Dec 152014
 

Registered liquidators are aware that they are prohibited by law from giving, or agreeing or offering to give, someone valuable consideration with a view to securing their own appointment or nomination as a liquidator or an administrator of a company, or an administrator of a deed of company arrangement (section 595 of the Corporations Act 2001).

But I wonder how many of them would be aware that giving an assurance of support for a proposed Deed of Company Arrangement may be an inducement under section 595.

The Chief Justice of the South Australian Supreme Court, Chief Justice Kourakis, took this view in his judgment in the case of Viscariello v Macks [2014] SASC 189, handed down on 9 December 2014.

Mr John Viscariello, a company director, alleged that registered liquidator Mr Peter Macks, administrator of two of Mr Viscariello’s companies, wrongfully failed to negotiate and put in place a Deed of Company Arrangement which would have allowed the companies to continue to trade under a changed ownership structure.

There were several other matters adjudicated upon in this case, and in a sense the allegation that the administrator had given an undertaking to the director that he would support a certain Deed of Company Arrangement (DOCA) became secondary.

But the comments by Chief Justice Kourakis are intriguing.

Chief Justice Kourakis

Chief Justice Kourakis

Mr Viscariello alleged that Mr Macks made certain representations to him and Mr Fred Bart (a businessman and entrepreneur who was a prospective purchaser of the company’s business) in a meeting in November 2001 to the effect that if he (Macks) were appointed as administrator, he would cause the company to enter into a deed of company arrangement reflecting the terms in a Heads of Agreement document, refered to by His Honour as “the proposed Bart DOCA”.

His Honour said:

“I find it unlikely that Mr Macks would have given an unqualified assurance that he would support the proposed Bart DOCA in breach of his duty to investigate the financial circumstances of the Companies and provide opinions to creditors.” [Para 122 of judgment]
….
“It is inherently improbable that he would have made the unqualified representations pleaded by Mr Viscariello.”[Para.125]
….
“If the pleaded representations were made and an agreement or understanding reached to that effect, Mr Macks would have breached s 595 of the Corporations Act and both Mr Bart and Mr Viscariello would have procured him to do so.” [Para.128]
….
“It would be contrary to the public interest to allow Mr Viscariello to recover damages for a misrepresentation which arises out of a failure to give effect to an unlawful arrangement.
(Footnote 76) With respect to the false and misleading conduct alleged against Mr Macks in respect of the 27 November meeting with Mr Viscariello and Mr Bart, I reject Mr Viscariello’s evidence that Mr Macks gave an assurance that he would ensure that the Companies would enter into the Bart DOCA.” [para. 130](Emphasis added)

Footnote 76: Yango Pastoral Co Pty Ltd v First Chicago (Australia) Limited (1978) 139 CLR 410; Brownbill v Kenworth Trucks Sales (NSW) Pty Ltd (1982) 39 ALR 191; Alexander v Rayson [1936] 1 KB 169; McCarthy Rose (Milk Vendors) Pty Ltd v Dairy Farmers Coop Milk Co Ltd (1945) 45 SR(NSW) 266; Mason v Clarke [1955] AC 778.

Click here for pdf copy of judgment by Chief Justice Kourakis on 9 December 2014: Judgment in Viscariello v Macks [2014] SASC 18

Mystery of ION Ltd $13 million income tax refund continues despite massive report

 Tax debts, Tax liabilities, Taxation Issues  Comments Off on Mystery of ION Ltd $13 million income tax refund continues despite massive report
Oct 212010
 

The insolvency administrators’ 200 page report on ION Limited and subsidiaries (20/10/10) does not mention the once-anticipated income tax refund of $13 million.

So the mystery – described in my article “Insolvency administration income tax refund held up” – continues.

But then a tax dispute over $13 million could be regarded by some as trivial, compared with the momentous and complex issues addressed in the Deed Administrators’ report.  The report deals with ION Limited and its 17 subsidiary companies.  It was produced after the Deed Administrators had received from shareholders “numerous allegations of misconduct by ION”, and after the Deed Administrators obtained directions/permission regarding the report from the Federal Court of Australia.

The report’s main purpose is described in its introduction:

“In this Report we set out details of the work that has been done to date in relation to shareholder claims and the steps which remain to be taken to enable the Deed Administrators to determine these claims and to distribute funds to creditors. “

The present position in the administrations is summarised as follows:

“Since the initial appointment of the Administrators and the appointment of the Deed Administrators on 27 May 2005, the realisation of ION’s  businesses and assets has been completed. The review of proofs of debt lodged by suppliers of goods and services and by financiers has largely been completed with only a small number of complex claims still in dispute. The only matter of significance still to be concluded is the adjudication of proofs of debt lodged (or to be lodged) by shareholders.”

A taste of the report’s contents can be seen in the main headings in its Table of Contents, namely:

PART A – UPDATE AND WAY FORWARD

1. Introduction
2. Executive Summary
3. The Fund
4. Who can share in the Fund
5. Calling for and lodgement of Proofs of Debt or Claim
6. Estimated Return to Creditors
7. Updates to Creditors and Creditors’ Committee meetings
8. Purpose of Report
9. The Way Forward
 

PART B – OVERVIEW OF RESULTS OF INVESTIGATIONS

10. Overview of ION Group
11. Overview of Forensic Investigation Process
12. Factual Overview
13. ION’s disclosures regarding Financial Outlook
14. Consequences if tru position disclosed
15. Potentially Actionable Disclosures and Non-Disclosures

PART C – DETAILED RESULTS OF INVESTIGATIONS

16. Introduction
17. Financial Controls
18. Albury
19. Altona
20. Wingfield
21. North Plympton
22. Auckland
23. Kentucky
24. Energy Services
25. ION’s disclosures regarding Financial Outlook
Annexure 1. Pooled and Non-Pooled Entities.

For the full report go to http://www.ionlimited.com and click on the link to ION Report to Creditors 20 October 2010. For a short version click on the link to Creditor information.

Enjoy the read!

Any information on what happened to the expected income tax refund would be gratefully received.

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