Federal Court of Australia

Krejci (liquidator) v Panella, in the matter of Richmond Lifts Pty Ltd (in liq) (No 3) [2025] FCA 1114

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to confer and bring in short minutes of order to give effect to these reasons for judgment.

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

REASONS FOR JUDGMENT

MOORE J:

Introduction

1    In the form ultimately pressed, this is an interlocutory application brought by (inter alia) a director, Mr Sam Cassaniti, of two companies said by the plaintiffs (who are funded by the Commonwealth) to be participants in a significant tax evasion scheme, allegedly at the direction of Mr Cassaniti. The companies, Marginata Securities Pty Ltd (Marginata) and Reliance Financial Services Pty Ltd (Reliance), are the fifth and sixth defendants in these proceedings. Mr Cassaniti is also alleged to be the director (and controlling mind) of (inter alia) the third defendant, Armstrong Scalisi Holding Pty Ltd trading as CAP Accounting (CAP Accounting).

2    The first and sixth plaintiffs, Mr Peter Krejci and Mr Jonathan Keenan, are the provisional liquidators of Marginata and Reliance, having been appointed by order of the Commercial and Corporations Duty Judge on 19 February 2025. Mr Krejci and Mr Keenan are also the liquidators of various plaintiff entities, including the second to fifth plaintiffs (the Relevant Plaintiffs).

3    Mr Krejci and Mr Keenan have, on an interim basis pursuant to s 1323(3) of the Corporations Act 2001 (Cth) (Corporations Act), been appointed receivers of another defendant, Capital Financial Advisory Pty Limited, formerly known as Accolade Advisory Pty Ltd (Accolade). Accolade is also alleged to be a participant in the tax evasion scheme.

4    For convenience, I will refer to Mr Krejci and Mr Keenan as the Liquidators, although they are also acting as provisional liquidators and receivers.

5    The Liquidators are therefore, in a relevant sense, on both sides of the proceedings. They are the liquidators of the Relevant Plaintiffs and the provisional liquidators or interim receivers of Marginata, Reliance and Accolade (the Relevant Defendants). The proceedings are complex with many different parties and many different claims. However, amongst the many claims, the Relevant Plaintiffs are bringing claims against the Relevant Defendants for knowing involvement of breaches of directors’ duties by, inter alia, Mr Cassaniti.

6    (To be more precise, unlike the position with the third, fourth and fifth plaintiffs, Mr Cassaniti is not alleged to owe directors’ duties to the second plaintiff. However, another person, Mr Teddy Panella, is said to owe those duties, and the Relevant Defendants are alleged to be involved in breaches of duties owed by Mr Panella to the second plaintiff. For present purposes, the distinction between Mr Panella and Mr Cassaniti does not matter).

7    Mr Cassaniti and the other applicants say that the presence of the Liquidators on both sides of the record is a problem, and that it creates an obvious conflict. They submit that the appropriate mechanism for remedying this problem is for the Liquidators to be replaced as provisional liquidators of Marginata and Reliance and for new provisional liquidators to be appointed, being those nominated by the applicants. They likewise seek replacement receivers to be appointed to Accolade.

8    By contrast, the Liquidators submit that any potential conflict is, in reality, largely hypothetical (having regard to the nature of the conduct underlying the proceedings) and can be managed by giving the directors of the Relevant Defendants the right to defend the claims by the Relevant Plaintiffs. They also submit that the present application fails to account for the involvement of all of the relevant companies in a fraudulent scheme masterminded by Mr Cassaniti, and the use of all of the entities to siphon away money properly belonging to the Commonwealth.

9    I have determined that the Liquidators should be replaced as provisional liquidators of Marginata and Reliance, and should be replaced as receivers of Accolade, the Marginata Trust, the Reliance Trust and the RFS Trust (using certain terms defined later in these reasons).

10    A further aspect of the interlocutory application was the seeking of a discharge of the various orders appointing the Liquidators as provisional liquidators and receivers unless the plaintiffs proffer the usual undertaking as to damages. As the plaintiffs proffered that undertaking, the issue fell away. However, the relevant orders should be amended to formally record that they are continued on the basis of the provision by the plaintiffs of the usual undertaking as to damages.

Procedural matters

11    The present interlocutory application involves some procedural irregularity. Mr Cassaniti was not named as an applicant. Instead, the application was said to be brought by:

(a)    Mr Carmello Duardo, in his capacity as director of Accolade;

(b)    Ms Thi Linh Trinh, being the wife of Mr Cassaniti, in her capacity as director of Marginata; and

(c)    Mr Andrew Bruce Miller, in his capacity as director of Reliance.

12    This is no doubt because Mr Cassaniti was not recorded as a director of any of the Relevant Defendants when the application was brought.

13    However, at the hearing of the application, counsel for the applicants informed the Court that he also acted for Mr Cassaniti. The evidence before me was that Mr Cassaniti now accepts that he was a director within the extended meaning in s 9AC(1)(b) of the Corporations Act of Marginata and Reliance (only). An ASIC Form 484 has been lodged formally recording Mr Cassaniti as a director of each of Marginata and Reliance with effect from 7 May 2025. Mr Cassaniti is not recorded as a director of Accolade or CAP Accounting, and nor does he accept that he is a shadow director of either of those entities.

14    Further, as it turns out, Mr Miller had retired as a director of Reliance with effect from 7 February 2025, and therefore has no standing to prosecute this application on behalf of Reliance. Ms Trinh has also retired as a director of Marginata with effect from 7 May 2025.

15    Relief was sought in respect of Marginata, Reliance, Accolade and CAP Accounting. However, counsel for the applicants, Mr Sulan SC, accepted that he had no basis to seek relief on behalf of CAP Accounting. He instead submitted that if I was persuaded to grant relief in respect of the other entities, I would not leave CAP Accounting in a different position.

16    None of Mr Duardo, Ms Trinh or Mr Miller gave evidence in support of the application.

17    The parties proceeded to deal with the present application on the footing that Mr Cassaniti, although not named as an applicant, was an applicant on the interlocutory application. I will proceed on the same basis, but I will require the interlocutory application to be amended to add Mr Cassaniti as an applicant and to remove Mr Miller, who has and had no standing. Ms Trinh can remain because she had standing until 7 May 2025.

18    I will also proceed on the basis, as conceded by Mr Sulan, that the applicants cannot seek any relief in relation to CAP Accounting. I will later in these reasons consider whether I should make any order relevant to CAP Accounting of my own motion.

Background to the proceedings

19    These proceedings concern an alleged tax evasion scheme, by which it is said that monies owing to the Deputy Commission of Taxation were instead improperly diverted to other entities through a chain of corporate relationships, with the Australian Taxation Office left as the major creditor in the insolvency of companies owing PAYG tax. The Commonwealth has entered into a funding agreement with the Liquidators in relation to the conduct of these proceedings, and entry into that agreement has been approved pursuant to s 477(2B) of the Corporations Act.

20    As alleged by the plaintiffs, and in very broad terms, the nature of the scheme is as follows. Company A would engage Company B to provide payroll functions for Company A. Company B would employ the staff who did work for Company A. Company A would pay Company B monies sufficient to meet the wages, superannuation and PAYG tax liabilities in respect of those employees. Company B would pay the wages and superannuation of the employees, but would not make the PAYG tax payments to the Deputy Commissioner of Taxation, and would instead remit that money to a third party, either Person C or Company C. There would thereafter be no assets in Company B to meet the tax liabilities and Company B would be placed into liquidation, leaving the Australian Taxation Office as a creditor.

21    Four of the entities alleged to have participated in this scheme (each as a Company B, utilising the above terminology) are the Relevant Plaintiffs, being the second to fifth plaintiffs:

(a)    Sydney Exotic Aquariums Casula Pty Ltd (in liquidation) (ACN 649 148 014) (SEAC);

(b)    Richmond Lifts Pty Ltd (in liquidation) (ACN 608 024 719) (Richmond);

(c)    United Lift Technologies Pty Ltd (in liquidation) (ACN 659 501 532) (ULT); and

(d)    Financial Advisory Australia Pty Ltd (administrators appointed) (ACN 669 266 228) (Financial Advisory).

22    Each of those companies is either in liquidation or administration, and the Liquidators are the appointed liquidators and administrators of those entities.

23    The plaintiffs have brought proceedings against multiple defendants, including corporations alleged to have acted as a Company C, utilising the terminology above, and other companies that have benefited from the on-distribution of funds.

24    For example, in respect of Richmond, the third plaintiff, it is alleged that:

(a)    Richmond was engaged to perform payroll functions for United Lift Services Pty Limited (ULS);

(b)    Richmond employed staff utilised by ULS;

(c)    the staff did not do any work for Richmond;

(d)    ULS paid Richmond monies sufficient to meet the wages, superannuation and PAYG tax liabilities for the staff;

(e)    Richmond paid the wages and superannuation of the staff;

(f)    the amounts in respect of PAYG liabilities paid by ULS to Richmond were not paid by Richmond to the Deputy Commission of Taxation, but were instead paid to “one or more of” a number of entities, including Reliance, and were paid “indirectly” to other entities, including Marginata;

(g)    no tax returns were prepared or lodged for Richmond;

(h)    the payments from Richmond to, inter alia, Reliance and Marginata meant that Richmond was unable to meet its taxation liabilities.

25    Similar allegations are made in respect of ULT, although the alleged scheme structure utilised was a little more complicated.

26    No scheme is identified or pleaded in relation to SEAC, although the Statement of Claim appears to proceed on the basis that such a scheme is pleaded elsewhere in the document, and pleads that SEAC is a victim of the pleaded schemes, without identifying how. The Statement of Claim, for example, does not plead that SEAC paid any relevant money to any person in connection with a scheme. This is perhaps an oversight. It is clear that the Statement of Claim is in a rudimentary state and needs a considerable degree of refinement.

27    A separate scheme is pleaded in relation to Financial Advisory. It is alleged that Financial Advisory employed staff utilised by Accolade, and some staff utilised by McEvoy Legal Pty Ltd (a law firm that provides legal services to various entities associated with Mr Cassaniti). It is alleged that Financial Advisory was paid monies sufficient to meet, inter alia, the PAYG tax liabilities associated with its employees, but that these monies were not paid to the Deputy Commissioner of Taxation, and were instead paid as bonus payments to Mr Cassaniti. It is not pleaded that any of the Relevant Defendants were otherwise involved in that scheme in any factual sense, but it is pleaded (in a rolled-up pleading) that they are “involved” in a breach of directors’ duties, because they knew of those breaches “including by reason of their knowledge imputed to them by reason of Mr Panella and/or Mr Cassaniti being a director” of the Relevant Defendants. The Statement of Claim appears to make a bare allegation that any company of which Mr Cassaniti is a director, without more, is involved in any breach by Mr Cassaniti of his director’s duties. In that respect, the Statement of Claim needs some further attention.

28    These proceedings first came before this Court on an urgent, ex parte basis on 18 February 2025 and the next day the Corporations and Commercial Duty Judge made orders (the 19 February Orders) appointing Mr Krejci and Mr Keenan as provisional liquidators of:

(a)    Marginata;

(b)    Reliance; and

(c)    CAP Accounting,

and appointing Mr Krejci and Mr Keenan as receivers of Accolade.

29    Whilst there are no published reasons associated with the 19 February Orders, before the Commercial and Corporations Duty Judge was evidence suggesting that: (1) there was a prima facie case that the Provisional Liquidation Companies would be wound up on a just and equitable ground; (2) the affairs of the companies were under the control of persons other than the de jure directors; and (3) the companies have engaged in transactions of concern which appear to serve no discernible business purpose and may concern the potential operation of a scheme.

30    In addition to the evidence relating to the appointment of provisional liquidators, the evidence before the Commercial and Corporations Duty Judge in relation to the appointment of receivers to Accolade involved evidence that Accolade was an entity centrally involved in the alleged scheme the subject of the proceedings. It appears that the Liquidators were appointed as receivers to Accolade on the basis of a concern to protect the assets of the company in question for the benefit of those who may be entitled to them.

31    Following the first urgent ex parte application, these proceedings came before Cheeseman J, in her capacity as the Commercial and Corporations Duty Judge, on a relatively urgent basis as the second to twenty-fifth defendants (and two others) sought to discharge the appointment of provisional liquidators to Marginata, Reliance and CAP Accounting and to set aside the appointment of the receivers to Accolade. Her Honour dismissed the application to set aside these appointments. The background to the proceedings and her Honour’s reasons for the orders are set out in the judgment of Cheeseman J in Krejci (liquidator) v Panella, in the matter of Richmond Lifts Pty Limited (in liquidation) [2025] FCA 151 (Krejci No 1). In very general terms, her Honour was satisfied that:

(a)    there were good prospects that Marginata, Reliance and CAP Accounting would be wound up on the just and equitable ground;

(b)    the appointment was needed in the public interest, to preserve the status quo and to preserve and protect each company’s assets or affairs for the benefit of their creditors;

(c)    the evidence revealed a lack of proper corporate governance, including the conduct of the affairs of the companies in a casual manner and in neglect of obligations under the Corporations Act;

(d)    there was evidence of a failure to comply with taxation obligations, and evidence of the suspicious movement of funds through various entities; and

(e)    there was a risk of dissipation of assets and Marginata, Reliance and CAP Accounting.

32    In relation to the application to set aside the receivers of Accolade, her Honour concluded, in general terms, that the plaintiffs had identified and substantiated, for the purposes of the interlocutory application, a reasonable basis for claims against Accolade based on the apparent involvement of Accolade in the transactions about which the plaintiffs complain, and the concomitant need for the assets and records of Accolade to be preserved in circumstances in which Mr Cassaniti appears to be in control of Accolade, such as to support the continuation of interim receivers pursuant to s 1323(3) of the Corporations Act.

33    On 11 March 2025, this proceeding came before me by way of an urgent ex parte application, and I subsequently made orders (the 11 March Orders) appointing the Liquidators as receivers of the assets of the:

(a)    ASH Discretionary Trust (ASH Trust);

(b)    Marginata Securities Trust (Marginata Trust);

(c)    Reliance Discretionary Trust (Reliance Trust); and

(d)    RFS Trust (RFS Trust),

collectively, the Relevant Trusts.

34    The reasons for those orders are set out in Krejci (liquidator) v Panella, in the matter of Richmond Lifts Pty Ltd (in liq) (No 2) [2025] FCA 248 (Krejci No 2).

35    The present application, by the directors of relevant entities in external administration, is the subject of a written consent from the Liquidators pursuant to s 198G(3) of the Corporations Act. However, because the Liquidators rely upon this consent more generally, the relevant permission should be set out. At the interlocutory hearing, the Liquidators handed up a letter sent from ERA Legal (solicitors for the Liquidators) to Watson Webb (solicitors for the Applicants and a number of the defendants in these proceedings) dated 15 April 2025 (the Liquidators’ Letter). It became Exhibit 1 on the application. The Liquidators’ Letter contains the following relevant paragraph, and nothing further:

To the extent that your clients require leave to do so pursuant to s 198G(3) of the Corporations Act (formerly s 471A(2), see Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85 at [15]-[17]), our clients as provisional liquidators of Marginata, Reliance and CAP Accounting hereby approve your clients (to the extent that your clients are directors of each of those companies) appearing to oppose the winding up orders sought in respect of each of those companies.

36    The letter does not indicate what is meant by “the winding up orders”.

Consideration

37    The applicants rely upon Re Nickel Mines Ltd (1978) 3 ACLR 686 (Re Nickel Mines), a decision of Needham J of the Supreme Court of New South Wales as the starting point for the present application. The facts of that case are relatively simple. Mr Hamilton was appointed provisional liquidator of company L. Later, L petitioned to wind up company N on the grounds of insolvency, relying on a claimed unpaid debt to L of $176,016, and Hamilton was appointed provisional liquidator of N. The directors of N sought the removal of Hamilton as provisional liquidator on grounds including that Hamilton was in an untenable position of conflict, being on each side of the record in the winding up petition. It is appropriate to set out the reasoning of Needham J in full (at pp 688 – 689):

The second question is whether Mr Hamilton should continue as provisional liquidator. He is, as I have said, provisional liquidator of Laverton, the petitioner. It is not unusual, in the first instance, for the one liquidator to be appointed to two or more related companies; it usually saves expenses and ensures a speedier and more satisfactory liquidation. However, the question of conflict of interest is always a matter of concern and, when a liquidator feels that such a conflict has arisen, he applies to the court for discharge from one of his conflicting positions. There is no doubt that, in the present case, Mr Hamilton is in a position of conflict. His retention of office in Nickel Mines is based on two considerations, one commercial and one legal. The first is that, because of the joint ownership of assets by the petitioner and Nickel Mines, negotiations for the utilization or realization of those assets is better done by one liquidator than by two. I have no doubt that that is so and that Mr Hamilton’s resistance to the order sought for his removal is based on that commercial proposition. The second justification is that his being provisional liquidator of Nickel Mines does not prevent the directors contesting the petition – Re Union Insurance Co Ltd [1972] 1 WLR 640. On his behalf undertakings were offered as follows:- “(1) that as provisional liquidator he will not dispose of any mining lease held by the company or any interest in any mining lease held or in which the company has any interest, nor will he sell the Burwood Real Estate without first seeking the directions of the Court on notice to the solicitors for the applicant; (2) that he will afford to the solicitors for the applicant reasonable access to all records of the company in his custody reasonably required by them for the purpose of the hearing of the petition.”

It is pointed out that, whatever provisional liquidator is in office, the directors will have to seek from him access to books and documents necessary for the preparation of their case. While that is so, it is, in my opinion, most undesirable that one man should be provisional liquidator of two companies who are engaged in litigation against one another. The provisional liquidator is an officer of the court in the sense that he is appointed by and answerable to the court. Events which are under the control of the court should not create an air of equivocation or unfairness. While I have no doubt that Mr Hamilton would honour the proffered undertaking both in letter and in spirit, I do not think the court should be a party to requiring the directors of Nickel Mines to approach the representative of the petitioner in order to prepare their case against the petition.

For these reasons I think that Mr Hamilton should not remain provisional liquidator of Nickel Mines…

38    In Re Greight Pty Ltd (in liq) (2006) 56 ACSR 334; [2006] FCA 17 (Finkelstein J), a liquidator (Mr Cant) was the liquidator of three companies who were originally under the control of a single person, Mr Cardamone. Some of the companies had made claims in the liquidations of the others. As observed by Finkelstein J (at [1]), in some instances only Mr Cardamone will know the relevant facts, and the liquidator is in an impossible position because:

As liquidator of one company, he may wish to believe Mr Cardamone. As liquidator of another he may not. This is a problem when one has several masters. Mr Cant owes duties to each and there now is a conflict between duty and duty.

39    Mr Cant proposed that rather than removing him from any company, special purpose liquidators should be appointed to deal with the known conflicts. Finkelstein J made the following relevant observations (at [14] – [15], citations omitted):

Before deciding what to do, let me make these preliminary observations. If there are, or are likely to be, disputes between companies in liquidation that are under the control of one liquidator then as a general rule different persons should be appointed as liquidator to each company... This is not to say that it is inappropriate to appoint one person as liquidator of a group of companies or of companies that are closely connected… But once the likelihood of conflict becomes apparent it is necessary to take action.

Having made those observations, there are two problems in the way of going along with Mr Cant’s proposal. The first is the likelihood that, as the liquidations progress, other problems will come to light with which Mr Cant will be unable to deal…

40    Finkelstein J ordered that Mr Cant be replaced as liquidators of two of the companies.

41    A somewhat different approach has been adopted in other cases where the entities are part of a corporate group of companies. In Australian Securities and Investments Commission v Westpoint Corporation Pty Ltd (2006) 227 ALR 623; [2006] FCA 135 (Westpoint) (Siopis J), application was made for the appointment of liquidators to Westpoint Corporation Pty Ltd who were current provisional liquidators of other companies in the Westpoint group of companies, including on the basis of efficiency and cost savings. Reference was made to the following observations of Lehane J in the case of Re Chilia Properties Pty Ltd (administrators appointed) (1997) 73 FCR 171 at 173:

… it is well established that in the absence of any real, as opposed to theoretical, conflict of interest it is generally desirable that the external administration of a group of companies should be placed in the hands of one administrator.

42    Siopis J made the following observations at [31] – [34]:

[31]    I have come to the view that Mr Herbert and Mr Read should be appointed as liquidators for the following reasons.

[32]    First, I agree that the observations made by Lehane J in Cilia, referred to above, state the principles to be applied in this case. The principles are also reflected in the following observations by Hoffman J (as he then was) in Re Arrows Ltd [1992] BCC 121, which were cited with approval by Warren J in Sisu Capital [Sisu Capital Fund Ltd v Tucker [2005] EWHC 2170 Ch, at 123]:

… It is by no means uncommon in the case of the insolvency of a substantial group of companies for cross-claims and conflicts of interest to arise between companies within the group. That does not usually deflect the court from appointing a single firm of insolvency practitioners in the first instance to deal with the whole insolvency of the group, leaving the question of potential conflict of interests to be dealt with if and when it arises.

[33]    I accept the arguments advanced by Mr Colvin SC and Mr Thomson that in the situation where there is no obvious and real conflict but there is a possibility of a theoretical conflict, a court should not thereby be inhibited from appointing a single set of liquidators when that would advance the efficiency of the liquidation, and result in fewer fees being charged in respect of the liquidation.

[34]    I am not satisfied that, on the evidence before me, there is any real conflict in the sense that that concept is recognised in the cases. There is no evidence the appointment of Mr Herbert and Mr Read to the position of liquidators of the company would adversely affect the interests of external creditors or other external interests. The evidence of Mr Francis as to the inter-relationship between Westpoint Management and the company does not demonstrate any such prejudice.

[35]    I am also confident that in the event that any real conflict does emerge, the liquidators will approach the court and seek directions in relation to how to deal with that conflict, as is foreshadowed in the authorities.

43    In Hayes (Liquidator) v 5G Developments Pty Ltd [2019] FCA 1541 (Hayes) (Stewart J), the liquidator of Denham Constructions Pty Ltd (DC), which had a large claim against Denham Wyndham Pty Ltd (DW), sought the reinstatement of DW, the winding up of DW, and the appointment of the liquidator to also be the liquidator of DW, but with a special purpose liquidator for dealing with the issue in respect of which the liquidator would have a conflict, being the claim against DW by DC. Stewart J dealt with the conflict point in relative short order, observing (in relation to an objection relying on the conflict) at [146]:

In my view that objection is met by the appointment of a special purpose liquidator to deal specifically with considering and determining whether DC’s claim against DW should be admitted to proof. Also, as DC and DW were part of the same group of companies and subject to the same control, the conflict of interest that Mr Hayes would be in should not be overstated. That is particularly so where that conflict, such as it is, would not adversely affect the interests of external creditors or other external interests [citing Westpoint].

44    In the present case, the nature of the claims has been summarised above. The nature of the proceedings can also be gleaned from the Originating Process, which seeks (inter alia) the following relief:

(a)    judgment in favour of Richmond against CAP Accounting for the sum of $3,903,366 or such other amount as is determined by the Court;

(b)    judgment in favour of Richmond against Accolade for the sum of $340,000, or such other amount as is determined by the Court;

(c)    judgment in favour of Richmond against Reliance for the sum of $175,000, or such other amount as is determined by the Court;

(d)    a declaration that each of the Accolade, CAP Accounting, Reliance and Marginata has contravened sections 181 and/or 182 of the Corporations Act, in respect of Mr Panella’s and/or Mr Cassaniti’s breaches of duty as a director of Relevant Plaintiffs;

(e)    an order pursuant to section 1317H of the Corporations Act that each of Accolade, CAP Accounting, Reliance and Marginata pay compensation for damages suffered by Relevant Plaintiffs as a result of their contraventions of ss 181 and/or 182 of the Corporations Act in such amount as is determined by the Court;

(f)    an order that each of Accolade, CAP Accounting, Reliance and Marginata pay equitable compensation or equitable damages to Relevant Plaintiffs in such amount as is determined by the Court;

(g)    an order pursuant to section 461(1)(k) of the Corporations Act that numerous defendants, including Marginata, Reliance and CAP Accounting, be wound up on the just and equitable ground.

45    It is thus apparent that these are not simply winding up proceedings. They seek substantive relief against the Relevant Defendants and CAP Accounting on the basis of causes of action that will have to be established in due course, and on a final basis, if the relief set out above is to be granted.

46    There is an obvious conflict between the position of the Liquidators, in their role controlling the Relevant Plaintiffs who are making claims for knowing involvement in breaches of directors’ duties against Marginata and Reliance, and their role as provisional liquidators controlling (inter alia) Marginata and Reliance in defending those claims. For example, the Liquidators acting on one side of the record might formulate a contention as to the liability of Marginata and Reliance which the Liquidators, acting in their other role, might be expected to find uncommonly persuasive, given that it is their own contention.

47    A further potential issue is that the Liquidators, as provisional liquidators of Marginata and Reliance, have the right to take possession of the books and records of those companies, rather than being limited to accessing such documents as they would receive on discovery or other document production process as plaintiffs in the ordinary course. That would include any documents the subject of legal professional privilege where the holder of the privilege is Marginata or Reliance, because the Liquidators are standing in the shoes of Marginata and Reliance.

48    The document risk is not merely theoretical. Numerous privilege claims have been made in respect of documents that were captured on the execution of the search orders at the address of McEvoy Legal, who acted as lawyers for Mr Cassaniti and various of the corporate entities. These include privilege claims made on behalf of Marginata and Reliance.

49    The Liquidators resist the conclusion that these issues should result in their removal on various grounds.

50    First, the Liquidators say that the applicants should not be permitted to advance the present application in circumstances where they are in breach of various orders of the Court for the production of documents and the provision of information and explanations. Annexure A to the Liquidators’ written submissions is a table which identifies each of Mr Duardo, Ms Trinh and Mr Miller, and specifies the orders that are the subject of alleged non-compliance, together with a statement as to the nature of the non-compliance. The table does not include Mr Cassaniti (presumably because he was not an applicant at the time of preparation).

51    More generally, the matters addressed in Annexure A are addressed at too high a level (for example, that Mr Duardo “has produced limited books and records”) to support a finding of disentitling conduct due to disobedience of Court orders.

52    I raised this at the hearing of the application, and indicated that if this point was to be pursued, a more focussed document with supporting evidence would be necessary. Nothing further emerged, and nor did any document that related to Mr Cassaniti.

53    I would not dismiss the Liquidators’ application on this basis.

54    Secondly, the Liquidators say that replacing the provisional liquidators will cause significant disruption and additional expense, and make it much more difficult for the relevant tasks (of both liquidators and provisional liquidators) to be carried out. I accept that this is so. It is an obvious factor to consider, and one that means that the Court should not lightly order the replacement of the provisional liquidators, because it will cause delay and be costly.

55    Thirdly, the Liquidators say that, having regard to the nature of the conduct and the evidence, any potential conflict or difficulty is hypothetical and remote. These arguments were advanced in some detail by reference to the prima facie evidence of the relevant schemes and the siphoning of money for no explicable purpose, together with the evidence of the irregularities in corporate governance and the evidence of control by Mr Cassaniti rather than the directors de jure.

56    The Liquidators emphasise that no alternative explanation has been provided by any of the defendants and that no legitimate reason has been identified for the observed conduct that is described in the evidence. There is some force to this contention. Although no defence has yet been filed, there have been obligations to provide information and assistance to the Liquidators and there have been various examinations in the course of these proceedings. None has revealed any rational explanation for the observed conduct.

57    Although Mr Miller was identified as one of three applicants, no information has been provided by him, including because he cannot be located or contacted. Until recently, Mr Cassaniti has denied being the person in control of any of the entities, and the Liquidators point to several examples of a lack of cooperation including an ongoing failure to provide information and documents. Mr Panella failed to attend one examination, and gave evidence at another examination that would tend to support a conclusion that he was not carrying out his duties as a director. Ms Trinh has failed to meet with the Liquidators to answer questions about the Relevant Defendants. There is some evidence that Mr Panella, Ms Trinh and Ms Cassaniti breached the 19 February Orders by transferring shares in violation of freezing orders and not complying with asset disclosure orders.

58    Those matters are relevant to consider in the context of assessing whether there is truly any dispute about the matters alleged in the proceedings, and relevant to the consideration of whether any potential conflict is hypothetical.

59    The Liquidators submit that, once attention is directed to the relationship between the various companies, their common directing mind being Mr Cassaniti, and their common involvement in an apparent broad-ranging scheme to defraud the revenue, “it is plainly appropriate that there be a common set of appointees to all companies within the broader group”.

60    I accept that the efficiency of having a common set of appointees across the various entities is a relevant consideration. However, the Liquidators’ submissions do not give sufficient significance to the structure of the present proceedings. These are not proceedings brought by the Commonwealth seeking to wind up various companies in a group of companies on the just and equitable ground on the basis that they are participants in a tax fraud scheme, and seeking to trace payments through various entities. Rather, the Liquidators have constituted a proceeding whereby certain entities controlled by the Liquidators are plaintiffs bringing claims for breach of directors’ duties against various individuals and claims for knowing involvement in the breach of directors’ duties against various corporations, as defendants. They have placed companies which they allege were controlled by Mr Cassaniti on both sides of the record.

61    The Liquidators’ submissions emphasise the asset preservation aspect of the appointment of the present provisional liquidators, but somewhat overlook the structure of the proceedings and the need to prove the claims that have been brought. Mr Krejci describes his role as “primarily investigatory in nature”.

62    As the applicants point out, the Liquidators’ submissions assume that they establish the very matters that have yet to be determined on a final basis. The present application cannot be dealt with on the basis that there is unlikely to be any real defence, or that the claims are presumptively valid, or that it is incontrovertible that all of the relevant entities are part of a single group of companies controlled by Mr Cassaniti, whatever might be the prima facie evidence, and whatever might be the failures of the directors of the Relevant Defendants to cooperate with the Liquidators or provide any credible alternative explanation. This is particularly in circumstances where the defendants have yet to provide their version of events.

63    I do not accept that the conflict in the present case is hypothetical. Unlike the position in Westpoint where there was merely the potential for some conflict to arise in the future, there is an immediate conflict in the present case. Put simply, it is in the interests of the defendants that they be found not liable to the plaintiffs, and in the interests of the plaintiffs that they are found so liable.

64    Fourthly, and grappling more directly with the problem, the Liquidators submit that any conflict can be avoided without losing the benefit of the Liquidators’ collective knowledge and experience from the existing provisional liquidations, because the Liquidators will permit the directors to defend any claim against the Relevant Defendants.

65    The relevant paragraph from the Liquidators’ Letter granting permission pursuant to s 198G(3) of the Corporations Act has been set out earlier. It does not, in terms, grant any permission to defend the proceedings generally (as opposed to the winding up of the relevant entities). However, in oral submissions, senior counsel for the Liquidators said that this was a historical artifact and a broader permission was what was now intended. Further, when asked about whether the directors would have access to the company funds in defending the action, Mr Giles SC said:

Well, if it’s the company’s money, then, no doubt, they can do that.

Beyond that, there has been no clarification of the scope of any exception for litigation funding.

66    At a superficial level, this proposed approach has the attraction of resolving the conflict whilst leaving the Liquidators in place as provisional liquidators of, for example, Marginata and Reliance, thereby enabling the continued fulfilment of the functions of asset collection and preservation. It is somewhat analogous to the pragmatic outcome in Hayes.

67    However, in the present case, it is likely that any such approach would give rise to interminable disputes as to what is the proper scope of the defence of the claim, and what is the proper scope of the other activity of the provisional liquidators. Further, the proposal is not in any event a complete solution to the conflict. The present case is not one where there is some distinct aspect which is the subject of a conflict. The entire matter which the Liquidators are considering as provisional liquidators is bound up in the issue of whether Mr Cassaniti and/or Mr Panella have, in respect of monies that should have been used to pay tax, improperly diverted those monies to themselves or to other defendants, including whether those monies have been siphoned from the Relevant Defendants to other entities. In those circumstances, there is no neat distinction between the defence of the proceedings and the provisional liquidation.

68    For example, if the Liquidators, as part of the provisional liquidation of Reliance, were considering the proper characterisation of a payment from a plaintiff entity to Reliance, and the on-payment of those monies to another entity (including for the purposes of determining whether Reliance had a proper claim for recovery against that other entity), Mr Cassaniti might assert that, given that he has carriage of the defence of the proceedings, the proper characterisation of these payments is a matter integral to the defence, and therefore he has the carriage of any analysis of the relevant payments. It is likely that the ongoing conduct of the provisional liquidation would descend into a morass of applications to the Court as to who has carriage of the relevant issues.

69    Fifthly, the Liquidators say that the issue concerning access to documents is a non-issue, because all parties can have access to copies of the documentary record, and that Re Nickel Mines was a case from 1978 concerned with physical documents. The Liquidators also submit that the Court should not give any weight to any issue concerning privilege because it has not been established that there is any document falling into that category.

70    It can be recognised that having access to all documents overcomes the problem identified in Re Nickel Mines of the defendant needing to disclose to the plaintiff what documents the defendant is focussing on for the purposes of the proceedings – i.e. the problem of having to go to the plaintiff for documents to defend the claim. Further, I do not consider that the mere fact that parties on both sides of the proceedings have obtained a library of common documents (or will obtain such a library) – i.e. that the Liquidators have access to more documents than plaintiffs usually would – is sufficiently problematic to justify any change to the identity of the provisional liquidators.

71    In relation to privilege, I do not consider that the question of privilege can just be brushed aside on the basis that no problematic documents have been identified for the purposes of the argument. As noted earlier, there are privilege claims made in respect of documents which the Liquidators will otherwise obtain. However, it would be simple enough to deal with this problem by preventing the Liquidators from having access to these documents until the privilege claims are determined. I would not order replacement on this separate basis.

72    Taking all of the above matters into account, the conflict problems are fundamental and cannot readily be overcome. There should be the appointment of alternative provisional liquidators to Marginata and Reliance.

Position of CAP Accounting

73    As observed earlier, there is no present application brought by CAP Accounting. Mr Sulan accepted that he did not act for that entity. However, it was submitted that I should, of my own motion, harmonise the position of CAP Accounting with the position of Marginata and Reliance, because the same issues arise.

74    I do not consider that the Court should act on its own motion. If there is nobody with a sufficient interest, or a legitimate basis, to bring an application on behalf of CAP Accounting, then that may suggest that there is no practical consequence of the issues otherwise raised. The conflict issue might, in those circumstances, be hypothetical only.

75    In those circumstances, I do not propose to make any order in respect of CAP Accounting.

Position of Accolade

76    The Liquidators submit that the same conclusion should not be reached in relation to the appointment of receivers to Accolade, because the receivers are appointed only to the property of Accolade and are not in the same position as the provisional liquidators of the other entities, including because the entity can defend itself and the receivers are not simply standing in the shoes of Accolade.

77    However, in applying for the appointment of receivers to Accolade, the Liquidators sought and obtained additional investigatory powers. Order 15 of the 19 February Orders appointing the Liquidators as receivers of Accolade included the following:

15.    Mr Keenan and Mr Krejci, as receivers of Accolade, have the power to:

(a)    undertake investigations:

(i)    into whether any transaction of Accolade is a voidable transaction pursuant to Div 2 of Part 5.7B of the [Corporations Act] which could be voidable at the suit of a liquidator, pursuant to s 37A of the Conveyancing Act 1919 (NSW) or its equivalents, or at common law or in equity;

(ii)    in relation to any antecedent transaction, into any breaches of duty owed to the [sic] Accolade, whether under the [Corporations Act], at the suit of a liquidator or otherwise, at common law or in equity, by:

(A)    the directors or officers of Accolade; or

(B)    any other person, including persons otherwise involved in the management and control of Accolade;

(iii)    subject to the outcome of the findings in sub-orders (i) and (ii) above, into the likely range of potential recovery that may be available in a liquidation scenario after giving consideration to the costs of litigation, and to provide an estimate of that likely range of recovery;

…

78    Thus, the Liquidators, as receivers of Accolade, are considering whether there was any breach of duty owed to Accolade by, inter alia, the directors or officers of Accolade, as a result of the matters the subject of the proceedings whilst simultaneously propounding in the proceedings that the actions and knowledge of the same directors and officers of Accolade can be imputed to Accolade such that Accolade is knowingly concerned in the alleged breach of directors’ duties owed to the Relevant Plaintiffs.

79    As noted earlier, Cheeseman J concluded, in general terms, that the plaintiffs had identified and substantiated, for the purposes of the interlocutory application, a reasonable basis for claims against Accolade based on the apparent involvement of Accolade in the transactions about which the plaintiffs complain, and the concomitant need for the assets and records of Accolade to be preserved in circumstances in which Mr Cassaniti appears to be in control of Accolade, such as to support the continuation of interim receivers pursuant to s 1323(3) of the Corporations Act.

80    There is a conflict created by the constitution of the proceedings and the appointment of the Liquidators as the receivers of Accolade with the abovementioned functions and powers. It is not appropriate that an officer of the Court be placed in that position of conflict.

81    In those circumstances, it is appropriate that the Liquidators be replaced as the receivers of Accolade.

The position of the Relevant Trusts

82    As noted earlier, by the 11 March Orders, the Liquidators were appointed as receivers of the Marginata Trust, the Reliance Trust, the RFS Trust, and the ASH Trust.

83    Unlike the position with the Relevant Defendants themselves, there is no necessary conflict in the Liquidators being appointed to the Relevant Trusts and the carrying out of their functions as liquidators of the Relevant Plaintiffs. They do not have the same investigatory function or power in connection with the trusts.

84    However, in circumstances where the Liquidators are being replaced as provisional liquidators of Marginata and Reliance, it makes little sense for the Liquidators to be receivers of the Marginata Trust (the trustee of which is Marginata) or the Reliance Trust and RFS Trust (the trustee of which is Reliance). That is likely to cause administrative difficulties, confusion and additional costs. I will therefore order that the Liquidators be replaced as the receivers of these trusts.

85    The position is different with the ASH Trust, because the Liquidators are not being replaced as provisional liquidators of CAP Accounting.

The making of orders

86    In the period leading up to the interlocutory hearing and during the hearing itself, I indicated that if the Court ordered the replacement of the Liquidators as provisional liquidators or receivers, I would not order that the replacement provisional liquidators or receivers be the persons nominated by Mr Cassaniti. Having regard to the prima facie evidence propounded by the Liquidators as to the control exercise by Mr Cassaniti over the plaintiffs and the defendants (although I emphasise and take into account that I have not yet heard Mr Cassaniti’s version of events), it would be prudent to ensure that any appointment is of a person not nominated by Mr Cassaniti. Further, having regard to the close working relationship that will need to subsist between the Liquidators and the replacement provisional liquidators and receivers, it is sensible that the replacements be persons who the Liquidators are comfortable will be able to work with them efficiently and effectively.

87    At the hearing of the interlocutory application, the Liquidators identified for the first time the identities of potential replacement candidates. The applicants, having had no notice of this, sought time to consider the position. I indicated that if I was otherwise persuaded by the applicants’ application, the parties would have an opportunity to deal with the steps that would be taken for appointments in accordance with the reasons for judgment.

88    Accordingly, the only order I will make is that the parties bring in short minutes of order to give effect to these reasons for judgment. There is an impending case management hearing. At the case management hearing, either the relevant orders can be made or a timetable can be set for the taking of any steps necessary for the resolution of the orders.

Associate:

Dated:    10 September 2025

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