Cussen, in the matter of Arcuri
[2016] FCA 1444
•1 December 2016
FEDERAL COURT OF AUSTRALIA
Cussen, in the matter of Arcuri [2016] FCA 1444
File number: NSD 1812 of 2016 Judge: FLICK J Date of judgment: 1 December 2016 Catchwords: BANKRUPTCY – claim to be entitled to moneys remitted to Commonwealth by trustee – claim made by administrators – declaration made Legislation: Bankruptcy Act 1966 (Cth), ss 254, 254(2A), 254(3)
Corporations Act 2001 (Cth), Pt 5.3A, ss 437A, 437B, 437D
Cases cited: Re Chappell (1968) 12 FLR 497
Gibb v Australian Financial Security Authority [2016] FCA 1264
Date of hearing: 9 November 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 24 Solicitor for the Applicants: Mr S Mattiussi of Russells ORDERS
NSD 1812 of 2016 IN THE MATTER OF SALVATORE ARCURI
NEIL ROBERT CUSSEN AND EZIO MARCO SENATORE IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF BEECHWORTH LAND ESTATES PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 160 808 631)First Applicants
BEECHWORTH LAND ESTATES PTY LTD (ADMINISTRATORS APPOINTED)
Second Applicant
JUDGE:
FLICK J
DATE OF ORDER:
1 DECEMBER 2016
THE COURT DECLARES THAT:
1.Pursuant to s 254(3) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”) the Second Applicant is entitled to moneys paid to the Official Receiver in pursuance of s 254(2A) of the Bankruptcy Act in respect of the estate of Salvatore Arcuri, NSW6430/12/3.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
On 17 October 2016 there was filed in this Court an Application seeking a declaration under s 254(3) of the Bankruptcy Act1966 (Cth) (the “Bankruptcy Act”). The First Applicants are Messrs Neil Cussen and Ezio Senatore, the administrators of Beechworth Land Estates Pty Ltd (the Company). They were appointed administrators in July 2014. The Second Applicant is the Company itself.
There is no respondent to the proceeding.
The declaration which is sought is that the Company is entitled to moneys paid to the Official Receiver in pursuance of s 254(2A) of the Bankruptcy Act in respect of the estate of Mr Salvatore Arcuri.
The matter first came before the Court on Monday 7 November 2016. As a matter of abundant caution, directions were then made for a copy of the Application and the two supporting affidavits to be served upon the Australian Financial Security Authority and the former trustee of the estate of Mr Arcuri. Such service has been effected. A similar course was pursued in Gibb v Australian Financial Security Authority [2016] FCA 1264. The Application was stood over for hearing to Wednesday 9 November 2016.
The declaration should be made.
The Bankruptcy Act
The provision of the Bankruptcy Act which assumes relevance is s 254.
That section provides as follows:
Payment of unclaimed moneys to the Commonwealth
(1) In this section, trustee means:
(a) a trustee of the estate of a bankrupt; or
(aa) the administrator of a debt agreement; or
(b) a trustee of a personal insolvency agreement; or
(c) a trustee of a composition or a scheme of arrangement; or
(d)a trustee of the estate of a deceased person in respect of which an order has been made under Part XI of this Act;
and includes the Official Trustee.
(2) Where a trustee has under his or her control:
(a)any dividends or other moneys that have remained unclaimed for a period exceeding 6 months; or
(b) any moneys that it is proposed not to distribute or pay to any person;
he or she shall forthwith pay those moneys to the Commonwealth.
(2A) Where:
(a)the Court has, after the presentation of a creditor's petition against a debtor, directed the Official Trustee, an Official Receiver or a registered trustee to take control of the property of the debtor;
(b) the petition has been withdrawn or dismissed;
(c)the Official Trustee, Official Receiver or registered trustee, as the case may be, has moneys under its control in pursuance of the direction; and
(d)it is not reasonably practicable to pay those moneys to the person entitled to them;
the Official Trustee, Official Receiver or registered trustee, as the case may be, shall pay those moneys to the Commonwealth.
(3)A person who claims to be entitled to any moneys that have been paid to the Commonwealth by a trustee in pursuance of subsection (2) or (2A) may apply to the Court for an order under this subsection declaring him or her to be so entitled and, if the Court is satisfied that the applicant is entitled to those moneys or a part of those moneys, it may make an order accordingly.
(4)Upon receipt by the Official Receiver of an office copy of an order under subsection (3), the Official Receiver shall pay to the person in whose favour the order was made the amount specified in the order out of moneys lawfully available for the purpose.
Two aspects of this provision assume present relevance.
First, the ambit of the power conferred by s 254(3) is relevantly constrained by two requirements, namely:
·that the person who makes the application is a “person who claims to be entitled to any moneys”; and
·the Court is “satisfied” that that person “is entitled to those moneys or a part of those moneys…”.
Even if the Court is so “satisfied”, s 254(3):
·confers a residual discretion upon the Court as to whether it should make the declaration sought.
Second, a trustee may be a person “who claim[s] to be entitled…” for the purposes of s 254(3): Re Chappell (1968) 12 FLR 497. There in question was whether an official trustee of a bankrupt estate fell within those words. In answering that question in favour of the trustee, Gibbs J (as his Honour then was) concluded:
The words “a person who claims to be entitled to any moneys” seem to me, in their natural sense, wide enough to include a person who claims to be entitled as trustee. There is strong reason for holding that the legislature used those words in ss. 295 (2) and 254 (3) in that wide sense, because, if their meaning were restricted, there would follow the most inconvenient result that neither a trustee nor any other person could obtain undistributed moneys which had been paid into the Consolidated Revenue Fund, not-withstanding that they were required to enable a dividend to be declared and paid.
The payment of moneys in November 2013
The facts giving rise to the present Application need only be set forth in skeletal form.
Those facts start with the Company acquiring a mortgage debt over property held in Beechworth, Victoria. The debt was acquired by the Company in November 2012 for $1.55 million.
Following their appointment as administrators of the Company in July 2014, Messrs Cussen and Senatore commenced an investigation into the affairs of the Company and reported to creditors in August 2014. That report exposed (inter alia) the fact that:
·on 18 November 2013 Mr Salvatore Arcuri was appointed a director of the Company;
·on or around 19 November 2013 Mr Arcuri opened a Westpac Business Cash Reserve Account in the name of the Company;
·on 21 November 2013 the sum of $120,000 was withdrawn from the account and deposited into an account in the name of Mr S Piscopo; and
·on or around 22 November 2013 Mr Arcuri ceased being a director of the Company.
Mr Piscopo is a chartered accountant. He was appointed the Controlling Trustee of Mr Arcuri’s estate in October 2012. In November 2012 a Personal Insolvency Agreement had been executed by Mr Arcuri. A term of that Agreement provided that Mr Arcuri would:
… borrow sufficient funds to make available 20 cents in the dollar to all his unsecured creditors pari passu in addition to paying the Controlling and PIA Trustee’s remuneration and costs and other charges within 12 months of execution of the Personal Insolvency Agreement.
The funds required were not obtained by Mr Arcuri.
Further facts of relevance include the fact that:
·on 20 November 2013 a Deed of Loan was entered into between CMEA Pty Ltd (as trustee for the CMEA Superfund) and the Company, whereby CMEA Pty Ltd lent $250,000 to the Company. That Deed was executed on behalf of CMEA Pty Ltd by Mr James Taylor and by Mr Arcuri;
·on 21 November 2013 the Westpac Business Cash Reserve Account discloses the sum of $250,000 being deposited to that account; and
·the Loan and Payment Ledger for CMEA Pty Ltd discloses an advance payment being made on 22 November 2013 of $250,000; and
·on 8 August 2014 the first report of Messrs Cussen and Senatore to the creditors of the Company discloses CMEA Pty Ltd having lodged a proof of debt as against the Company in the sum of $317,041.
In May 2015 Mr Piscopo advised creditors that he intended to seek a termination of the Personal Insolvency Agreement. That Agreement was terminated later in May 2015.
In June 2015 Mr Piscopo remitted the $120,000 to the Official Receiver pursuant to s 254(2) of the Bankruptcy Act.
The conduct of Mr Arcuri did not escape scrutiny. Criminal proceedings had been initiated against Mr Arcuri by Mr James Taylor. It appears that the New South Wales Police had applied unsuccessfully for an order that the $120,000 be paid into a New South Wales Treasury Account.
The solicitor for the Applicants, Mr Mattiussi, had also in August 2014 sought the agreement of Mr Piscopo not to transfer the $120,000 without advance notice. That request was repeated in May 2015. In May 2015 Mr Mattuissi was seeking that the $120,000 be returned to the Company, subject to the control of the Administrators.
In August 2016 Mr Piscopo confirmed that he no longer held the $120,000 because he had transferred that sum to the Official Receiver.
An entitlement to the moneys?
Messrs Cussen and Senatore maintain that the $120,000:
·appears to be an asset of the Company; and that
·the moneys were remitted to the Official Receiver pursuant to s 254(2).
They further maintain that:
·administrators have important statutory rights and obligations imposed generally by Part 5.3A of the Corporations Act 2001 (Cth), including the control of the company’s business (s 437A); to act as agent of the company (s 437B); and to deal with the company’s property (s 437D); and
·the remitted moneys are capable of being reclaimed by a party with a legitimate claim to them, such as administrators of a company.
These submissions are accepted.
For the purposes of s 254(3), it is concluded that Messrs Cussen and Senatore as administrators are both persons:
·“who claim to be entitled to” those moneys; and
·“entitled to those moneys”.
It is further concluded that:
·the discretion conferred by s 254(3) should be exercised in favour of making the declaration sought in order for the Administrators to account for the moneys in accordance with their statutory obligations.
The “entitlement” to the moneys follows primarily from the following facts:
·Mr Arcuri was appointed as a director of the Company on 18 November 2013;
·the Company borrowed $250,000 on 20 November 2013, with Mr Arcuri executing the Deed of Loan;
·the opening of the Westpac Business Cash Reserve Account on 19 November 2013 in the name of the Company and $250,000 being deposited to that account on 21 November 2013; and
·the proof of debt lodged by CMEA Pty Ltd.
It is inferred that the deposit of the $250,000 was made to facilitate the withdrawal of $120,000. That inference is drawn notwithstanding the fact that the amount of the deposit and withdrawal are not the same and that the proof of debt is for a sum greater than $250,000.
It is noted that the moneys in the hands of the Administrators necessarily have to be dealt with in accordance with law and in accordance with their statutory obligations.
CONCLUSIONS
The declaration as sought should be made.
THE COURT DECLARES THAT:
1.Pursuant to s 254(3) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”) the Second Applicant is entitled to moneys paid to the Official Receiver in pursuance of s 254(2A) of the Bankruptcy Act in respect of the estate of Salvatore Arcuri, NSW6430/12/3.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate:
Dated: 1 December 2016
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