Pitcher Partners Andrew Yeo and Gess Rambaldi have extracted a decision from the Federal Court that goes a long way to affirming the insolvency law reforms dealing with causes of action and what insolvency practitioners can do with them.
“The decision hopefully supports the closely related law reforms from September 2017,” Yeo and Rambaldi told Insolvency News Online (INO).
“Prior to the changes, the liquidator would have no power to assign these claims to a third party and the opportunity for creditors to advance claims against the defendants would likely have been lost.
“The decision has shown support for the general approach of the reforms, which applies common sense to the progress of liquidations and bankrupt estates and can only lead to better outcomes for creditors,” the Pitchers pair said.
Yeo and Rambaldi are the trustees of the bankrupt estate of Tom Karas, an alleged money launderer for organised crime figure Horty Mokbel and brother-in-law of controversial Melbourne night club owner Nick Meletsis.
Back in 2011 Meletsis replaced Karas as sole director and shareholder of 70 Nicholson Street Pty Ltd.
At around the same time property associated with the company was sold to a related party and as part of that sale a mortgage Karas held over the property, purportedly to secure a loan he made to the company in 2009, was discharged.
In 2013 the company was wound up on the application of the Commissioner for State Revenue. Hamish Mackinnon of Bent & Cougle was appointed liquidator.
As Mackinnon was unfunded not much happened and in October 2015 Karas declared bankruptcy on his own petition with Stephen Dixon, formerly of Grant Thornton, and Nick Mellos appointed as his trustees.
For reasons we have yet to uncover Dixon and Mellos were replaced by Yeo and Rambaldi within four months and the Pitchers pair soon formed the view that the dealings around the sale of the property required further investigation to confirm no money was owing to the bankrupt’s estate.
By July 2016 Mackinnon had delivered company documents relating to the property sale to the trustees along with a note advising them that he intended to finalise the liquidation because he had no funds.
Those documents led the trustees to obtain further material from Karas’s former lawyers and, funded by the Deputy Commissioner of Taxation (DCoT), they conducted examinations of Karas, Meletsis and associate Howard Speer.
By mid-2017 Yeo and Rambaldi had formed the view, based on their investigations and their legal advice, that 70 Nicholson Street Pty Ltd had causes of action against various related parties and that as a result of property dealings undertaken prior to liquidation, the company owed the bankrupt estate at least $1.1 million.
They offered Mackinnon $25,000 to assign the causes of action over to the trustees and after the liquidator obtained approval from 70 Nicholson Street’s creditors a deed of assignment was executed between the liquidator and the trustees in September 2017.
Helpfully for Yeo and Rambaldi, the DCoT agreed to indemnify them for the $25,000 so in effect they acquired the assets at no cost to the bankrupt’s creditors, save for the ATO.
The various parties associated with the property transactions then challenged the assignment of the claims on the basis that the claims couldn’t be held to be property of the bankrupt estate.
For their part Yeo and Rambaldi sought confirmation from the court that they had the power to acquire the claims and that the deed of assignment was enforceable.
On August 1, they won.