepared it was anticipated that it would be agreed. The Commissioner, however, did not agree to the statement although he accepted the admissions. It was agreed between the parties that the statement should be treated as admissions made by Mr Iannuzzi for the purpose of consent orders to dispose of the matter.

17    It is apparent from the statement that Mr Iannuzzi admits a large number of the allegations asserted against him by the Commissioner in the amended originating application, but not all. The Commissioner does not accept that the admissions made are complete or comprehensive, but considers they provide a proper basis for the consent orders. The Commissioner’s reservation is that in the event that I was not satisfied that the admissions provide a sufficient basis for the relief sought then he would seek to adduce further evidence, including the examination of Mr Iannuzzi, to establish more serious delinquent conduct by Mr Iannuzzi.

18    The statement is extensively cross-referenced to the ten volumes of documents that were tendered. With reference to the documents, I am satisfied that there is a proper basis for the admissions, both with regard to the admitted facts and the admitted conclusions as to the shortfall in Mr Iannuzzi’s conduct to be made from those facts. As will be seen, in a few instances I have recorded additional conclusions with regard to shortfalls in Mr Iannuzzi’s conduct.

19    As indicated, I am also satisfied that the consent orders are properly justified by the admissions and any additional conclusions which means that it is not necessary for me to inquire into whether additional factual findings would be necessary and should be made in order to justify the orders.

20    Mr Iannuzzi’s admissions as supported by the documents, and hence my findings, are summarised below. They are arranged under headings reflecting six separate companies or groups of companies in respect of which Mr Iannuzzi was appointed liquidator.

North Shore Property Developments Pty Ltd (In Liquidation)

21    On 29 March 2010, Level 33 Pty Ltd was registered as a company under the Act and on 15 February 2012 changed its name to North Shore Property Developments Pty Ltd (NSPD). NSPD carried on a business of property development with Mr John Haddad as its sole director, secretary and shareholder. Banq were the accountants for NSPD and for most of the life of the business NSPD’s registered offices were Banq’s address.

22    In 2011, NSPD purchased four parcels of land located in Lane Cove, including 72-74 Gordan Crescent. On 23 August 2012, the Commonwealth Bank of Australia (CBA) sent a letter to NSPD confirming the offer of a $21,325,000 loan facility to construct a multi-level residential development, incorporating 53 residential apartments and five levels of basement parking, on that land (Lane Cove Development). The offer was accepted on 28 August 2012 by John Haddad.

23    NSPD completed the construction of the dwellings in around late 2013. From March 2014 to June 2014, it sold units of the Lane Cove Development to various purchasers.

24    On 4 March 2014, 72–74 Gordon Crescent Lane Cove Pty Ltd was registered as a company under the Act. 72-74 Gordan had Eddy Haddad, brother of John Haddad, as its sole director, secretary and shareholder. Both its registered office and its principal place of business are the same location as NSPD’s.

25    On or around 17 June 2014, NSPD transferred 16 lots of the Lane Cove Development to 72–74 Gordon at an average value of approximately $6,700 per strata unit entitlement. This consideration for the sale of the units is admitted to have been well below market value, with previous sales of units in the Lane Cove Development reaching an average of approximately $18,000 per strata unit entitlement.

26    On or around 10 June 2014, NSPD entered into a contract for the sale of Lot 1/SP89472 (Unit 1.01) of the Lane Cove Development with GFP Holdings (Aust) Pty Ltd for a stated consideration of $800,000 with a deposit of $80,000. The ultimate shareholders of GFP are the same as the ultimate shareholders of Banq.

27    On 26 June 2014, Banq issued an invoice to NPSD for $712,341.30 for accounting services for the year ending 30 June 2014. On the same day, two amounts were recorded by Banq as being received in payment of the debt, one receipt was for $170,000 described as “PAYMENT RECEIVED BY DEPOSIT FOR LANECOVE UNIT” and a second for $145,000 was described as “PAYMENT AS PER AGREEMENT”. A further payment of $60,000 recorded on 9 July 2014 is described as “PAYMENT RECEIVED BY EFT”.

28    The sale of Unit 1.01 to GFP was completed on 17 July 2019. The $170,000 deposit reflected on the settlement adjustment sheet was not paid to NPSD. Instead the amount was offset with the amount owed by NSPD to Banq in accounting fees. Unit 1.01 was transferred on the same day. The remainder of the purchase price was to be financed by a loan from NAB to GFP secured by a mortgage provided over Unit 1.01.

29    On 17 July 2014, NSPD transferred Lot 54 (Unit 8.01) and Lot 55 (Unit 8.02) of the Lane Cove Development, with total strata unit entitlements of 50 units and 30 units respectively, to Ms Patricia Hanna, the wife of a plumber who had completed work on the Lane Cove Development, for a stated consideration of $420,000 and $380,000 respectively. In fact, no consideration for the transfers was provided and no money was paid to NSPD by Ms Hanna.

Winding up of NSPD

30    On 14 November 2014, Banq issued a creditor’s statutory demand to NSPD for payment outstanding on an invoice dated 26 June 2014 for $337,341.30. The debt in the invoice was described in the accompanying affidavit and documents as being related for the provision of accountancy and taxation services less payments already made (see [27] above).

31    On or about 19 December 2014, Mr Iannuzzi and Mr Godfrey consented to act as liquidators of NSPD. On 24 December 2014, Banq applied to this Court to have NSPD wound up on the ground of insolvency. 24 December 2014 was then also the relation-back day in the winding up of NSPD, and Mr Iannuzzi admits he ought reasonably to have known this fact.

32    On 11 February 2015, the Court ordered that NSPD be wound up and Mr Iannuzzi and Mr Godfrey were appointed as joint and several liquidators of NSPD.

33    From the time of his appointment as liquidator of NSPD, Mr Iannuzzi admits he ought reasonably to have known that the payments identified in paragraph [27] above were possibly unfair preferences within the meaning of s 588FA of the Act and therefore possibly voidable transactions within the meaning of s 588FE of the Act made by NSPD to Banq within the period six months before the relation-back day. Mr Iannuzzi also admits that he should have also been aware that he would likely have to investigate these transactions which might conflict with his interest in maintaining his referral relationship with Banq.

34    At the time of the winding up of NSPD, the Commonwealth was a creditor of NSPD. Subsequently, on 18 June 2015 the Deputy Commissioner lodged a proof of debt in respect of NSPD in the amount of $3,514,752.65, which was later revised on 8 December 2016 to $7,471,856.65.

Books and records investigations

35    On 17 February 2015, Mr Iannuzzi wrote to John Haddad requesting the completion within 14 days of, among other things, a Report as to Affairs (RATA) and questionnaire. On 27 February 2015, Mr Iannuzzi wrote again to John Haddad requiring Mr Haddad to deliver all books, papers and records of NSPD to Mr Iannuzzi’s office. Mr Iannuzzi also noted that the RATA and questionnaire were required to be returned by 3 March 2015.

36    John Haddad partially completed a RATA and completed a questionnaire for NSPD, which was provided to Banq. The document was dated 6 March 2015 but this date may have been altered. Banq subsequently provided a copy of the questionnaire document to Veritas. This document disclosed, among other things, that Banq held the books and records of NSPD and that the accounts of the company were with the CBA. Mr Iannuzzi admits that a reasonably competent liquidator, upon receiving this information, should have realised that NPSD had previous bank accounts with the CBA and requested further information.

37    On or around 19 March 2015, Banq provided Veritas with some books and records of NPSD including business activity statements and a single year’s (2011) tax return.

38    From 19 March 2015 to 18 December 2015, Mr Iannuzzi and Veritas did not take any further steps to obtain further books and records of NSPD from either Mr John Haddad or Banq. Mr Iannuzzi admits that a reasonably competent liquidator in his position ought reasonably to have made further enquiries with Banq and John Haddad to secure the books and records of NSPD.

39    On 4 February 2016, John Haddad produced some further records including an annual financial statement, another annual tax return and further business activity statements. It was not until 5 December 2016 that John Haddad produced a USB stick containing the additional books and records of NSPD including bank statements, property sale contracts and settlement sheets, business activity statements and loan account reconciliations for the 2012-2015 financial years.

Bank account enquiries

40    On 16 February 2015, an employee of Veritas sent a fax to staff of various banks and financial institutions, including the CBA, attaching a letter from Mr Iannuzzi. The letter requested information about any accounts held at that time with the bank or institution in the name of NSPD. The letter only requested details of any accounts currently held in the name of NSPD. At no time did Mr Iannuzzi request from the CBA information concerning accounts in the name of NSPD that had been previously held and subsequently closed.

41    Prior to 2015, NSPD held three business accounts with the CBA. During the time these accounts were held, NPSD made payments totalling more than $1,285,000 to various entities. The signatories to two of these accounts were John and Eddy Haddad.

42    On or around February 2015, Denzil Pereira, an employee of the CBA, sent an email to Eddy Haddad noting that they had received notification of the appointment of liquidators to NSPD and requesting details of the liquidation and confirmation of statutory obligations having been met.

Property searches

43    On 25 February 2015, an employee of Veritas performed a search of the Personal Property Security Register in respect of securities granted by NSPD. The result of the search disclosed that the CBA had a registered security interest over all present and after-acquired property, without exceptions, of NSPD. On the same day Mr Iannuzzi wrote to the CBA requesting a copy of the financing agreement giving the CBA its security interest and the details of how the debt to the CBA arose.

44    Also on 25 February 2015, an employee of Veritas performed a search with New South Wales Land and Property Information requesting information about whether NSPD was the current owner of land in New South Wales. The employee performing the search did not select the box “include Purchaser/lessee from previous ownerships or lease held”. No results were obtained. If the employee had exercised the admitted required care and diligence and selected the box, the search would have disclosed that NPSD was the previous owner of land situated at 72-74 Gordon Street and 532-534 Mowbray Road both in Lane Cove, New South Wales.

45    By March 2015, correspondence between Veritas and the CBA had informed Veritas that the CBA had lent money to NSPD to fund a property development and that the loan had been paid out in April 2014.

46    In addition, on 5 March 2015 Energy Australia sent an email to an employee of Veritas providing details of ten accounts held by Energy Australia in the name of NSPD. All ten of the accounts were for addresses in the Lane Cove Development, with one of the accounts still active.

47    Mr Iannuzzi admits that by this time at the latest he ought reasonably to have known that NPSD was the former owner of property in the Lane Cove Development and he should have checked the New South Wales Land and Property Information search facility again. Mr Iannuzzi admits that if he had done this he could have then considered taking action to recover money from Banq as voidable transactions. On 11 March 2015, Mr Iannuzzi wrote to Energy Australia requesting that the open account, in one of the units which had been sold to 72-74 Gordon, be closed.

Creditor enquiries

48    Between 3 March 2015 and 21 May 2015, Veritas was contacted by multiple creditors of NSPD seeking further information about the company and the status of the investigation. On 11 March 2015, the Australian Taxation Office (ATO) completed a GST audit of NSPD, the result of which found NSPD liable to pay $5,824,812.60 (including penalties and interests) to the Commonwealth. The reasons for the decision, which were sent to Veritas by email on 11 March 2015, stated that between 1 January 2014 and 30 September 2014 NSPD made property sales totalling $39,740,500. Mr Iannuzzi admits that he ought reasonably to have known that these sales related to the Lane Cove Development.

49    On 21 May 2015, the secretary of the executive committee for the Lane Cove Development, who was also an analyst with the Australian Securities and Investment Commission (ASIC), emailed an employee of Veritas advising that the previous directors of NPSD were operating a new business and that some units of the Lane Cove Development were sold for non-commercial prices. Mr Iannuzzi admits that by this time he ought to have suspected that NSPD may have transferred units for non-commercial prices and made further investigations into whether transactions with 72-74 Gordon (see above [24]-[25]), GFP (see above [26]) and Ms Patricia Hanna (see above [29]) were voidable.

50    It is not necessary to detail all the enquiries that should reasonably have been made, and which Mr Iannuzzi admits that he should have made. They include standard and easily made enquiries with NSW Land Property and Information (now NSW Land Registry Services) and company searches with ASIC, and requests of 72-74 Gordon, GFP and Ms Hanna for further information about the transfers of the units.

51    On 23 February 2016, the ATO wrote to Mr Iannuzzi asking, among other things, what investigations had been undertaken into the transfers of lots of the Lane Cove Development and the process of sale. On 5 April 2016, Mr Iannuzzi replied to the ATO stating that the investigation into bank accounts and property sales had been thwarted by lack of access to books and records and the liquidators being unfunded.

52    In relation to being unfunded, on 23 November 2015 Mr Iannuzzi made an Assetless Administration funding request to ASIC concerning banning action against John Haddad as a director. In that request, Mr Iannuzzi stated that “[NPSD] has traded while insolvent since at least 15 February 2012”. The application was rejected on 22 December 2015. This shows that at least from 23 November 2015 Mr Iannuzzi knew that NPSD had been insolvent from at least 15 February 2012.

Formal steps in the liquidation of NPSD

53    On 22 November 2016, some 20 months after the liquidation commenced, Mr Iannuzzi issued his first report to creditors of NSPD. The report stated that Mr Iannuzzi had been approached by John Haddad on 11 November 2016 to propose a Deed of Company Arrangement (DOCA). The report did not contain a Declaration of Independence, Relevant Relationships and Indemnities (DIRRI).

54    On 22 November 2016, Mr Iannuzzi provided a form 529A notice pursuant to section 436B of the Act to creditors of a meeting to be held on 30 November 2016 (Notice of Meeting). The Notice of Meeting did not provide creditors with 10 business days’ notice of the meeting as required by r 5.6.12(3) of the Corporations Regulations 2001 (Cth). The Notice of Meeting was also provided on the incorrect form. On 23 November 2016, Mr Iannuzzi provided his remuneration report which he had omitted to provide in the earlier notice.

55    On 30 November 2016, the first meeting of creditors of NSPD was held. At that meeting a resolution was proposed to appoint Mr Iannuzzi and Mr Naidenov as joint and several administrators to the company, with a view to considering a DOCA proposed by John Haddad. The resolution was supported by a majority of creditors in number but not supported by a majority of creditors in value. That resolution was passed on the casting vote of the chairperson, Frank Farrugia of Veritas.

56    On 9 December 2016, a second meeting of creditors of NSPD was held. At that meeting a resolution was proposed to remove Mr Iannuzzi and Mr Naidenov as administrators. That resolution was supported by a majority of creditors by value but was not supported by a majority of creditors in number, and was accordingly defeated. Mr Iannuzzi did not exercise his casting vote.

57    On 10 January 2017, the convening period expired. No report to creditors was issued by Mr Iannuzzi or Mr Naidenov in accordance with s 439A(4) of the Act nor was a notice of meeting issued pursuant to s 439A(3) of the Act. No application was made to the Court to extend the convening period.

58    On 19 January 2017, Mr Iannuzzi wrote to the creditors of NSPD advising that John Haddad no longer wished to proceed with a DOCA. Mr Iannuzzi advised that under s 435C(3)(b)(i) of the Act, the administration was at an end and the company had reverted to being in liquidation.

59    In around July 2017, Mr Iannuzzi entered into a “Deed of Release and Settlement” on behalf of NSPD with Eddy Haddad and 72–74 Gordon, by which in consideration of $32,500 Eddy Haddad (and his family members and friends) and 72–74 Gordon were released from claims to recover for NSPD amounts totalling $322,508 in allegedly unreasonable director related transactions and allegedly $1,600,000 in uncommercial transactions.

60    On 14 September 2017, Mr Iannuzzi indicated that he was willing, without admission, to resign as the liquidator of NSPD, which he subsequently did. On the same date, Gleeson J in this Court ordered that he be replaced as liquidator of NSPD by Robyn-Lee Erskine.

Conclusion on conduct of Mr Iannuzzi in relation to NSPD

61    The previous paragraphs indicate a failure by Mr Iannuzzi, which he admits, to conduct any of the steps or enquiries in the timeframe in which an external administrator exercising reasonable care and diligence should have. The facts admitted to by Mr Iannuzzi, and the admissions made by him with regard to his conduct falling short of the standard of conduct reasonably to be expected of a liquidator in his position, establish that he failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of NSPD.

62    In my judgement, Mr Iannuzzi’s conduct in the liquidation and administration of NSPD fell very substantially below the level of conduct that was reasonably to be expected of him; he was in substantial dereliction of his duties. Further, it is possible that this conduct caused substantial loss to creditors of the company.

RC Group Aust Pty Ltd (Deregistered)

63    On 29 May 2013, RC Group Aust Pty Ltd was registered. At all material times, RC Group was owned and controlled by George Khalil, brother of Fred Khalil who was a director of Banq. George Khalil was the sole director of RC Group.

64    On 18 August 2014, the members of RC Group resolved to wind up the company voluntarily and appoint Mr Iannuzzi and Mr Godfrey as joint and several liquidators. The relation-back day in relation to RC Group was 18 August 2014.

Inadequate disclosure in the DIRRI

65    On 25 August 2014, Mr Iannuzzi circulated the first report to creditors in respect of RC Group which, amongst other things, annexed a DIRRI signed by Mr Iannuzzi. The report stated that “Godfrey and I are not aware of any issues, circumstances or relationships which would preclude our appointment.” It also stated that “there are no other known relevant relationships, including personal, business and professional relationships, from the previous 24 months with the Company, an associate of the Company, a former insolvency practitioner appointed to the Company or any person or entity that has a charge on the whole or substantially whole of the Company upon his property that should be disclosed.”

66    The DIRRI disclosed that the matter was a referral pursuant to Mr Iannuzzi’s referral relationship with Mr Macri, that George Khalil had provided an indemnity of $5,000 including GST to cover Mr Iannuzzi and Mr Godfrey’s initial remuneration and expenses, and that Mr Iannuzzi and Mr Godfrey had been appointed as liquidators of RPS Security Pty Ltd on 27 May 2014, of which George Khalil was also the sole director. The DRRI failed to disclose Mr Iannuzzi’s referral relationship with Banq in circumstances where the sole director and member of RC Group (George Khalil) was the brother of Fred Khalil of Banq, and that Mr Iannuzzi and Mr Godfrey had received a number of referrals from Gino Cassaniti, an employee of RC Group and a director of Original Banq.

Bank account enquiries

67    On 22 August 2014, an employee of Veritas sent an email to staff of various banks and financial institutions, including the CBA, attaching a letter from Mr Iannuzzi. In that letter, Mr Iannuzzi requested information about any accounts held at that time with the bank or institution in the name of RC Group. In or around August 2014, an employee of the CBA replied advising that RC Group had held two accounts with the CBA.

68    Mr Iannuzzi failed in August 2014, or at any time before August 2016, to obtain the bank statements in relation to these accounts. In failing to do so, Mr Iannuzzi failed to identify or investigate transactions apparent from those statements that totalled more than $6 million, including more than $888,885.00 in cash withdrawals, which were possibly unfair preferences and voidable transactions made by RC Group to various entities within the period six months before the relation-back day.

Formal steps in the liquidation

69    On 1 September 2014, Mr Iannuzzi chaired the first meeting of creditors of RC Group. During that meeting Mr Iannuzzi was asked by the ATO representative whether there were any other companies which had been placed into liquidation which the director was also a director of in the last seven years, to which Mr Iannuzzi confirmed that there were and advised that he would look into lodging a director banning request. Mr Iannuzzi was asked by the ATO representative why all business activity statements for RC Group were lodged at the same time, to which Mr Iannuzzi advised that he would investigate and outline his findings in his next report to creditors.

70    On 23 October 2014, Mr Godfrey lodged a report pursuant to s 533 of the Act with ASIC reporting that the director (George Khalil) had breached his obligation to keep financial records and the obligation pursuant to s 588G(1)-(2) of the Act to prevent the company from trading while insolvent. Mr Godfrey did not recommend that the case warranted any inquiry by ASIC and advised that he did not intend to make an application for funding from the Assetless Administration Fund.

71    After receiving a letter from ASIC requesting that a supplementary s 533 report be lodged, Mr Iannuzzi lodged an Assetless Administration Funding request with ASIC in respect of RC Group advising of the names of nine companies that had been placed into liquidation in the last seven years of which the director had also been a director and requesting funding in the amount of $10,000.00. On 19 January 2019, ASIC sent a letter to Mr Iannuzzi advising that his application for funding from the Assetless Administration Fund had not been approved.

72    Mr Iannuzzi failed to make a request to the Liquidator Assistance Program for assistance in obtaining the books and records of RC Group.

Final report to creditors

73    On 9 February 2015, Mr Iannuzzi circulated his final report to members and creditors of RC Group. In the final report, Mr Iannuzzi disclosed that the sole director (George Khalil) had only delivered minimal books and records for the company, and that he had sent letters to ten banks but had not received confirmation of any accounts held in the company’s name. Mr Iannuzzi failed to disclose the accounts held in the name of RC Group with the CBA (see above at [67]).

74    Mr Iannuzzi disclosed that as the company had failed to keep adequate books and records, there was a presumption that the company was insolvent for the period since 29 May 2013 and there may be liability for an insolvent trading claim amounting to $1,064,011. However, Mr Iannuzzi advised that he had not found the director to be the owner of any real property, meaning that any insolvent trading proceedings brought against him may not yield any benefit to creditors. He also advised that the director may be able to claim a defence under s 588H of the Act. Mr Iannuzzi failed to specify what would be the basis for any defence under s 588H.

75    Mr Iannuzzi failed to report to creditors in relation to the names of the nine companies that had been placed into liquidation in the last seven years of which the director had also been a director. He also failed to report to creditors on any investigations and findings in relation to why all business activity statements for RC Group had been lodged at the same time and to set out what investigations he had made into the $100,000 proof of debt filed by George Khalil to ensure the claim was legitimate.

76    On 28 August 2015, the Deputy Commissioner of Taxation sent a letter to Mr Iannuzzi raising some of the above failures in the report. On 10 September 2015, Mr Iannuzzi sent a letter in response advising that, amongst other things, the CBA had failed to advise of the bank accounts held by RC Group, despite the earlier correspondence from CBA confirming the existence of two accounts (see above at [67]).

77    Although not admitted by Mr Iannuzzi, I find this to be a breach by him of his duties of diligence and candour. A liquidator acting with the requisite diligence and candour would have taken the necessary care to ensure that the correspondence to the Deputy Commissioner was accurate and would have advised of the bank accounts that he had been advised of by the CBA.

78    Further, a candid liquidator presented with the information by the Deputy Commissioner would have made enquiries of his staff and CBA to investigate the matters raised and would have reported on these investigations to the Deputy Commissioner who was a major creditor.

79    Mr Iannuzzi admits that he failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of RC Group in the respects identified above. Mr Iannuzzi does not admit that he breached his fiduciary duties to avoid personal conflicts of interest and act with impartiality as alleged in the amended originating application.

Lester Group

80    The following companies are collectively referred to as the Lester Group: Lameroo Station Pty Ltd (LS) which was placed into external administration on 4 February 2015, Lameroo Station (Qld) Pty Ltd (LSQ) which was placed into external administration on 8 May 2015, and MacLachlan-Lester Pastoral Group Pty Ltd (MLPG) which was placed into external administration on 8 May 2015.

81    From early 2013 to December 2014, the Lester Group operated in a partnership with Bevo Agricultural Investments Pty Ltd in a business of growing and harvesting olives which were processed into olive oil. During this period, the Lester Group of companies was owned and controlled by Damian Lester. Bevo Agricultural was owned and controlled by Tim Clark.

82    On 26 November 2014, Mr Iannuzzi attended part of a meeting with Gino Cassaniti (of Original Banq), Suzanna Dale (acting as a business adviser to Damian Lester) and Damian Lester at the Sheraton Mirage Hotel on the Gold Coast. Shortly after this meeting, Ms Dale emailed Mr Iannuzzi, copied to Gino Cassaniti and Fred Khalil, summarising issues apparently discussed at the 26 November 2014 meeting.

83    The email records the following issues as having been discussed at the meeting: the removal of Tim Clark, and his entities, as participants in the Olive Grove Partnership; the replacement of LS and LSQ as trustee companies with an entity controlled by Damian Lester; the liquidation of LS and LSQ with no indemnity from the trust assets; and the replacement of Damian Lester as a director of LS and LSQ with a new director “James” to ensure that the new director was recorded as a director of the liquidated entity and which would keep the liquidation off Damian Lester’s credit file.

84    Mr Iannuzzi does not admit to having been present for the discussions which were said to have occurred in the email above. Shortly after receiving the email Mr Iannuzzi forwarded that email to Fred Khalil and stated “I shouldn’t be copied but blind copy. Pls educate Suzie.”

85    Even if Mr Iannuzzi was not present for that part of the meeting where the matters set out in [83] were discussed, as he says, his response to the email that recorded these matters is inadequate. Acting properly he would have confronted these matters and disclosed them to creditors. Instead he appears to have sought to sweep them under the carpet and protect himself from being tainted by them. The fact that he wished such communications still to be sent to him but in such a way that other recipients would not be able to see raises particular questions and concerns.

Formal steps in the liquidation of LS

86    On 9 December 2014, Inglewood Hardware Pty Ltd, a creditor of LS, applied in the Supreme Court of Queensland to wind-up LS. Inglewood Hardware was represented by Rostron Carlisle of Rostron Carlisle Solicitors.

87    On 2 February 2019, a form was lodged with ASIC notifying that as from 9 January 2015 Damian Lester had ceased to be a director of LS and had been replaced by Alexander MacLachlan-Lester.

88    On 4 February 2015, Mr Godfrey and Mr Iannuzzi consented to be appointed by the Supreme Court of Queensland to act as official liquidators of LS. On the same day, the Supreme Court of Queensland ordered the winding up of the company and appointed Mr Godfrey and Mr Iannuzzi as liquidators. This winding up was by consent, on the basis that Inglewood Hardware agree to Veritas being appointed as liquidators of LS.

89    On 21 September 2015, Mr Iannuzzi provided an official liquidator’s report to creditors of LS annexing, among other things, a DIRRI signed by Mr Iannuzzi. In the DIRRI Mr Iannuzzi declared that Rostron Carlyle Solicitors had sought the consent of Mr Godfrey and him to act as liquidators of LS, that he had not identified any real or potential risks to his independence as liquidator of LS, that he was not aware of any reasons that would prevent him accepting appointment as liquidator of LS, that neither he nor Veritas had provided any professional services to LS in the previous 24 months, and that there were no other known relevant relationships from the previous 24 months with LS or an associate of LS.

90    Mr Iannuzzi failed to disclose any of the matters above at [82]-[84] in the DIRRI.

91    On 1 October 2015, Mr Carlyle of Rostron Carlyle Solicitors sent a letter to Mr Iannuzzi taking issue with the DIRRI and stating that neither his firm nor his client had sought Mr Iannuzzi’s consent to act as liquidator. In addition, Mr Carlyle reminded Mr Iannuzzi that he had been appointed as a result of the request of LS (see above at [88]). Mr Carlyle requested that the DIRRI be amended to reflect these circumstances. Mr Iannuzzi stated that he would table an amended DIRRI at the 15 October 2015 meeting of creditors but there is no evidence that he did so.

92    On 15 October 2015, Mr Iannuzzi chaired a meeting of the creditors of LS. During that meeting Mr Iannuzzi was asked whether he had met Ms Dale. The minutes of the meeting state that: “The Chairperson confirmed that following his appointment he had spoken to Ms Dale.” Mr Iannuzzi was then asked whether he had met with Ms Dale face to face, in respect of which the minutes state that: “The Chairperson advised that on unrelated matters he had met Ms Dale.” These statements were false in light of the events above at [82]-[84].

93    On 5 May 2016, by consent, and upon the application of Inglewood Hardware, the Supreme Court of Queensland ordered that Mr Iannuzzi be removed as liquidator of LS.

Formal steps in the liquidation of LSQ and MLPG

94    On 8 May 2015, the members of LSQ and MLPG separately resolved that each company be wound up and that Mr Iannuzzi be appointed as liquidator.

95    On 18 May, Mr Iannuzzi circulated his first report to creditors in relation to MLPG which attached a DIRRI signed by Mr Iannuzzi. In the DIRRI Mr Iannuzzi declared that Ms Dale contacted him on 24 March 2015 for the purposes of providing information about the company to him so he could advise on the solvency of the company, to have him explain the nature and consequences of an insolvency appointment and for him to provide a consent to act. Mr Iannuzzi also declared that neither he nor Veritas had provided any professional services to MLPG in the previous 24 months, that he was also the liquidator of LS and LSQ but he was not aware of any financial relationship or conflicts of interest between the three companies, that apart from those matters disclosed in the DIRRI there were no other known relevant relationships from the previous 24 months with MLPG or an associate of MLPG, and that he was not aware of any reasons that would prevent him accepting appointment as liquidator of MPLG.

96    Mr Iannuzzi failed to disclose in the MLPG DIRRI the matters referred to above at [82]-[84].

97    Mr Iannuzzi admits on the basis of the above matters that he failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of Lester Group. Mr Iannuzzi does not admit, as was alleged in the amended originating process, that he had made knowingly false statements in the DIRRIs in relation to the Lester Group companies.

K G & V M Powe Pty Ltd (Deregistered)

98    On 30 December 1977, K G and V M Powe Pty Ltd was registered as a company. On 24 April 2015, the members of Powe passed a special resolution that the company be wound up voluntarily and that Mr Iannuzzi be appointed as liquidator. On 12 May 2015, the Deputy Commissioner of Taxation lodged a proof of debt in respect of Powe in the amount of $99,053.53.

99    Between 27 November 2014 and 19 December 2014, there were various email communications between Mr Iannuzzi, Ms Dale, acting as a business advisor to Powe, Fred Khalil of Banq and his partner Gino Cassaniti. These emails were in relation to effecting a sale of a mushroom farm, which was the main business venture of Powe, to a mining company. The emails also discussed Mr Iannuzzi entering negotiations with representatives of National Australia Bank (NAB) in relation to a mortgage over the mushroom farm which was in default.

100    On 4 May 2015, Mr Iannuzzi provided a report to creditors of Powe in advance of the first meeting of creditors of Powe. The report annexed, among other things, a DIRRI signed by Mr Iannuzzi and noted that the company had sold its property, business and assets to satisfy loans owing to NAB.

101    In the DIRRI, Mr Iannuzzi declared that he had been contacted by Powe’s business advisor, Ms Dale, on 14 April 2015 for the purpose of, among other things, obtaining Mr Iannuzzi’s consent to act in the liquidation, that neither he, his partners, nor Veritas had within the previous 24 months any relationships with Powe or an associate of Powe or provided any professional services to Powe, and that there were no other known relevant relationships, including personal, business and professional relationships, from the previous 24 months with Powe, an associate of Powe, or any person or entity that has a charge on the whole or substantially whole of the Powe’s property that should be disclosed.

102    In the DIRRI, Mr Iannuzzi failed to disclose the matters at [99] above despite Ms Dale being a business advisor of Powe, the emails having been concerned with possible strategies to restructure Powe and related entities and some of the emails referring to communications between Mr Iannuzzi and a secured creditor of Powe, NAB, in relation to Powe property. Mr Iannuzzi also failed to disclose the previous relationship with Ms Dale in relation to the Lester Group referred to above at [82]-[84].

103    Mr Iannuzzi admits that the matters above at [98]-[102] establish that he failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of Powe.

Tabuso Group

104    The following eight companies are collectively referred to as the Tabuso Group: Inter Management Group Pty Ltd (IMG), Co-ordinated Transport Solutions Pty Ltd, Diesel Dan Pty Ltd (Diesel Dan 1), Silverhills Haulage Australia Pty Ltd, ACN 133 636 414 Pty Ltd (formerly ITS – Interfreight Transport Solutions Pty Ltd) (Interfreight 1), Fara Logistics (Aust) Pty Ltd, Machinery Moves Australia Pty Ltd, and Brisbane Inner City Tilt Tray Services Pty Ltd.

105    Prior to entering external administration, the Tabuso Group of companies (excluding Silverhills) operated a transport and logistics business with its principal place of business at 395 Devonshire Road, Kemps Creek, New South Wales. Prior to 6 July 2013, Mr John Tabuso was the sole director and secretary of each of the Tabuso Group companies (excluding Silverhills). Ms Mirjana Tabuso, the wife of John Tabuso, was the sole director and shareholder of Silverhills from its incorporation until 5 September 2013.

106    On 6 July 2013, Mirjana Tabuso replaced John Tabuso as a director of each of the Tabuso Group companies (excluding Silverhills). Three days later, on 9 July 2013, John Tabuso was declared a bankrupt. The petitioning creditor was the Deputy Commissioner. On 25 July 2013, the registered office of each of the Tabuso Group companies was changed to the address of Banq.

107    On 5 September 2013, company registration forms were submitted to ASIC for the registration of Diesel Dan (NSW) Pty Ltd (Diesel Dan 2) and Interfreight Transport Pty Ltd (Interfreight 2). Both companies were registered on the same day. The registration forms and later ASIC searches for both companies record that the registered offices were Banq’s premises and the occupier of Banq’s premises had consented in writing to this, the principal places of business were the same as for the Tabuso Group (excluding Silverhills) (see above at [105]), the sole director and secretary of the companies was (and is) Mr Maurizio Ligori, the neighbour of John and Mirjana Tabuso, and the sole shareholder for the companies was and remains Runcity Pty Ltd.

108    Runcity has the same principal place of business as the Tabuso Group (excluding Silverhills) (see above at [105]). The sole director, secretary and shareholder of Runcity is Mirjana Tabuso.

109    Also on 5 September 2013, Mirjana Tabuso was replaced as director of the Tabuso Group of companies by Robert James Pollock. Later on 11 June 2014, Robert James Pollock was replaced as a director of the Tabuso Group of companies by Stephen Salt. At all material times the companies of the Tabuso Group were owned by John Tabuso, Mirjana Tabuso or entities associated with them.

Winding up and first report to creditors of the Tabuso Group

110    On 8 December 2014, the members of each of the Tabuso Group of companies resolved to wind up the respective companies voluntarily, and appoint Mr Iannuzzi and Mr Godfrey as joint and several liquidators of the companies.

111    On 15 December 2014, Mr Iannuzzi issued a first report to creditors in respect of each of the companies in the Tabuso Group. In the DIRRI circulated with the first reports to creditors concerning the Tabuso Group companies, Mr Iannuzzi declared that the liquidations were referred to Veritas by the external solicitor of the companies, Mr Macri. The DIRRI did not declare Mr Iannuzzi’s relationship with Banq, which was the occupier of the registered premises of the Tabuso Group companies (see above at [106]).

112    At the time of winding up, the Commonwealth was a creditor of each of the companies in the Tabuso Group, except Brisbane Inner City. Subsequent to each of those companies being placed into liquidation, the Deputy Commissioner lodged proofs of debt.

Transfer of phone line

113    On 16 December 2014, Mr Iannuzzi approved the transfer of a phone line from IMG to Interfreight 2. Interfreight 2 had the same company name as Interfreight 1 prior to its change of name as well as the same business address. As described above, Interfreight 2 was also controlled by Mirjana Tabuso.

114    Mr Iannuzzi admits that a reasonably competent liquidator in his position would reasonably have suspected the possibility that the persons in control of the Tabuso Group of companies were involved in activity to deliberately liquidate the companies in the group and transfer the assets of the group to a new entity in the above circumstances. This is referred to as ‘phoenixing’.

Proofs of debts

115    On 22 December 2014, Mr Iannuzzi sent an email to Banq requesting proxies in advance of the first meeting of creditors and requesting a statement from the director of the Tabuso Group regarding the reasons for failure of the Tabuso Group. On the same day a representative of Banq replied attaching a spreadsheet which detailed that each of the Tabuso Group companies had ceased trading on 30 June 2013 and that the reason for failure of the Tabuso Group companies was the previous director, John Tabuso’s, ill health and subsequent bankruptcy.

116    On 23 December 2014, Mr Iannuzzi again sent an email to Banq requesting that proxies and proofs of debt be sent to him. On the same day a representative of Banq sent an email attaching proxies and proofs of debt in respect of each of the Tabuso Group companies. These proofs of debts included various debts apparently due to Interfreight 2 from six of the Tabuso Group companies together totalling $375,000 and all said to be owing for “Unpaid Contracts”. They also included two debts apparently due to Diesel Dan 2 totalling $55,000 both for “Unpaid Repairs”. Finally there was also a proof of debt from Runcity Pty Ltd in respect of Diesel Dan 1 in the amount of $50,000 described as being for an “Unpaid Loan”.

117    All of the proofs of debt were for round figures, concerned related entities and many or all appeared to have been completed by the same person. In addition, Interfreight 2 and Diesel Dan 2 were not registered until 5 September 2013, which was after the Tabuso Group companies had apparently ceased trading (see above [115]). Runcity was not registered until 22 July 2013 which was also after the Tabuso Group companies had apparently ceased trading.

118    Mr Iannuzzi admits that a reasonably competent liquidator in his position would have reasonably suspected that some or all of the proofs of debt warranted further investigation. Despite this, all of the debts were subsequently admitted to proof by Mr Iannuzzi for the amounts stated (save that those lodged by Diesel Dan 2 were admitted as debts owing to Diesel Dan 1), and Mr Iannuzzi did not disclose to creditors any investigations undertaken by him in establishing the veracity of the proofs of debt.

First meeting of creditors

119    On 23 December 2014, the first meeting of creditors of each of the Tabuso Group companies were held concurrently, at which Mr Iannuzzi was the chair. The minutes of the meeting in respect of Interfreight 1 and Fara Logistics incorrectly recorded the proofs of debt lodged by Diesel Dan 2 as debts owing to Diesel Dan 1.

120    On 5 January 2015, Mr Iannuzzi emailed Gino Cassaniti and Fred Khalil and asked them to arrange for the balance of the contribution to be paid into the Veritas trust account noting that he had received $20,000 but required a further $13,000. At no point did Mr Iannuzzi provide an updated DIRRI to disclose his relationship with Banq.

Final reports to creditors

121    On or about 27 July 2015, Mr Iannuzzi provided a final report to members and creditors in relation to the companies within the Tabuso Group, excluding Interfreight 1. On 20 January 2016, Mr Iannuzzi provided a final report to creditors in relation to Interfreight 1. In those reports Mr Iannuzzi disclosed, among other things, the following matters: that preliminary investigations and enquiries indicated that the majority of the outstanding debts of the companies were incurred during the directorship and control of the companies by Robert Pollock, that is after 5 September 2013, while for Interfreight 1 it was by Mr John Tabuso, that is before 6 July 2013, that little or no trading of the companies occurred after the resignation of Mr Pollock or Mr Tabuso as directors, that is after 11 June 2014 and 6 July 2014 respectively, that Mr Pollock and Mr Tabuso ceased being directors of the companies as a result of ill health, and that Mr Salt had failed to provide the books and records of the companies to Mr Iannuzzi.

122    In the final reports, Mr Iannuzzi failed to provide any explanation for the substantial inconsistencies between the first report to creditors and the final 27 July 2015 report, including the date of cessation of trading of the Tabuso Group companies and the director responsible for the incurring of debts, an explanation for, or an account of enquiries conducted to explain, why there were two changes in the directorship of Interfreight 1 after it had apparently ceased trading in July 2013 or why Interfreight 1 was not placed into liquidation until December 2014, and an explanation of why he had not been able to obtain the books and records of the companies from their former accountants, Banq.

123    Mr Iannuzzi failed to identify the possibility of, or any investigation conducted in relation to, phoenixing activity by John or Mirjana Tabuso which he should have done having regard to the matters identified in paragraphs [106]-[117] above, the circumstance that Interfreight 1 had apparently ceased trading in July 2013 but the remainder of the Tabuso Group companies had apparently continued trading, and the circumstance that members of the Tabuso Group of companies had apparently incurred debts to Interfreight 2, a company ultimately owned by Mijrana Tabuso, with the same name as Interfreight 1 and operating a similar business at the same address as Interfreight 1.

124    Mr Iannuzzi failed to explain how, if he was promised a $5,000 indemnity by Stephen Salt for each of the Tabuso Group companies, he came to receive an up-front payment labelled “indemnity” of only $3,750 in relation to each company recorded in the summary of receipts and payments. He also failed to correctly record Diesel Dan 2 as a creditor in respect of Fara Logistics rather than Diesel Dan 1. The Interfreight 1 report also failed to explain why the proof of debt lodged by Diesel Dan 2 for $45,000 had been admitted but in favour of Diesel Dan 1.

125    Mr Iannuzzi admits that the matters in paragraphs [104]-[124] above reasonably suggest that he has failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of each of the companies in the Tabuso Group. Once again, in my judgement Mr Iannuzzi’s conduct in relation to these companies fell very substantially below the level that the law expects of a liquidator.

Morgan Group

126    The following eight companies are collectively referred to as the Morgan Group: Kamikaze Teppanyaki (DH) Pty Ltd, Sozo Japanese Lounge Pty Ltd (Deregistered), Yugo Lounge Pty Ltd (Deregistered), Vision Corp (Aust) Pty Ltd (Deregistered), and 2PS2GLA Pty Ltd (Deregistered).

127    Kamikaze, Sozo and Yugo are referred to collectively as the Kamikaze Group.

128    The ATO submitted formal proofs of debt in respect of Yugo in the amount of $378.00 and in respect of Vision Corp in the amount of $185,622.74.

The Kamikaze Group

129    At all material times prior to 6 May 2015, Kamikaze operated the Kamikaze Darling Harbour Restaurant from Shop 347, 2 Harbourside Shopping Centre, Darling Drive, Darling Harbour. Yugo were the external accountants of Kamikaze and a trading entity for the Kamikaze group from 31 March 2014. Sozo originally operated as a trading and leasing entity and later as an asset and lease holding entity for the Kamikaze Group.

130    Mr Peter Abboud was the sole director and shareholder of both Kamikaze and Yugo up until 6 May 2015. The sole shareholder and director of Sozo as recorded in the ASIC records until being amended and backdated on 11 May 2015 was Gino Cassaniti of Original Banq. Following these respective dates the sole shareholder and director of the Kamikaze Group companies was recorded as Kody Jason Morgan, then aged 21 years old.

131    On 12 May 2015, Mr Iannuzzi had a meeting with Fred Khalil of Banq for the purposes of, among other things, Mr Iannuzzi providing a consent to act in a voluntary liquidation of Kamikaze and Sozo and as administrator of Yugo. On the same day, Mr Morgan apparently resolved to wind up Kamikaze and Sozo and to appoint Mr Iannuzzi as liquidator of the companies.

132    At all material times prior to 18 May 2015, the registered office of Kamikaze and Yugo was Banq’s address. Sozo’s registered address at all material times was Banq’s address. From 11 May 2015, Sozo’s principal place of business was recorded as an address in Woy Woy, being Mr Morgan’s residential address. From 18 May 2015, the registered offices of both Kamikaze and Yugo were recorded as also being Mr Morgan’s residential address in Woy Woy.

Communications regarding the Kamikaze Group

133    On 11 May 2015, Fred Khalil of Banq forwarded an email to Mr Iannuzzi that had previously been sent to Gino Cassaniti, Fred Khalil and Peter Abboud. The email attached a letter dated 6 May 2015 from Adams & Co Lawyers Pty Ltd on behalf of Mirvac Retail Sub SPV Pty Ltd requiring Sozo to remedy its breaches of lease over the Kamikaze Darling Harbour Restaurant premises (see above at [129]). On 13 May 2015, there were numerous emails between Mr Iannuzzi, Gino Cassaniti, Fred Khalil and Peter Abboud concerning steps to be taken to preserve Sozo’s lease over the premises. None of those emails was sent or copied to Mr Morgan.

134    In the light of paragraphs [129]-[133], Mr Iannuzzi admits that on or about 13 May 2015 he ought reasonably to have suspected that Mr Morgan’s appointment as a director of the Kamikaze Group companies may have been a sham, that Gino Cassaniti and Peter Abboud of Banq may have been de facto directors of the Kamikaze Group companies, and that Banq may have procured Mr Morgan’s appointment as a director of the Kamikaze Group of companies and may have done so to avoid, among other things, the possibility of director banning action against Peter Abboud under s 206F of the Act, and the liquidation appearing on Peter Abboud’s credit history.

135    In my judgement, these failures by Mr Iannuzzi demonstrate his reckless indifference to his duties and to matters plainly requiring investigation by him.

Winding up of the Kamikaze Group

136    On 14 May 2015 in respect of Sozo and 20 May 2015 in respect of Kamikaze and Yugo, Mr Iannuzzi circulated the first report to creditors which among other things annexed a DIRRI.

137    The DIRRI for each company failed to disclose Mr Iannuzzi’s professional relationship with Gino Cassaniti and Peter Abboud, the de facto directors of Sozo, and the email communications with Banq staff of 13 May 2015 (see above [133]). The DIRRI also failed to disclose that there were reasonable grounds to suspect that Mr Morgan’s appointment may have been a sham.

138    On 6 April 2016, 9 May 2016 and 22 December 2016, Mr Iannuzzi provided his final report to creditors for Kamikaze, Yugo and Sozo respectively.

139    Mr Iannuzzi failed to disclose in each of those reports any investigation by him into the circumstances of Mr Morgan’s appointment as a director of the respective companies, that Mr Morgan had been appointed as a director of at least two other companies shortly prior to the liquidation of those companies, that in each case Banq was the accountant of the company and Mr Iannuzzi was the liquidator, and that staff of his referrer, Banq, had previously been the directors of those entities.

Vision Corp

140    At all material times prior to 30 April 2015, Mr Paul Ayoub was the sole director and shareholder of Vision Corp. On 14 May 2015, a form was lodged with ASIC notifying that Mr Morgan had replaced Mr Ayoub as sole director and shareholder of Vision Corp.

141    On 21 May 2015, Vision Corp’s registered address was changed from Mr Ayoub’s residential address to Mr Morgan’s residential address. On 22 May 2015, Fred Khalil of Banq, Vision Corp’s external accountants, contacted Mr Iannuzzi to discuss, among other things, whether Mr Iannuzzi would act as a liquidator of Vision Corp in any voluntary winding up. On 12 June 2015, the members of Vision Corp resolved to wind up the company voluntarily and appoint Mr Iannuzzi as liquidator.

142    On or about 22 June 2015, Mr Iannuzzi provided his first report to creditors in relation to Vision Corp, which annexed, among other things, a DIRRI signed by Mr Iannuzzi. The DIRRI disclosed that the matter had been referred to Mr Iannuzzi by Vision Corp’s external accountants pursuant to the Mr Iannuzzi’s referral relationship with Banq.

143    On 30 March 2016, Mr Iannuzzi provided his final report to creditors in respect of Vision Corp. In that report, Mr Iannuzzi failed to disclose any investigation by Mr Iannuzzi into the circumstances of Mr Morgan’s appointment as a director of the company. In addition, there was no disclosure that Mr Morgan had been appointed as a director of at least three other companies shortly prior to the liquidation of those companies, and that in each case Banq was the accountant of the company and Mr Iannuzzi was the liquidator.

2PS2GLA

144    2PS2GLA operated in the real estate industry, introducing builders/developers to sites and then tenants to the completed developments. At all material times prior to 12 May 2014, Ms Katherine Giezekamp (née Driver) was the sole director and shareholder of 2PS2GLA.

145    On 12 May 2014, ASIC was notified that Shelley Fay Harris had replaced Ms Giezekamp as sole director and shareholder of 2PS2GLA. On 17 November 2014, ASIC was notified that Hendrik Jacobus Giezekamp had replaced Ms Harris as sole director and shareholder of 2PS2GLA. On 12 December 2014, ASIC was notified that Natalie Louise Giezekamp had replaced Mr Giezekamp as sole director and shareholder of 2PS2GLA.

146    On 28 May 2015, Fred Khalil of Banq, 2PS2GLA’s external accountant, contacted Mr Iannuzzi for the purpose of discussing, among other things, whether Mr Iannuzzi would be willing to act as liquidator in the voluntary winding up of 2PS2GLA. On the same day an employee of Veritas completed a search of ASIC records and a client maintenance form in respect of 2PS2GLA both of which recorded Natalie Louise Giezekamp as the director of 2PS2GLA.

147    On 27 August 2015, Banq lodged a form with ASIC notifying that as of 28 May 2015 Mr Morgan had replaced Ms Giezekamp as sole director and shareholder of 2PS2GLA.

148    On 9 September 2015, Mr Morgan apparently resolved to wind up 2PS2GLA voluntarily and appoint Mr Iannuzzi as liquidator.

149    On 21 September 2015, Ms Katherine Driver sent a letter to Mr Iannuzzi ahead of the meeting of creditors of 2PS2GLA to be held on 25 September 2015. Ms Driver advised, amongst other things, that she had never signed any form authorising either the transfer of her shares in 2PS2GLA to Shelley Fay Harris or the appointment of Ms Fay Harris as director of 2PS2GLA, and, as a result, she believed the transfer of ownership to and appointment of Ms Fay Harris to be invalid.

150    Ms Driver said that she understood Shelley Fay Harris to be the de facto partner of her former husband, Paul Giezekamp, whom she had separated from on 23 September 2013, that Mr Morgan was the son of a business associate of Mr Paul Giezekamp, and that on 11 August 2015 an application had been filed on her behalf with the Family Court of Australia relating to her pending property settlement with Paul Giezekamp which sought, amongst other things, information in relation to the affairs of 2PS2GLA.

151    Ms Driver also advised that the form lodged with ASIC on 27 August 2015, notifying that as of 28 May 2015 Mr Morgan had replaced Ms Natalie Louise Giezekamp (the sister of Paul Giezekamp) as sole director and shareholder of 2PS2GLA, was lodged approximately 17 days after Ms Driver’s application had been filed with the Family Court of Australia, and that documents filed by Mr Paul Giezekamp in the Family Court of Australia on 28 August 2015 refer to 2PS2GLA as the owner of a motor vehicle, being a 2014 Audi TT.

152    On or about 17 September 2015, Mr Iannuzzi provided a first report to creditors in respect of 2PS2GLA, which annexed, among other things, a DIRRI signed by Mr Iannuzzi. The DIRRI disclosed that the matter had been referred pursuant to Mr Iannuzzi’s referral relationship with Banq and that Mr Morgan had provided an indemnity of $7,000.

153    On 22 September, an employee of Veritas sent an email to Fred Khalil of Banq, copied to Mr Iannuzzi, attaching a copy of the letter from Ms Driver and requesting that he provide a response to the matters raised in the letter before the meeting of creditors of 2PS2GLA.

154    On 25 September 2015, a meeting of creditors of 2PS2GLA was held at which Mr Iannuzzi was the chairperson. During the meeting, Mr Iannuzzi advised that 2PS2GLA operated in the real estate industry and had ceased trading approximately six months prior to the liquidation (i.e. around March 2015).

155    On 25 October 2016, Mr Iannuzzi provided his final report to creditors in respect of 2PS2GLA. Mr Iannuzzi failed to disclose in the report the former directors of the company, any investigation by Mr Iannuzzi into the circumstances of Mr Morgan’s appointment as director of the company, that Mr Morgan had been appointed as director of at least four other companies shortly prior to the liquidation of those companies, that in each case Banq was the accountant of the company and Mr Iannuzzi was the liquidator, and any investigation by Mr Iannuzzi in relation to motor vehicles that may have been owned or previously owned by the company.

Conclusions with regard to the Morgan Group

156    Mr Iannuzzi admits that the matters in paragraphs [126]-[155] above establish that he failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of each of the companies of the Morgan Group.

157    Mr Iannuzzi does not admit as was alleged in the amended originating application that he was a party to a scheme with Fred Khalil of Banq whereby Mr Morgan was appointed as a sham director of the Morgan Group of companies prior to their liquidation with the purpose of avoiding adverse consequences to the real directors of those companies, that in the liquidation of each of the Kamikaze Group of companies Mr Iannuzzi acted in concert with Banq, Fred Khalil, Gino Cassaniti and Peter Abboud for the purpose of promoting their interests, or interests associated with them, to the prejudice of the other creditors of the companies, and that in the liquidation of each of the Morgan Group of companies Mr Iannuzzi did not faithfully and properly perform his duties as a liquidator of the Morgan Group of companies.

158    Leaving aside whether or not Mr Iannuzzi was a party to the alleged scheme, it is clear that he should have been aware of it as a possibility and he should have investigated it. His failure to do so is a serious breach of his responsibilities and may have caused loss to creditors.

Tukel Group

159    The following four companies are referred to as the Tukel Group: Tuff Gym Pty Ltd which was registered on 7 May 2007, National Auto Dealers NSW Pty Ltd which was registered on 12 July 2010, Tucorp Constructions Pty Ltd which was registered on 11 October 2011, and Tucorp Maintenance Pty Ltd which was registered on 2 May 2012.

Tuff Gym

160    At all material times prior to 30 September 2014, Tuff Gym was owned and controlled by one or other of Mr Fidel Tukel and Mr Baris Tukel, or their relatives. Tuff Gym operated a health and fitness gym with its registered office recorded as the premises of Banq. On 24 November 2014, according to Veritas records, Mr Iannuzzi and Mr Godfrey were appointed under a creditor’s voluntary liquidation as liquidators of Tuff Gym. On the same day, Mr Iannuzzi and Mr Godfrey caused a current and historical search of Tuff Gym to be performed which revealed the director at that time to be Fidel Turkel.

161    On or about 1 December 2014, Banq lodged a form with ASIC notifying that as from 30 September 2014 Fidel Tukel was replaced as director of Tuff Gym by Anthony Michael Crook. On 2 December 2014, Mr Iannuzzi and Mr Godfrey caused a further current and historical search of Tuff Gym to be performed.

162    On 3 December 2014, an employee of Veritas completed an internal creditor’s voluntary liquidation client maintenance form in respect of Tuff Gym. The form lists Anthony Michael Crook as the director of Tuff Gym.

163    On or about 15 December 2014, Banq lodged a further form with ASIC notifying that as from 30 September 2014 Anthony Michael Crook was replaced as director of Tuff Gym by Alex Shirakian. On the same date, Tuff Gym was wound up voluntarily and Mr Iannuzzi and Mr Godfrey were appointed as joint and several liquidators of Tuff Gym. On 16 December 2014, Mr Iannuzzi caused a further company search of Tuff Gym to be performed.

164    Mr Iannuzzi admits that in the light of [160]-[163] above, on or about 16 December 2014 he ought reasonably to have suspected that Mr Shirakian’s appointment as a director of Tuff Gym may have been a sham. It should have been reasonably clear to Mr Iannuzzi that an officer or employee of Banq may have procured Mr Shirakian’s appointment as a director of Tuff Gym and may have done so to avoid, among other things, the possibility of director banning action against former directors of the company under s 206F of the Act and the liquidation appearing on former directors’ credit histories.

165    On 19 December 2014, Mr Iannuzzi circulated the first report to creditors of Tuff Gym, which among other things, annexed a DIRRI. The DIRRI failed to disclose what had caused Mr Iannuzzi to run multiple current and historical searches of Tuff Gym on 24 November 2014, 2 December 2014 and 16 December 2014.

Appointment of Mr Shirakian to additional entities

166    On 13 January 2015, Mr Iannuzzi was appointed liquidator of Onsite Building Services Pty Ltd, Marvel Tradex Pty Ltd and S Naffah Investments Pty Ltd.

167    Banq was listed as the registered office of Onsite and Naffah. Alex Shirakian was listed as the director of Onsite and Naffah, having been appointed to those roles on 15 December 2014.

168    On 19 January 2015, Mr Iannuzzi circulated the first report to creditors of Onsite and Naffah, each of which, among other things, annexed a DIRRI. The DIRRIs disclosed that Mr Shirakian had provided an upfront payment of $5,000 plus GST to cover Mr Iannuzzi’s initial remuneration and expenses which was held in the firm’s trust account, despite this never having had occurred. The DIRRIs also failed to disclose that Mr Iannuzzi had been appointed liquidator of Tuff Gym and that Alex Shirakian was also a director of that company.

Final report to creditors of Tuff Gym

169    On 5 August 2015, Mr Iannuzzi circulated the final report to members and creditors of Tuff Gym. The final report disclosed that the company operated a health and fitness gym at 19 Glendower Avenue, Eastwood NSW, that the director had failed to provide delivery of the company’s books and records, that the company’s external accountant had advised that he believed the reason for the company’s failure was a loss of contracts, and that Mr Iannuzzi had sent letters to ten banks but had not received confirmation of any accounts held in the company’s name.

170    Mr Iannuzzi stated that the company had operated the health and fitness gym at an address in Eastwood NSW, which was the address listed as the residential address of former director Mr Anthony Michael Crook. In fact, the company search for Tuff Gym reveals that the company had six addresses listed as ceased/former principal places of business, including the residential addresses of former directors and premises in Victoria.

Tucorp and National Auto

171    At all material times prior to 3 November 2015, each of the Tukel Group companies (other than Tuff Gym) was owned and controlled by one or other of Baris Tukel and Fidel Tukel, or their relatives.

172    On 17 November 2015, employees of Veritas emailed the principals of Veritas, including Mr Iannuzzi, stating that Mr Iannuzzi and Mr Naidenov had been asked by Banq if they would accept appointment as liquidators of each of the Tukel Group companies (excluding Tuff Gym), asking them to advise whether they had any ongoing professional relationships with the companies, and attaching a copy of the current and historical ASIC search of the companies. The searches disclosed that Baris Tukel was the sole current director of each of the companies.

173    On 21 December 2015, each of the Tukel Group companies (excluding Tuff Gym) was wound up voluntarily, and Mr Iannuzzi and Mr Naidenov were appointed joint and several liquidators of the companies.

174    On 24 December 2015, Banq lodged forms with ASIC notifying that as from 3 November 2015, Baris Tukel was replaced by Talal Joseph Elias Shabobah as director of each of the Tukel Group companies (excluding Tuff Gym). On the same day, Mr Iannuzzi lodged forms with ASIC notifying that Mr Shabobah had resolved on 21 December 2015 to wind up the Tukel Group companies (excluding Tuff Gym) and of his and Mr Naidenov’s appointment as liquidators.

Appointment of Mr Shabobah to additional entity

175    On 10 November 2015, Mr Iannuzzi was appointed liquidator of Firstchoice Protective Service Pty Ltd. Mr Shabobah was listed as the director of Firstchoice, having been appointed on 6 October 2015.

Formal steps in the winding up

176    On or about 30 December 2015, Mr Naidenov circulated a first report to creditors in respect of each of the Tukel Group companies (excluding Tuff Gym). The DIRRIs each failed to disclose that Mr Iannuzzi had been appointed liquidator of Firstchoice and that Mr Shabobah was also a director of that company.

Correspondence with the Deputy Commissioner in relation to the Tukel Group

177    On 7 January 2016, the Deputy Commissioner sent a letter to Mr Iannuzzi and Mr Naidenov advising of a number of concerns that the Deputy Commissioner had with their conduct of the liquidation of the Tukel Group (excluding Tuff Gym). In particular, the Deputy Commissioner referred to Mr Iannuzzi and Mr Naidenov’s failure to disclose or adequately disclose in the DIRRIs all relevant relationships and adequate reasons for believing that none of the relevant relationships resulted in a conflict of interest or duty. These relationships included Mr Iannuzzi’s appointment to Tuff Gym and Firstchoice and his involvement in the liquidation of Original Banq. The Deputy Commissioner also raised concerns with the forms replacing Baris Tukel as director by Shabobah not being lodged until more than a month after he was apparently appointed (see above [174]).

178    In the same letter, the Deputy Commissioner requested that Mr Iannuzzi and Mr Naidenov provide a list of all referrals they had received (including corporate and personal appointments). The Deputy Commissioner also asked that they consider their independence prior to the creditors meeting to be held the next day and table an updated DIRRI if necessary.

179    On 8 January 2016, the first meeting of creditors for each of the Tukel Group companies (excluding Tuff Gym) were held concurrently, at which Mr Iannuzzi was the chair. The minutes record that Mr Iannuzzi tabled the letter from the Deputy Commissioner dated 7 January 2016 and made a number of statements in relation to the letter including the following:

    Mr Iannuzzi was only ever an employee of RMG Partners;

    The liquidation of Original Banq was finalised outside the preceding twenty-four (24) months;

    RMG Partners or Veritas had never received a referral from Original Banq;

    RMG Partners or Veritas had never received a referral from Gino Cassaniti, whose bankruptcy was then being administered by Louise Thompson of Veritas;

    An inadvertent oversight caused the DIRRI to be deficient, not disclosing that the director was the director of Firstchoice, a matter which was then being administered by his office; and

    The ATO had presented this oversight to his office on 7 January 2016 and that an updated DIRRI for each liquidation was tabled and would be provided to creditors in the next correspondence.

180    In making these statements, Mr Iannuzzi failed to disclose that:

    the directors of Original Banq were Ivana Cassaniti, Gino Cassaniti and Fred Khalil;

    the DIRRI for Original Banq states that Mr Iannuzzi was contacted by the director of the company (Gino Cassaniti) on 20 December 2011 for the purposes of advising on the solvency of the company and explaining the various options available to the company;

    Mr Iannuzzi had chaired the first meeting of creditors for Original Banq held on 6 January 2012;

    Mr Godfrey had been appointed as the liquidator of ACN 139 097 251 (formerly RCG Aust Pty Ltd), of which Gino Cassaniti was the sole director and shareholder, on the same day as his appointment to Original Banq;

    the DIRRI for RCG states that Mr Iannuzzi was contacted by the director of the company (Gino Cassaniti) on 20 December 2011 for the purposes of advising on the solvency of the company and explaining the various options available to the company; and

    Gino Cassaniti was a source of referral work for Veritas.

181    On 12 January 2016, Mr Iannuzzi responded to the Deputy Commissioner’s letter of 7 January 2016. Mr Iannuzzi stated that Fred Khalil and his associated entities had referred 15 matters to his office over the financial year ended 30 June 2015, representing 3% of his total revenue for that financial year, and had referred three matters to his office for the quarter 1 July 2015 to 30 September 2015, representing 2% of revenue for the quarter.

182    On 26 April 2016, the Deputy Commissioner sent a further letter to Mr Iannuzzi and Mr Naidenov, which included, amongst other things, a further request for them to provide a list of all referrals received by them and Veritas from Fred Khalil and Banq, confirmation of why Mr Iannuzzi’s appointment to Tuff Gym had not been included in the updated DIRRIs, and in relation Mr Iannuzzi’s relationship with Fred Khali, Banq and Gino Cassaniti, a request that Mr Iannuzzi disclose the relationship, the period that the relationship had existed and reasons for believing that there was no conflict of duty as a result of this relationship.

183    On 1 June 2016, Mr Iannuzzi responded to the Deputy Commissioner’s letter of 26 April 2016 enclosing a list of referrals from Banq since the inception of Veritas. The list of referrals did not include referrals by Mr Macri made on behalf of Banq clients including, by way of example, the referral of the liquidations of the Tabuso Group companies. In his response, Mr Iannuzzi also noted that his appointment to Tuff Gym had not been included as a relevant relationship in the DIRRI since neither Baris Tukel nor Fidel Tukel were directors of Tuff Gym at the time of his appointment, and that, other than the appointment of Ms Louise Thompson of Veritas as Mr Gino Cassaniti’s trustee in bankruptcy, there was no other current relationship with Mr Cassaniti, who he also understood was not an employee of Banq.

Final report to creditors of National Auto

184    On 2 February 2017, Mr Iannuzzi circulated the final report to members and creditors of National Auto. In the final report, Mr Iannuzzi disclosed, among other things, that the company operated as a dealer and wholesaler of motor vehicles at 4 Carolyn Street, Silverwater NSW, that the director had failed to provide delivery of the company’s books and records, that there were no company assets to recover, that the company’s director had advised that he believed the reason for the company’s failure was poor strategic management of the business, that Mr Iannuzzi had sent letters to ten banks but had not received confirmation of any accounts held in the company’s name, that Mr Iannuzzi had identified 28 motor vehicles previously owned by the company that had been transferred out of the company’s name, but had obtained records and information from the director and former director of the company to support the validity of all but five of the transfers, and that in relation to the remaining five transfers, Mr Iannuzzi had concluded that it was likely these vehicles were validly transferred as part of the trading of the business but was unable to confirm this was the case without documentary evidence.

185    In his final report, Mr Iannuzzi failed to disclose that National Auto was still the registered owner of two motor vehicles, that five of the motor vehicles previously owned by National Auto had been transferred during the period six months before the relation-back day, and that four of the five motor vehicles transferred during the period six months before the relation-back day had been transferred to Tucorp, a related entity.

186    Mr Iannuzzi also failed to report to creditors on any investigations in relation to whether the five motor vehicles transferred during the period six months before the relation-back day were unfair preferences within the meaning of s 588FA of the Act and therefore voidable transactions within the meaning of s 588FE of the Act, and on any investigations in relation to whether the transfers of motor vehicles to Tucorp were unreasonable director-related transactions within the meaning of s 588FDA of the Act and therefore voidable transactions within the meaning of s 588FE of the Act made by National Auto within the period four years before the relation-back day.

Conclusions with regard to the Tukel Group

187    Mr Iannuzzi admits that the matters in paragraphs [159]-[186] above establish that he failed to exercise reasonable care and diligence in the exercise of his powers and the discharge of his duties as external administrator of each company in the Tukel Group. In my judgement, this failure represents a substantial shortfall below the level of care and diligence required of Mr Iannuzzi and his admissions leave many questions unanswered.

Mr Iannuzzi’s insight with regard to his conduct

188    As indicated, this proceeding was commenced in August 2017. Annexed to the originating process was a schedule in the nature of a pleading setting out more than 90 pages of detailed factual averments on the basis of which it was said that the relief sought was justified. That schedule was subsequently amended, in May 2019, but for the most part the amendments merely added references to documents underpinning the averments and made very few substantive changes.

189    The Commissioner also served affidavits and 10 volumes of documents that had been produced under subpoenas to third parties. However, the attitude taken by Mr Iannuzzi right up to the week of the final hearing, which is to say over a period of nearly two years, was to deny what was put against him and to raise obstacles to the Commissioner’s case.

190    Mr Iannuzzi served a defence, in December 2017, in which certain averments that were subsequently admitted were denied, and which resisted even an inquiry into his conduct, never mind conclusions with regard to that conduct that might justify sanctions.

191    Mr Iannuzzi served an affidavit, in March 2018, in which he either denied averments which he has subsequently admitted, or he sought to place an exculpatory gloss on averments in respect of which he now accepts that findings critical of his conduct should be made.

192    Mr Iannuzzi also objected to the admissibility of most of the documents sought to be relied on by the Commissioner, which objection was rejected by Perram J. As indicated, Mr Iannuzzi then sought leave to appeal against that decision but that application was dismissed. Even thereafter, albeit on marginally different terms, Mr Iannuzzi continued to press the objection to the Commissioner’s evidence. Whereas the original objection that was rejected by Perram J was that the documents were not admissible at the stage of deciding whether there should be an inquiry, it was now contended that the documents were not admissible at the stage of determining whether any disciplinary orders should be made against Mr Iannuzzi.

193    The hearing of the evidence objection was listed for 15 July 2019, two days before the hearing on the inquiry. Both sides of the case filed submissions, and I prepared for the hearing. Then, on the morning of the hearing on the objection, I was advised through my Associate that Mr Iannuzzi withdrew his objection but that the matter should still be called. When it was called, I was advised that Mr Iannuzzi was prepared to make the admissions contained in the so-called statement of agreed facts and that orders would likely be sought by consent.

194    It was an admitted fact in the proceeding that as recently as 23 May 2019, that is to say only about seven weeks before the hearing, Mr Iannuzzi in a counselling session with a psychologist expressed some disbelief, frustration and significant feelings of injustice surrounding the matter. He said that he perceived he had been unfairly targeted by the Commissioner. Thus, even at that late stage Mr Iannuzzi lacked an appreciation of the delinquency of his conduct.

195    Notwithstanding that history of dogged opposition and resistance, at what might quite appropriately and without exaggeration be described as the eleventh hour, Mr Iannuzzi accepted much of the wrongdoing alleged against him. Senior counsel on his behalf candidly and rightly accepted that his new-found insight, coming when it did, was “belated” and that that counts against him and points in favour of a strong sanction. In that regard, Mr Iannuzzi was prepared to consent to very serious, “life-changing” consequences. Senior counsel accepted, without prompting, that Mr Iannuzzi’s conduct constituted “a very significant departure” from the standard expected of him.

196    It goes without saying that Mr Iannuzzi’s conduct in defending the matter until very near the end has taken up a considerable amount of time and effort of the Court which is to the detriment of other litigants, and it has put the Commissioner to considerable effort and costs not all of which will be made good by the party/party costs order to which he has consented. These matters all count against him in so far as an appropriate penalty is concerned.

Legal principles governing the relief sought

The approach to consent orders

197    As indicated at the outset, the court cannot make orders under s 536 simply on the request of the parties; the court must be satisfied that there is a proper basis for the orders, and the court cannot proceed merely on the basis of the parties’ consent: see [7] above. However, in circumstances where the parties have agreed on the appropriate period for disqualification, the court should not reject the form of orders proposed so long as the agreed period is within a permissible range, and there is a strong public interest in the court giving effect to the agreement: Australian Securities and Investment Commission v Rich [2004] NSWSC 836; 50 ACSR 500 at [80] per White J.

198    In Commonwealth v Director Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at [46], French CJ, Kiefel, Bell, Nettle and Gordon JJ emphasised the important public policy involved in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers. Amongst other things, such predictability of outcome assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and it frees investigating officers to turn to other areas of investigation that await their attention. Although the Commissioner is not a regulator in the sense referred to in that case, these observations are nevertheless apposite given the role that the Commissioner has played in seeking to protect the public interest in bringing this case.

199    The High Court also explained (at [57]) that there is “very considerable scope” for parties in civil proceedings to agree on facts and upon consequences, as well as for them to agree on the appropriate remedy. The High Court (at [58]) observed that subject to the court being sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences, “and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed” (emphasis in the original), it is highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty.

200    Finally, in an allied area of civil penalties under the Competition and Consumer Act 2010 (Cth), Gordon J in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70]-[79] identified some relevant principles. In particular, her Honour held that once the court is satisfied that the proposed orders are within power and that they are appropriate, the court should exercise a degree of restraint when scrutinising the proposed terms, particularly where both parties are represented and able to evaluate the desirability of settlement. Further, that in deciding whether agreed orders conform to legal principle, the court is entitled to treat the consent of the respondent as an admission of all facts necessary or appropriate to the granting of the relief sought against it.

The standard of conduct expected of a liquidator

201    The liquidator’s essential functions are to identify, take possession of and realise the company’s assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority: Australian Securities and Investment Commission v Edge [2007] VSC 170; 211 FLR 137 at [40] per Dodds-Streeton J; Macks v Viscariello [2017] SASCFC 172; 353 ALR 201 at [771]-[772] per Lovell J, Corboy and Slattery AJJ.

202    A court-appointed liquidator is an officer of the court, through whom the court itself notionally conducts compulsory liquidations: Edge at [39]. This has particular implications for the standard of conduct expected of a liquidator. The liquidator is entrusted with the reputation of the court for impartial and proper dispatch of their duties: Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 696 per Marks J.

203    Section 536 is a statutory embodiment of the court’s power to supervise its officers, but extends to all liquidators, whether appointed by the court or otherwise. That is doubtless because all liquidators, however appointed, perform an important public function. The position of liquidator is a repository of public trust; the public is entitled to trust a liquidator to perform their functions to a high standard and with scrupulous attention to obligations of candour, honesty and integrity.

204    When a liquidator falls short of the standards expected of them, the public’s trust in the office of liquidator is eroded. That in turn has a corrosive effect on the administration of the body of insolvency law, and consequently on the administration of justice.

205    A liquidator’s duties include both general law and statutory duties to act with reasonable care and diligence (s 180, Asden Developments Pty Ltd (in liq) v Dinoris [2017] FCAFC 117 at [91]-[92] per Greenwood, Davies and Markovic JJ), good faith (s 181), proper use of their position (s 182), proper use of any information obtained (s 183) and not to act recklessly or dishonestly (s 184). Liquidators also have a fiduciary duty to act with complete impartiality between creditors and not to allow the liquidator’s personal interests to conflict with the liquidator’s duties.

206    In respect of a liquidator’s duty to investigate, in Re Contract Corporation (Gooch’s Case) (1871) LR 7 Ch App 207 at 211, James LJ said the following:

In truth, it is of the utmost importance that the liquidator should, as the officer of the Court, maintain an even and impartial hand between all individuals whose interests are involved in the winding-up… It is his duty to the whole body of shareholders, and to the whole body of creditors, and the Court, to make himself thoroughly acquainted with the affairs of the company; and to suppress nothing, and to conceal nothing, which has come to his knowledge in the course of his investigation, which is material to ascertain the exact truth in every case before the Court.

(Adopted in Stewart v Atco Controls Pty Ltd (in Liquidation) [2014] HCA 15; 252 CLR 307 at [58] per Crennan, Kiefel, Bell, Gageler and Keane JJ.)

207    Similarly, in Re Allebart Pty Ltd (in liq) [1971] 1 NSWLR 24 at 26, Street J said:

The official liquidator is an officer of the Court, and as such he has public responsibilities to investigate past activities connected with the company, and, in appropriate cases, to initiate such further proceedings, civil or criminal, connected therewith as the circumstances may dictate. It is his duty to discover not only breaches of the Companies Act, but also conduct falling short of the requisite standards of commercial morality.

(Adopted in Dunner at [20] per Middleton J.)

208    In Pace v Antlers Pty Ltd (1998) 80 FCR 485 at 497F-498B, Lindgren J summed up the position as follows:

The liquidator's duty to exercise reasonable care and skill has been the subject of some debate. The following propositions, however, appear to have gained acceptance in Australia:

•    The court should not be quick to condemn a person in the difficult position of a liquidator, and, in particular, should not judge his or her conduct with wisdom born of hindsight: Re Windsor Steam Coal Co (1901) Ltd [1929] 1 Ch 151; Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285 (Olsson J) at 287; it is not every error of judgment that will be accounted negligence: Re George A Bond & Co (1932) 32 SR (NSW) 301 at 306;

•    At the same time, a high standard of care and diligence is to be expected of a liquidator as a professional person who is being paid for his or her services: Windsor Steam Coal at 165, per Lawrence LJ; Maelor Jones at 288-289; McPherson, The Law of Company Liquidation, p 218;

•    A liquidator is under a duty to complete the administration of the assets within a reasonable time and not to protract the liquidation unduly: Re House Property & Investment Co [1954] Ch 576 at 612; McPherson, The Law of Company Liquidation, p 218; he or she must act with “due despatch”: Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 691; Maelor Jones at 288;

•    If there is a difficulty at any stage of the administration, it is the liquidator's clear duty to inform the court and seek directions: CCA v Harvey at 691; Windsor Steam Coal at 159, 161; Maelor Jones at 288.

209    I consider that all of that holds true today, some 20 years later, including the caution not to judge the conduct of a liquidator with the wisdom born of hindsight.

Appropriate penalties

210    In Australian Securities and Investments Commission v Rich [2004] NSWSC 836; 50 ACSR 500, the New South Wales Supreme Court heard an application by consent for, among other things, disqualification orders under ss 206C and 206E of the Act to dispose of proceedings brought by ASIC against a director for breach of s 180(1). Despite turning on a different section of the Act, the principles in relation to orders for disqualification under ss 206C and 206E which White J sets out at [80] are relevant here:

(1)    The responsibility for determining whether a disqualification is justified and if so for what period, rests with the court, not with the parties.

(2)     The fixing of a period of disqualification is not an exact science. Where the parties have agreed on a precise figure, the court need not and should not ask whether it would have fixed the same period of disqualification in the absence of agreement. If the agreed period of disqualification is within a permissible range, it should not be rejected merely because the court would have been disposed to select some other figure.

(3)     The court examines all of the circumstances of the case and may act on agreed statements of fact if it is appropriate to do so. The court is not bound to do so. It may request the parties to provide additional evidence and if they do not do so, the court may well not be satisfied that the proposed period of disqualification is within the permissible range.

(4)     There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy, and that may be taken into account in determining whether it is appropriate to act on an agreed statement of facts.

211    Section 536 has been said to be “concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what can broadly be described as disciplinary reasons”: Hall v Poolman (2009) 75 NSWLR 99 per Spigelman CJ, Hodgson JA and Austin J at [67]. In Hall v Poolman, the Court of Appeal also held (at [68]) that the power to inquire into the conduct of a liquidator extends to the full range of a liquidator’s duties to the court and under the Act.

212    With regard to the terms of appropriate relief, the cases under s 536 involving “banning orders” are of relatively limited assistance as they are few in number, and each involves quite different circumstances to the present case. Nevertheless, it will be of assistance to briefly outline the circumstances of some of the cases referenced by the Commissioner, while keeping in mind that each case turns on its own facts.

213    Dunner was concerned with the conduct of the liquidator as the liquidator of 12 companies. ASIC alleged that Mr Dunner had failed to investigate the circumstances of companies to which he was appointed, paid remuneration to himself which was not validly approved, and communicated inaccurately or unsatisfactorily with creditors, including as to the work done and anticipated to be charged.

214    In that case ASIC sought prohibition orders for between five and seven years, while Mr Dunner indicated that he would consent to an order not to practice for a period not exceeding three years (at [215]). The purpose of withdrawing a liquidator’s registration is “directly to protect the public from the work of that person” (at [218]). Middleton J further accepted (at [219]) that:

there is a compelling public interest in the maintenance of a system which recognises that registration as a liquidator is a privilege, the continuance of which is conditional upon diligent performance of its attendant duties. It is also important to demonstrate to the public that there exists a regulatory regime applicable to liquidators which is effective in maintaining high standards.

215    Middleton J noted (at [230]) that “the conduct in question indicates a systemic failure of administration and internal protocols, as well as (in a number of instances) extremely poor professional judgment” and then imposed a prohibition of five years upon Mr Dunner (at [233]). It was relevant to the decision that Mr Dunner cooperated substantially during the proceedings and ultimately accepted his shortcomings (at [234]).

216    In Ariff, a life-time ban was imposed (by agreement) in relation to a liquidator who had acted dishonestly and misappropriated substantial sums from companies in liquidation for the liquidator’s personal benefit.

217    In Edge, Dodds-Streeton J imposed a restraint of 10 years in relation to a liquidator who had repeatedly failed to lodge statutory reports and accounts, hold and advertise meetings and, in relation to some companies, had obtained remuneration which had not been approved (at [632]]. The evidence established in that case that “for some years the defendant repeatedly contravened numerous significant provisions of the Act and Regulations in relation to numerous companies” (at [632]). Also significant in that case was the needlessly uncooperative attitude of the defendant to the ASIC investigation (at [639]).

Application of the principles to the present case

218    On the basis of the findings that I have made above, most of which Mr Iannuzzi has admitted, it is apparent that he has been systemically negligent in his responsibilities as liquidator over an extended period of time (August 2014 to July 2017), and across a large number of companies – 23 in total.

219    It is fair to say that Mr Iannuzzi made little or no effort other than to go through a set of standard procedures and without paying attention to whether his enquiries were bearing fruit or to whether further or different enquiries were warranted. On many occasions he failed to make even the most basic enquiries about a company’s assets such as previous bank accounts or real property, or who its real directors were. His supervision of his staff on whom he relied to do much of the work was patently inadequate.

220    While it is not possible or appropriate to make any definitive findings on whether Mr Iannuzzi’s conduct caused actual losses to creditors, there is no doubt that it may have done. For example, in respect of NSPD, he failed to take any action in relation to recovering a potential unfair preference of $375,000 and failed to take appropriate action in relation to potential uncommercial and unreasonable director-related transactions valued at in excess of $1.5 million. In relation to RC Group, he failed to investigate in excess of $6 million in potential uncommercial transactions, including more than $1.3 million in cash transactions.

221    It was submitted on behalf of the Commissioner that the serious and systemic nature of the failures by Mr Iannuzzi goes not only to his competence and the need to protect the public by preventing him from continuing to act as a liquidator, but also to his character. That much can be accepted.

222    It was further submitted that the facts point to an individual who has acted in wilful or reckless disregard of his duties, and that such a person is not a fit and proper person to remain registered as a liquidator. Wilfulness means something that is done on purpose or wittingly; something deliberate or intentional, and not accidental or casual: Oxford English Dictionary. Deliberate or intentional wrongdoing by Mr Iannuzzi has not been admitted by him. Undoubtedly, he has been reckless and can even be said to have closed his eyes to inconvenient features of the liquidations that he was administering, but even that is something less than deliberate. In my view it would not be fair to Mr Iannuzzi to make findings of wilful wrongdoing by him in the circumstances in which the case has been presented, i.e. that on the basis of admissions made by him orders by consent should be made and if the Court was satisfied with regard to those orders he would not be required for examination.

223    Nevertheless, Mr Iannuzzi’s systemic conduct was certainly reckless; it fell very far short of the conduct that was to be expected of him; it demonstrates that he failed to observe the obligations of candour on him with regard to disclosing relevant circumstances to creditors; it reflects poorly on his character; and it demonstrates that he is not a fit and proper person to remain registered as a liquidator.

224    Although one can discern from the facts that there may be a proper case to investigate against Mr Iannuzzi that his lack of candour was such as to amount to dishonesty (e.g. with regard to the meeting dealt with at [82]-[84] and the events that [89]-[92]), on the facts admitted and found by me such a conclusion is not open. That has caused me some pause, because it may be that I should not be satisfied that the agreed orders are appropriate not because dishonesty has been shown but because if the inquiry was to progress further, and in particular if Mr Iannuzzi was to be examined, dishonesty might be shown and if it was shown then a more serious sanction – possibly a lifetime ban – would be required.

225    In my view, that is not ultimately the correct approach. The inquiry is whether I am satisfied that on what has been proved the agreed orders are within an appropriate range of sanction. I am so satisfied. It would be an incorrect approach to speculate as to what further misconduct might be established if the inquiry was to proceed further, and on that basis to not be satisfied with the agreed orders.

226    In the circumstances, it is just as well to make it clear: I do not find Mr Iannuzzi to have been dishonest in the execution of his duties as liquidator. Equally, however, the Commissioner did not run a case of dishonesty because of Mr Iannuzzi’s admissions and his acceptance of very serious sanctions against him. Thus, no case of dishonesty is dismissed or rejected by this judgment.

227    A significant factor in my assessment that the agreed orders are within a range of appropriate orders is the lateness of Mr Iannuzzi’s insight into his wrongful conduct. As indicated above, the approach that he took to this proceeding until the eleventh hour caused the Court, other litigants in other matters before the Court and the Commissioner considerable inconvenience and/or expense. Moreover, it is an adverse reflection on Mr Iannuzzi’s character, and thus on whether he is a fit and proper person to be a liquidator, that he has come to the insight that he now has at such a late stage and only when faced with a potentially significantly more serious case including allegations of being party to a proposed scheme to defeat or hinder creditors. It also shows the possible precariousness of that insight such that it is necessary to protect the public from Mr Iannuzzi acting as a liquidator for a long period of time.

Conclusion

228    For all the above reasons, I am satisfied that the orders that the parties have agreed to are appropriate as being within a proper range of orders in the light of the proved and admitted conduct of Mr Iannuzzi.

Associate:

Dated:    7 November 2019