The Federal Court has ruled that Vincents partner Peter Dinoris failed in his duties by not contacting the director who appointed him voluntary liquidator of her company, despite the director transferring $236,500 from the company’s bank account just days prior to his appointment.
In a judgment handed down last week, Federal Court Judge John Reeves found that “Mr Dinoris contravened s 180(1) of the Corporations Act by failing to discharge his duties as the liquidator of Asden Developments with the degree of care and diligence of a reasonably competent liquidator.
“In reaching this conclusion, I have been careful to assess Mr Dinoris’ conduct by reference to the circumstances that applied at the time and not with the benefit of hindsight.
“I have also considered whether his conduct constituted a mistake or error of judgment rather than a breach of duty. In all the circumstances ……… I consider it was sufficiently deficient to constitute the latter and not the former,” Justice Reeves said.
However he stopped short of ruling that those breaches caused the company damages, a finding that would’ve disappointed Asden’s current liquidator and applicant, David Clout.
In an email sent to SiN yesterday afternoon, Dinoris said he was awaiting advice from his lawyers before deciding whether to appeal. “My lawyers and I are currently reviewing the decision,” Dinoris who is on annual leave said. “Once I receive advice from my lawyers I will further consider the available options.”
Dinoris’s colleague Nick Combis, who was jointly appointed to Asden, drew SiN’s attention to the judge’s conclusion in relation to his involvement. “Curiously he is not mentioned in the issues template and he was not the subject of any submissions by either party,” the judge said.
“This despite the fact …… that Mr Dinoris and Mr Combis were jointly and severally appointed as the liquidators of Asden and most of the allegations in Asden’s amended statement of claim are pleaded against both respondents, that is Mr Dinoris and Mr Combis.
“Nonetheless, there is no evidence that Mr Combis had any direct involvement in any of the events described. That being so and unassisted by submissions, I do not therefore consider I can make any finding of a contravention against Mr Combis.”
The sorry tale began for Dinoris on December 15, 2010 when he was contacted by Peter Levis of Slater Byrne Recoveries. Levis said he had a client, Asden’s sole director Melinda Jayne Nichols, who might need to appoint a liquidator. He told Dinoris that Nichols was under duress due to Family Court proceedings brought on by ex-husband Phillip Nichols and a dispute with her ex-husband’s family who had been Asden’s financial backers.
In his affidavit Dinoris said that that Levis told him: “… he (Levis) would be the point of contact between me and the director, Melinda Nichols, as she was under a lot of pressure and stress by reason of a family dispute.”
“I was not provided with the telephone number or email address of the director by Mr Levis as he wanted the communications directly through him,” Dinoris said. “Without a telephone number I was not able to contact the director by telephone.”
But Levis’s request that Dinoris deal directly with him was not the only reason he did not contact Melinda Nichols. Dinoris deposed that early on in the liquidation, he suspected she was not the prime controller of Asden. “There was evidence that Phillip Nichols was, despite his bankruptcy, dealing with creditors and entering into transactions on behalf of the Company,” Dinoris said. Whatever that evidence was, it was not tested in these proceedings and SiN makes no suggestion of wrongdoing on the part of Philip Nichols.
Dinoris also deposed that he thought in the early stages that there was a real possibility that Melinda Nichols had executed the funds transfer herself and that he was not prepared to unquestioningly accept what Levis was telling him.
“…. though I held reservations about what I was being told by Mr Levis, there was at that stage no, or no sufficient evidence available to challenge the veracity of what I was being told by Mr Levis as it was, at that stage, unclear as to where the funds had gone,” Dinoris said. However he also said that Levis had told him that the funds were not received by Melinda Nichols personally and that Mr Dinoris should further investigate their withdrawal.
Like Melinda Nichols, Levis was ultimately joined to related proceedings and on July 22, 2013 declared bankruptcy via debtor’s petition. He declined to comment about the term of his bankruptcy but the National Personal Insolvency Index (NPII) shows that Peter John Levis, 47 of Runaway Bay, Queensland remains an undischarged bankrupt, though the usual three year term is set to expire in 10 days. A call to Levis’s trustee, Bill Robson, was not returned prior to publication.
Another aspect that Dinoris said influenced his decision to refrain from contacting Melinda Nichols was her ex-husband’s family. The court heard evidence that the Nichols family believed all assets of Asden vested with the family via constructive trust and that it would file an injunction if Dinoris attempted to investigate and recover the monies. Lacking sufficient funds to defend the injunction was another reason why he did not to contact the director, Dinoris submitted.
None of these excuses were acceptable to Clout. In his statement of claim he argued that, “it was inexcusable for Mr Dinoris not to contact Ms Nichols personally when it was, or should have been, clear to any reasonably competent liquidator that she had “cleaned out” the bank account the day before the liquidation commenced.”
Proving you can never have enough points of view in a fight between liquidators, two other insolvency practitioners made significant cameos in this saga as independent experts. Dinoris had David Stimpson of SV Partners Insolvency (Qld) in his corner while BDO partner Matthew Joiner appeared for Clout.
Clout did not respond to requests for comment prior to publication and while Justice Reeves tended to favour Joiner’s opinion, it didn’t lead to an award for damages. The judge determined that Dinoris’s contraventions were not such as to cause the company damage. Costs of course, are a different matter. And the lesson if there is one? Always make the call.
The judgement can be read in full at: Asden Developments Pty Ltd (in liq) v Dinoris (No 3)  FCA 788.