Applications By Benjamin Peter Piggott in the Matter Of the Estate Of Giuseppe Vincenzo Iuliano & Ors

[2012] FMCA 608

FEDERAL MAGISTRATES COURT OF AUSTRALIA

APPLICATIONS BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF GIUSEPPE VINCENZO IULIANO & ORS [2012] FMCA 608

BANKRUPTCY – Extension of time for holding of creditors meeting – power to extend time – exercise of discretion – factors.

Bankruptcy Act 1966 (Cth), ss.33(1)(c), 190(2)(d), 194(1)
Bankruptcy Regulations 1996 (Cth), reg.10.04

Application by Benjamin Peter Piggott [2010] FMCA 23
Application by Glenn Douglas Trinick & Benjamin Peter Piggott in the Matter of the Estate of Robert Charles Atherley [2011] FMCA 481
Application of Melvyn Malcolm Posner [2007] FMCA 610
Council of the New South Wales Bar Association v Eddy & Ors (2006) 151 FCR 34; [2006] FCA 254
Deputy Commissioner of Taxation v Jaskola (2011) 8 ABC(NS) 603; [2011] FMCA 67
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344
Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346
Re Gowing & Anor; Ex parte Deputy Registrar in Bankruptcy (1985) 11 FCR 111

First Applicant: APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF GIUSEPPE VINCENZO IULIANO

File Number: PEG 149 of 2012

Second Applicant: APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF NUNZIO PLACIDO D’ARRIGO

File Number: PEG 150 of 2012

Third Applicant: APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF FILOMENA IULIANO

File Number: PEG 151 of 2012

Fourth Applicant: APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF GIOVANNI IULIANO

File Number: PEG 152 of 2012

Fifth Applicant: APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF PAOLO IULIANO

File Number: PEG 153 of 2012

Sixth Applicant: APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF ELISA IULIANO

File Number: PEG 154 of 2012

Judgment of: Lucev FM

Hearing date: 12 July 2012

Date of Last Submission: 12 July 2012

Delivered at: Perth

Delivered on: 13 July 2012

REPRESENTATION

Counsel for the Applicant: Mr M Robson

Solicitors for the Applicant: Wilson & Atkinson

Counsel for a Creditor (Onesteel Trading Pty Ltd): Mr C Ko

Counsel for a Creditor (Industrial Progress Corporation): Mr S Jackson

ORDERS IN EACH OF THE ABOVE MATTERS:

1. The time for the holding of the Meeting of Creditors pursuant to section 194(1) of the Bankruptcy Act 1966 (Cth) be extended from 13 July 2012 to 5 September 2012.

2. The applicant’s costs and disbursements of this application be expenses on their appointment as controlling trustees of the debtor’s estate.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT PERTH

PEG 149 of 2012

APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF GIUSEPPE VINCENZO IULIANO

First Applicant

PEG 150 of 2012

APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF NUNZIO PLACIDO D’ARRIGO

Second Applicant

PEG 151 of 2012

APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF FILOMENA IULIANO

Third Applicant

PEG 152 of 2012

APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF GIOVANNI IULIANO

Fourth Applicant

PEG 153 of 2012

APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF PAOLO IULIANO

Fifth Applicant

PEG 154 of 2012

APPLICATION BY BENJAMIN PETER PIGGOTT IN THE MATTER OF THE ESTATE OF ELISA IULIANO

Sixth Applicant

REASONS FOR JUDGMENT

1. These are applications under s.33(1)(c) of the Bankruptcy Act 1966 (Cth)[1] to extend the time set by s.194(1) of the Bankruptcy Act in which the controlling trustee of each of the bankrupt estates of:

   a)Giuseppe Vincenzo Iuliano;

   b)Nunzio Placido D’Arrigo;

   c)Filomena Iuliano;

   d)Giovanni Iuliano;

   e)Paolo Iuliano; and

   f)Elisa Iuliano,[2]

   must call a meeting of creditors by 13 July 2012. The applications were heard yesterday. Counsel for two creditors appeared to oppose the applications to extend time.

   [1] “Bankruptcy Act”.

   [2] “Debtors”.

2. In each matter, Mr Piggott, the controlling trustee, has filed an affidavit sworn 4 July 2012,[3] with each affidavit being in essentially the same terms, save for some detail as to the interests of the Debtors in related entities and their trusts, and some differences in relation to the unsecured creditors of each of the Debtors as disclosed in their respective Statements of Affairs.

   [3] “Mr Piggott’s Affidavits”.

3. Mr Piggott’s Affidavits depose to his appointment as controlling trustee of each of the bankrupt estates on 10 June 2012, that is less than five weeks ago, and also to the following:

   a)that there is a requirement to hold a meeting of creditors by 13 July 2012;

   b)that given the number of issues, similar issues for related entities and the complexities caused by actual and possible related party dealings, the controlling trustee requires more time to fulfil his statutory obligations and to investigate relevant issues and complexities concerning the Debtors’ affairs;

   c)those issues and complexities include:

   i)proving the Debtors’ current income, and whether the Debtors are in receipt of any other income or benefits besides those declared;

   ii)ascertaining the reasons that any entity, of which any of the Debtors were directors, failed and whether that failure caused the inability of the Debtors to pay their debts, or whether there were other reasons;

   iii)whether any assets owned by the Debtors exceed the limits permissible for divisible property under the Bankruptcy Act;

   iv)values of the real property and other property in the Debtors’ names and whether there will be any benefit to creditors from their realisation;

   v)bringing the financial statements and taxation returns of the Debtors, and related trusts, up to date to assist in determining their indebtedness to the Australian Taxation Office and other creditors;

   vi)ascertaining the Debtors’ level of superannuation contributions within the last five years;

   vii)reviewing the Debtors’ bank accounts and transactions into and out of those accounts for the six months before his appointment as controlling trustee for each Debtor;

   viii)obtaining and reviewing the report by the Deed Administrator of G&G Steelworks Pty Ltd (Subject to Deed of Company Arrangement)[4] and corresponding with the Deed Administrator to ascertain the likely success of the Deed because G&G Steelworks is the intended source of funds for the Debtors’ proposed Combined Personal Insolvency Agreement;

   ix)calling for and adjudicating on proofs of debts of creditors for the purposes of the report and First Meeting especially those creditors claiming to have debts accruing because of personal guarantees given by the Debtors;

   x)the Debtors’ past and current roles, dealings and flow of funds, and interests in the various related entities and their trusts including:

   [4] “G&G Steelworks”.

Company Name	Status of Entity
G&G Steelworks Pty Ltd	Voluntary Administrator & Receiver
Imperial Asset Pty Ltd	Voluntary Administrator & Receiver
Iuliano Holdings Pty Ltd	Registered
Jetbank Nominees Pty Ltd	Registered
Paramex Holdings Pty Ltd	Registered
D.A.R. Holdings Pty Ltd	Registered
Silkpalm Pty Ltd	Registered
Wingrove Holdings Pty Ltd	Registered
Skysilk Pty Ltd	Registered
Outlook Asset Pty Ltd	Registered

xi)determination of how the Debtors became separately indebted to four family trusts in varying amounts ranging from exceeding $640,000 to exceeding $18,000,000 and how the Debtors’ family trusts came to be in possession of those amounts and whether any offences occurred in the acquisition or disposition of those amounts;

xii)the Debtors’ dealings with and flow of funds between the Debtors;

xiii)the reasons for the Debtors selling or mortgaging their assets and their related entities’ assets, and the effect on unsecured creditors of those sales or mortgages; and

xiv)in view of the intertwined nature of the Debtors’ dealings, the drafting of the report to creditors setting out all matters relevant to whether the Debtors’ proposal is in the interests of creditors is anticipated to take longer than normal;

d)that the combined proposal by the Debtors requires significantly more enquiry and investigation than would normally be the situation for an individual debtor;[5]

e)that more time is required to consider whether the draft Combined Personal Insolvency Agreement is in the interest of creditors, whether it should be revised by the Debtors to better serve the interests of creditors, or alternatively, whether bankruptcy or the ceasing of the controlling trustee’s control of the Debtors’ properties would be better alternatives;[6] and

f)that based on his assessment of his obligations and the enquiries and investigations to be conducted, the creditors meeting cannot reasonably be held until 5 September 2012.

[5] Mr Piggott’s Affidavit, para.20

[6] Mr Piggott’s Affidavit, para.22.

1. In all the circumstances, Mr Piggott, as controlling trustee considers that an additional 10 to 12 weeks is necessary to fully consider all of these issues,[7] but the applications seeks only an additional six and a half weeks.

   [7] Mr Piggott’s Affidavit, para.23

2. It is also worth observing that each of the Debtors has named unsecured creditors, numbering from 16 to 21, and the majority of whom are common to each application, and the total amounts owed to the unsecured creditors by each of the Debtors range from $39,767,500 to $56,242,000, with individual debts to creditors ranging from $2,500 to $27,000,000. There are also some “unascertained” debts. The unsecured creditors include banks, finance companies, financiers, traders and suppliers, lawyers, accountants, the Australian Taxation Office and individuals.

Grounds for extension of time application

1. The grounds for the extension of time application are those set out in Mr Piggott’s Affidavits as summarised above.

Power to extend time

1. The power to extend time for purposes including meeting of creditors under s.194 of the Bankruptcy Act, is a power vested in this Court under s.33(1)(c) of the Bankruptcy Act. That power has been referred to and upheld in Re Gowing; Ex parte Deputy Registrar in Bankruptcy,[8] Application of Melvyn Malcolm Posner[9] and Application by Benjamin Peter Piggott.[10]

   [8] (1985) 11 FCR 111 at 112 and 113 per Beaumont J.

   [9] [2007] FMCA 610 at paras.5-8 per Lucev FM.

   [10] [2010] FMCA 23 at paras.5-6 per Lucev FM (“Piggott”).

2. As Pretoriusv Daltons Carpet Tiles Pty Ltd,[11] Council of the New South Wales Bar Association v Eddy[12] and Piggott make clear, it is only under s.33(1)(c) of the Bankruptcy Act that time for a meeting of creditors under s.194 of the Bankruptcy Act can be validly extended.

   [11] (1984) 1 FCR 346 at 352 and 353 per Smithers, Northrop, and Beaumont JJ.

   [12] (2006) 151 FCR 34 at 39-40 per Edmonds J; [2006] FCA 254 at para.30 per Edmonds J.

Criteria for exercise of discretion

1. In terms of the exercise of the discretion to extend time, no criteria for extending the time for a meeting of creditors under s.194 of the Bankruptcy Act is set out in the Bankruptcy Act.

2. In the Court’s view, it is appropriate to apply principles similar to those ordinarily applied by courts in determining whether to extend time, namely to have regard to:

   a)the fact that relevant time limits ought not be lightly ignored;

   b)the length of the delay and whether there is an acceptable reason for the delay;

   c)the merit of the substantive matter; and

   d)whether there is prejudice suffered by an affected party.[13]

   [13] Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349 per Wilcox J; Deputy Commissioner of Taxation v Jaskola (2011) 8 ABC(NS) 603 at 608 per Lucev FM; [2011] FMCA 67 at para.18 per Lucev FM.

Consideration

1. In this case the relevant time limits have not been ignored. The controlling trustee has made an application in each case prior to the time that the creditors meetings was required to be held, but after (by at least one day) the passing of the time for notice of the date, time and place of the meeting to be given to the Official Receiver, Debtors and any creditors.[14] This Court has previously observed, in relation to this same controlling trustee, that applications made in these circumstances obviously ought not to be encouraged.[15]

   [14] Bankruptcy Regulations 1996 (Cth), reg.10.04.

   [15] Application by Glenn Douglas Trinick & Benjamin Peter Piggott in the Matter of the Estate of Robert Charles Atherley [2011] FMCA 481 at para.10 per Lucev FM (“Atherley”).

2. The difficulty in this matter however has been caused by the fact that the controlling trustee waited for more than three weeks before making the applications to extend time, and by the time that the matters were listed and heard by the Court yesterday, the time for the creditors meeting was one day away. That puts the Court in an invidious position for, as Counsel for the controlling trustee pointed out, if the extension of time is not granted a meeting of creditors will have to be hastily convened, and, in all likelihood, a creditors meeting will be conducted in an unsatisfactory manner, to no-one’s satisfaction, with decisions made on incomplete information, and with the almost seemingly inevitable adjournment of the creditors meeting to another date, and the consequent incurring of additional costs for all involved. Those are good practical reasons to extend time in the current circumstances. It might however have been expected that where there were, at a minimum:

   a)six related Debtors;

   b)at least ten corporations, some inter-related, some with common directors, or directors who are Debtors;

   c)21 disclosed unsecured creditors;

   d)at least four family trusts, again seemingly inter-related;

   e)Debtors owing sums between $640,000 and $18,000,000 to the family trusts;

   f)unsecured creditors owed a minimum of $39,776,500 by the Debtors;

   g)a deed of company arrangement in relation to one of the related corporate entities;

   h)personal guarantees by the Debtors in relation to many of the debts; and

   i)a proposed Combined Personal Insolvency Agreement between all of the Debtors, which provided for the company subject to the deed of company arrangement to pay $500,000,

   that it would not take more than three weeks for the controlling trustee to be able to work out that an extension of time would be necessary in relation to the first creditors meeting, so as to allow proper investigation and inquiries to be conducted.

3. Whilst the controlling trustee has not ignored the relevant time limits, the controlling trustee has not acted in a manner which would necessarily allow those time limits to be complied with. That is a factor which the Court must consider in determining whether to grant an extension of time on the controlling trustee’s applications.

4. Two creditors appeared to oppose the application to extend time. Neither creditor had received sufficient notice of yesterday’s hearing from the controlling trustee, and therefore, neither creditor had filed a notice of appearance or any affidavit evidence. In the circumstances, the Court allowed each creditor to make submissions. In essence, both creditors submitted that there was a significant prior history in relation to the matters generally, and that that included:

   a)the entering into of the deed of company arrangement by G&G Steelworks, the terms of which, in relation to the first payment, had not been met;

   b)the adjournment by a Registrar of this Court of sequestration order applications against the individual Debtors on a number of occasions over a number of months, culminating in their further adjournment as a consequence of the appointment of the controlling trustee;

   c)the inadequacy of the proposed Combined Personal Insolvency Agreement offering $500,000 to be paid by G&G Steelworks, which was subject to a deed of company arrangement, and which had already defaulted on the required first payment; and

   d)that there was nothing more than a campaign of orchestrated delays by the Debtors which was frustrating creditors.

5. It is difficult not to sympathise with the creditors in these circumstances, particularly where the sums involved are significant, as, for example, with the creditor for whom Mr Ko appeared, which is owed $650,000. Nevertheless, the submissions made, quite properly, by the Counsel for both of the creditors, simply highlighted the difficult task confronting the controlling trustee upon his appointment. And, as both creditor’s Counsel quite rightly pointed out, whilst the controlling trustee has not descended into detail in relation to what has and has not been done in relation to the particular investigations and inquiries which are necessary, the Court nevertheless considers that this was never going to be a matter which could be properly prepared for a first creditors meeting within the space of 25 working days. The nature and number of the Debtors, their family trusts, and inter-related corporations, taken together with the size of the debts and number of unsecured creditors, the nature of the property transactions involved in at least one of the Debtors’ cases, and the necessity to finalise taxation arrangements (albeit that the scope of that task was not identified by the controlling trustee), all point to this being such a complex investigation and inquiry process that it is inevitable that a significant extension of time ought to be granted to the controlling trustee. It is not to the point that sequestration order applications against individual Debtors which have been brought by the Deputy Commissioner of Taxation before a Registrar of this Court have been adjourned, nor that there is a deed of company arrangement the terms of which have been defaulted upon by a corporate entity related to the individual Debtors, for those are matters which precede, and are beyond the control of, the controlling trustee, who, once appointed, has independent statutory obligations to comply with under the Bankruptcy Act. Viewed simply and practically this was always a matter in relation to which an extension of time for the first creditors meeting would have been granted by the Court. The fact that the applications to extend time obviously ought to have been made earlier by the controlling trustee does not obviate that inevitable conclusion. There is therefore an acceptable reason for the delay, given the necessity to undertake further and continuing investigations into the various matters set out above, particularly the various companies, related entities and family trusts and their activities. Given that the factors for consideration in relation to an extension of time do not necessarily carry equal weight, this factor alone is probably sufficient to warrant an extension of time being granted.

6. The delay in holding the meeting of creditors is not short, but it is also not undue, given the effect of the facts outlined in support of the applications for an extension of time.

7. There appears to be merit in the substance of the matters being pursued and considered by the controlling trustee. An extension of time will, in the Court’s view, allow the controlling trustee to deal with the Debtors’ property in a manner consistent with the controlling trustee’s statutory obligations, and the overall interests of creditors.[16]

   [16] Bankruptcy Act, s.190(2)(d).

Conclusion and order

1. In the circumstances, the Court considers that it is appropriate to extend time for the holding of the creditors meeting from 13 July 2012 to 5 September 2012, and there will be costs orders accordingly.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Lucev FM

Date:  13 July 2012