Straw director fooled them all, including himself

It all started when lawyer Thomas Russell sent an email on July 2, 2019 to then Jirsch Sutherland partner Sule Arnautovic.

Russell wanted to set up a time to discuss a potential VA appointment. He told Arnautovic he acted for Florian Heymans, the sole director of two companies operating under the Robust Construction Services Pty Ltd banner.

“…….. he had no recollection of the occasion on which the administrators were appointed to the Companies, that he had taken no steps to put the Companies into administration, and that he first became aware that the companies had gone into administration when “Jim” had asked him to go and see the lawyers or the liquidators in about July 2019”. Justice Kate Williams.

Following a further exchange of emails to which Heymans was copied in a meeting was set for July 4.

Arnautovic agreed to bring draft appointment documents and requested that the director bring the aged payables lists, receivables lists, year to date profit and loss reports, year to date balance sheets, and the ATO Portal/Running Balance Account statement for both companies.

But as NSW Supreme Court judge Kate Williams states In the matter of Robust Construction Services Pty Ltd (in liquidation) and Robust Construction Services 2 Pty Ltd (in liquidation) [2023] NSWSC 1156 the only document Arnautovic came away with was a copy of Heymans’ driver’s license.

What the judgment doesn’t declare but Arnautovic and Devine’s DIRRI does is that also attending the meeting were Arnautovic’s former colleague from Jirsch Sutherland Sam Henderson (since deceased) and the companies’ book keeper, Humberto “Jim” Cravero.

Henderson attended on the basis of his role as director of NPC Consulting & Advisory Pty Ltd and Spartan Specialised Labour & Equipment Pty Ltd, two companies Heymans identified as being creditors of Robust and Robust 2.

Following the meeting Arnautovic emailed Russell on the same day to advise that he and Jirsch colleague Trent Devine “hold signed appointment documents in escrow from Andrew Heymans. These documents to only be activated when you advise us to do so on behalf of Andrew Heymans.”

There were other conditions, including that Heymans tip in $50,000 to cover initial fees and expenses for each company but on July 11 the deal was sealed after Arnautovic received from Heymans’ email address copies of the resolutions for each company and a document confirming his and Devine’s appointments as administrators.

Each document was purportedly signed by Heymans and it seems was sufficient for Arnautovic and Devine to consider themselves validly appointed.

The appointments however galvanised not only the administrators into action. The Australian Tax Office (ATO) was the companies’ largest creditor, and at the second meeting on August 16 its representative Daniel McKnoulty alleged that Henderson was acting as a shadow director and declared the ATO surprised that Arnautovic and Devine had accepted the appointment.

When the meeting concluded both Robust entities had been wound up and the ATO’s preferred nominees, Phil Campbell-Wilson and John McInerney of Grant Thornton had been appointed liquidators.

Then they got busy, investigating the companies’ affairs and preparing for public examinations.

The liquidators were acutely interested in a deed of settlement Robust 1 entered into with Titan Cranes & Rigging Pty Ltd, and identified a number of avenues for recovery based on suspected voidable transactions.

They expected their efforts would be supported by information gleaned from public examinations, and that’s when Campbell-Wilson and McInerney missed an important though not one her honour deemed fatal.

Under questioning at his examination on December 7, 2020 Heymans told the liquidators that “Titan Cranes had paid him the sum of $1,000 per month for acting as the director of the Companies, that he had never made any decisions in his capacity as a director of either of the Companies, that he had never authorised either of the Companies entering into any agreement or transaction, that he had no recollection of the occasion on which the administrators were appointed to the Companies, that he had taken no steps to put the Companies into administration, and that he first became aware that the companies had gone into administration when “Jim” had asked him to go and see the lawyers or the liquidators in about July 2019. Mr Heymans gave evidence that he did not know who had taken the necessary steps to put the Companies into administration.”

At this juncture alarm bells should have rung for Campbell-Wilson and McInerney and it would have been with hindsight prudent to seek a declaration from the court that their predecessors’ appointments as VAs were valid and so their appointments as liquidators were also valid.

They didn’t and the possibility that they were operating without authority in respect of the companies’ affairs only occurred after they commenced proceedings on behalf of Robust 1 against Titan Cranes & Rigging seeking to have the settlement declared void and unenforceable, an action which prompted the following correspondence from Titan’s lawyers on May 24 of this year.

“If it is true that Mr Heymans did not appoint administrators to [Robust 1], it follows that the former administrators were not validly appointed, the second meeting of creditors of [Robust 1] was never validly convened and that [the liquidators] were never validly appointed as liquidators. It would also follow that [the liquidators] do not have standing to bring the Proceedings nor authority to cause [Robust 1] to bring the Proceedings.”

One can imagine the flurry of communications which would have followed and which led to the filing of an interlocutory application on September 4, 2023 seeking declarations that the former administrators and thus the liquidators had been validly appointed.

Fortunately for McInerney and Campbell-Wilson, Justice Williams found in their favour and creditors didn’t insist that they bear the costs of the application, maybe because the straw director had fooled them too?

Further reading:

ATO Replaces VAs As IP Succumbs To Sequestration

Bankrupt IP’s Affairs Yield Issues Of Interest

Ex-Jirsch director examined over curious settlement