Calabretta v Redpen Developments Pty Limited

Federal Court of Australia|2010-02-17|Before: Yates J

Counsel for the Applicant: Mr M J Dawson (on 4 November 2009) and Mr A W Smith (on 8 February 2010)

Solicitors for the Applicant: Levitt Robinson Solicitors (until 27 January 2010)

IN THE MATTER OF REDPEN DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) acn 113 687 666 BETWEEN DEPUTY COMMISSIONER OF TAXATION

REDPEN DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) ACN 113 687 666

The matter be adjourned to a date to be fixed for the purpose of making orders in accordance with these reasons.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE MATTER OF REDPEN DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) acn 113 687 666 BETWEEN DEPUTY COMMISSIONER OF TAXATION

AND REDPEN DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) ACN 113 687 666

REDPEN DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) ACN 113 687 666

REASONS FOR JUDGMENT 1 By Amended Interlocutory Process dated 9 December 2009 the applicant, Domenic Calabretta, seeks an order pursuant to s 447C(2) of the Corporations Act 2001 (Cth) (the Act) declaring whether or not his purported appointment as administrator of the defendant was valid. Mr Calabretta seeks this relief because his appointment was based on a resolution of the apparent sole director of the defendant, Santo Bartolotti, who, unbeknown to Mr Calabretta at the time, was an undischarged bankrupt and thus disqualified from managing corporations by operation of s 206B(3) of the Act. The effect of disqualification is that, absent permission, a person ceases to be a director, alternate director or secretary of a company: s 206A(2). Mr Bartolotti had no such permission. Therefore, he was not a director of the defendant at the time the resolution was purportedly passed. No other matter was brought forward as impugning Mr Calabretta's appointment as administrator. 2 If it be declared that his appointment was not valid (an outcome that was not resisted but was propounded by the applicant), Mr Calabretta seeks an order pursuant to s 447A(1) of the Act to the effect that Part 5.3A of the Act is to operate in relation to the defendant as if he, Mr Calabretta, had been validly appointed on 1 October 2009 on the basis of a valid resolution. 3 Appearances have been made by the Deputy Commissioner of Taxation (the plaintiff in the principal hearing on whose application the defendant was wound up by order of this Court on 30 October 2009) and Steven Nicols, the liquidator of the defendant. The Deputy Commissioner of Taxation did not oppose the relief sought by Mr Calabretta. Mr Nicols appeared at the hearing on 4 November 2009 but not at the hearing on 8 February 2010. He did advise in writing, however, that he had read the written submissions prepared by Mr Smith who appeared as counsel for Mr Calabretta and advanced those submissions on Mr Calabretta's behalf on 8 February 2010. Mr Nicols advised that he had nothing to add to those submissions, save that the costs of the application should not be payable out of the assets of the defendant and thus, in effect, borne by the creditors. Leaving aside the question of costs, I have taken Mr Nicols' present position to be that he does not dispute the factual and legal submissions advanced on Mr Calabretta's behalf, at least in their written form. 4 On 30 October 2009 the receivers and managers of the defendant, Justin Walsh and Richard Dennis, advised in writing through their solicitors that they did not propose to be heard in relation to the application. The receivers and managers had been appointed on 7 October 2009 by Suncorp-Metway Limited, a secured creditor of the defendant. 5 On 3 November 2009 the Australian Securities and Investments Commission (ASIC) advised in writing that it did not propose to intervene or seek leave to appear in respect of the application. 6 The defendant's creditors have been notified of the hearing of the application. No creditor has sought to appear. No creditor has sought to oppose the application. 7 I am of the view that, on the basis of the submissions that have been made, Mr Calabretta's appointment as administrator of the defendant was not valid. I am also of the view that an order should be made pursuant to s 447A(1) of the Act that Part 5.3A of the Act is to operate in relation to the defendant as if Mr Calabretta had been validly appointed as administrator by the defendant pursuant to s 436A(1) of the Act on 1 October 2009. However, the costs of the application should not be paid out of the assets of the company. 8 I wish to hear the parties further on the precise form of the orders to be made including, if necessary, the appropriate form of the order as to costs.

BACKGROUND FACTS 9 The evidence adduced in support of the application was not disputed. 10 Mr Calabretta is a registered liquidator and an official liquidator. He is a partner in the firm of chartered accountants called Hall Chadwick. 11 On 1 October 2009 the defendant, by writing, purported to appoint Mr Calabretta as administrator of the defendant pursuant to a resolution made that day by the board of the defendant constituted by its sole director, Mr Bartolotti. The purported appointment was made pursuant to s 436A(1) of the Act. 12 Section 436A(1) of the Act provides as follows: A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that: (a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some time in the future; and (b) an administrator of the company should be appointed. 13 Mr Calabretta had been approached to act as administrator by Guy Castellino on the evening of 1 October 2009. There is some evidence that Mr Castellino was, at that time, the general manager of the defendant. Mr Castellino also seems to have been a former director of the defendant. The approach was by telephone call. Mr Calabretta was not in his office. He signified his provisional consent to the appointment. At the time he did not have access to a computer to undertake a company search or a conflict search. Previously, however, on 18 August 2009, Mr Calabretta had participated in a meeting with representatives of the defendant, including Mr Castellino, to discuss the possible preparation by his firm of a solvency report to be used in the principal proceeding commenced by the Deputy Commissioner of Taxation to wind up the defendant. In the events which happened, Mr Calabretta's firm was not engaged by the defendant to prepare a solvency report. This earlier contact, however, was sufficient to enable Mr Calabretta to form a provisional view, on the evening of 1 October 2009, that his acceptance of the appointment would involve no conflict of interest. 14 On the morning of 2 October 2009 Mr Calabretta asked his staff to complete a conflict search and to obtain a company search, with respect to the defendant, from the publicly-accessible ASCOT database maintained by ASIC. The search showed Mr Bartolotti to be the sole and current director of the defendant. A search of the ASCOT database was also conducted with respect to Mr Bartolotti. The search showed Mr Bartolotti to be a current director of the defendant. 15 Mr Calabretta's evidence was that, after conducting all company, director and conflict searches, he completed and executed a consent to act as voluntary administrator of the defendant. No point was taken at the hearing about the fact that this written consent was given on 2 October 2009, plainly after the purported appointment by the defendant of Mr Calabretta as administrator: see s 448A of the Act. This may itself be a ground for impugning Mr Calabretta's appointment: Gould v Companies Auditors and Liquidators Disciplinary Board (2009) 71 ACSR 648. However, as the point was not taken by any interested party, and as no submissions have been made in relation to it, I will simply note that it may have constituted an independent ground for holding that the appointment was not valid. 16 On 6 October 2009 Mr Calabretta issued a Report to Creditors and convened a first meeting of creditors, as an administrator is required to do by s 439A of the Act. The meeting was held at the offices of Hall Chadwick on 14 October 2009. After the meeting Mr Calabretta had a conversation with Mr Castellino (who had attended the meeting) in which Mr Calabretta raised the issue of possible insolvent trading by directors. He inquired of Mr Bartolotti's financial position. Mr Castellino informed Mr Calabretta that "Santo has no money and he recently filed for bankruptcy". Mr Calabretta gave this evidence: I said: "When did he file for bankruptcy?" He said: "Last week, I think." I said: "Guy, this is really important. Did he file for bankruptcy before he appointed me to Redpen." He said: "No. It was definitely after your appointment." I said: "Ok." 17 Mr Calabretta said that he made a note to conduct a bankruptcy search against Mr Bartolotti so that the date of bankruptcy could be recorded in Mr Calabretta's Second Report to Creditors. I infer that Mr Calabretta accepted the accuracy of what he had been told by Mr Castellino concerning the timing of Mr Bartolotti's bankruptcy. 18 On 28 October 2010 a member of Mr Calabretta's staff undertook a search of the National Personal Insolvency Index (NPII) in respect of current and former directors of the defendant. The search showed that Mr Bartolotti was an undischarged bankrupt who had been made bankrupt on 7 August 2009 following the presentation of his own petition. 19 Mr Calabretta says that the result of this search was the first knowledge he had that Mr Bartolotti had become a bankrupt with effect from 7 August 2009. 20 On 29 October 2009 Mr Calabretta issued his Second Report to Creditors. In that report he disclosed Mr Bartolotti's bankruptcy and his discovery of the possible defect in his appointment as administrator. He gave notice of his intention to make the present application. He also recommended that it was in the creditors' interests for the defendant to be wound up. 21 The evidence shows that on 22 April 2002 ASIC and Insolvency and Trustee Service Australia (ITSA) entered into a Memorandum of Understanding which provided for data-matching between the ASCOT database and the NPII database, with ASIC as the matching agency. Under this arrangement ITSA contributes data relating to (amongst other things) undischarged bankrupts. On a weekly basis ASIC downloads from ITSA an NPII update file that includes details of new bankrupt persons and updates with respect to (amongst other things) existing bankruptcies. After this data has been screened, an automated matching report is generated each week by ASIC. The matching report identifies those persons who are recorded on ASCOT as being current office holders and whose ASCOT data matches the NPII data with respect to certain personal details. All matching reports are manually verified for data quality assurance. The evidence indicates that any administrative action to be taken by ASIC will be taken no later than 90 days after the matching process has been completed. Such administrative action may include ASIC updating its corporate register to show that a person has, in accordance with s 206A(2) of the Act, ceased to be an office holder of the company. Plainly enough, there is a time-delay between data-matching and any administrative action that ASIC eventually may take with respect to a particular office holder of a company. 22 A search of the ASCOT database conducted on 5 February 2010 with respect to the defendant showed that Mr Bartolotti ceased to be a director on 7 August 2009. As I have previously noted, the searches that Mr Calabretta caused to be carried out on 2 October 2009 showed Mr Bartolotti to be the sole and current director of the defendant. It was submitted on behalf of Mr Calabretta that the entry shown on the search conducted on 5 February 2010 was consistent with administrative action having been taken by ASIC as a result of the process I have described, as opposed to voluntary action having been taken by Mr Bartolotti or by any other person acting on behalf of the defendant. I accept that submission. 23 Mr Calabretta gave evidence that it has always been his practice to undertake a company search when appointed as an external administrator to a company. He does not undertake an NPII search but relies on ASIC searches to correctly identify the directors and any person who has been disqualified as a director of a company. He gave evidence that he has been working in (what he called) the "insolvency industry" for nine years and that he regularly participates in and attends training sessions run by various organisations, including the Insolvency Practitioners Association of Australia (IPAA) and insolvency firms, about the practice and management of insolvency appointments. He is currently a full member of the IPAA. He has worked for other liquidators. He gave evidence that he has never known anyone to obtain, at the time of being appointed an administrator, a NPII search for each director of a company. He gave evidence that he does not recall being told that to obtain such a search was "industry practice", or that such a search was required by law or otherwise considered to be best practice. He expressed his belief that it is widely accepted in the "insolvency industry" that an insolvency practitioner will rely on an ASIC company search to identify the current directors and whether any directors are bankrupt or otherwise disqualified from acting as directors. 24 There was no challenge to this evidence. I accept it as evidence of the general and usual practice of insolvency practitioners in the position of Mr Calabretta at the time of his purported appointment as administrator of the defendant. 25 The evidence shows that no monies were received or recovered by Mr Calabretta as administrator of the defendant in the period 1 October to 30 October 2009, although costs were incurred by him.

STANDING 26 Section 447C(1) of the Act makes plain that Mr Calabretta has standing to seek an order declaring whether or not his appointment was valid. I am also satisfied that he has standing to seek the consequential relief to which I have referred. Section 447A(4)(f) of the Act provides that an order can be made under s 447A(1) on the application of "any other interested person". In Re Pasdonnay Pty Ltd (ACN 009 131 622) (Administrators Appointed); McDonald & Anor (2005) 53 ACSR 717 Gyles J at [17] held that invalidly appointed administrators who have acted on the basis of the appointment are interested persons within the meaning of s 447A(4)(f). Mr Calabretta is such a person.

THE CONSEQUENCES OF MR BARTOLOTTI'S BANKRUPTCY 27 It has been submitted on behalf of Mr Calabretta that, as Mr Bartolotti was an undischarged bankrupt at the time of Mr Calabretta's appointment as administrator of the defendant, Mr Calabretta's appointment was invalid and cannot be validated by s 201M of the Act. 28 No contradictor has come forward to argue against this submission. In the absence of an effective contradictor, and having regard to the considerations to which I now refer, the submission should be accepted. 29 As I have noted, a person is disqualified from managing corporations if the person is an undischarged bankrupt: s 206B(3). A person ceases to be a director, alternate director or a secretary of the company if the person becomes disqualified from managing corporations under Part 2D.6 of the Act and is not given permission to manage the corporation: s 206A(2). 30 The relevant effect of the Official Receiver accepting on 7 August 2009 the debtor's petition presented by Mr Bartolotti was that Mr Bartolotti became a bankrupt on that date: ss 55(4A) and 57ABankruptcy Act 1966 (Cth). The cumulative effect of s 206B(3) and s 206A(2) was that, by operation of the Act, Mr Bartolotti ceased to be a director of the defendant on 7 August 2009. Thereafter no application for permission to manage a corporation was made by him. As he was not a director of the defendant on 1 October 2009 he could not have passed a resolution that would enliven the operation of s 436A of the Act pursuant to which the defendant purported to appoint Mr Calabretta. It follows that Mr Calabretta's appointment was not valid. 31 Moreover, in the absence of argument to the contrary, I am not persuaded that s 201M operates to render effective Mr Bartolotti's act of purportedly passing the resolution. Section 201M(1) provides: An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Act. 32 Section 201M(1) is qualified, relevantly, by the requirement that, at the time of the impugned act, the appointment, or the continuance of the appointment, of the director was invalid because the company or the director failed to comply with the company's constitution or a provision of the Act. However, in the present case, the effect of Mr Bartolotti's bankruptcy was that, by operation of the Act itself, and without more, Mr Bartolotti immediately ceased to be a director of the defendant at the commencement of his bankruptcy on 7 August 2009. The problem for Mr Calabretta was that, as at 1 October 2009, that fact could not be ascertained by search of the ASCOT database. The case does not present itself as one involving the act of a director whose appointment or continuing appointment was invalid at the relevant time because the company or the director did not comply with the company's constitution or a provision of the Act. For an example of such a case, see Re Colorbus Pty Ltd (in liq); Mentha and Another v Colorbus Pty Ltd (in liq) and Another (2004) 213 ALR 789 at [21]-[22]. 33 I am of the view that it is appropriate in the circumstances to make an order declaring that Mr Calabretta's purported appointment as administrator of the defendant was not valid because the resolution on which his purported appointment was based was not a valid resolution of the board of directors of the defendant.

RELIEF PURSUANT TO S 447A(1) OF THE ACT 34 Section 447A(1) provides as follows: The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. 35 In Australasian Memory Pty Limited and Another v Brien and Another (2000) 200 CLR 270 at [17] the High Court made a number of observations concerning the width of the power conferred by s 447A(1). The High Court noted that there is nothing on the face of the provision which suggests that it should be read down. The High Court further noted that the words of the provision are wide enough to confer power to make orders which will have effect in the future but which are occasioned by something that has been done or not done under Part 5.3A before an application is made under s 447A(1). 36 Section 447A(1) has been used on a number of occasions to overcome a deficiency in the appointment of an administrator, including where a resolution founding the appointment of an administrator was invalid: Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 156 FLR 453; Sutherland (as liq of Sydney Appliances Pty Ltd (in liq)) v Robert Bosch (Aust) Pty Ltd and Others (2000) 33 ACSR 680; Shirlaw v Graham [2001] NSWSC 612; Panasystems Pty Ltd v Voodoo Tech Pty Ltd (2003) 21 ACLC 842; McIntosh and Another (as joint and several admins of CMX Technologies Pty Ltd) v CMX Technologies Pty Ltd (admins apptd) (2005) 56 ACSR 283; Re Pasdonnay, supra; HPI Australia Pty Ltd [2008] NSWSC 1106. 37 The discretion whether to exercise the power is undoubtedly a plenary one, to be exercised having regard to all the circumstances of the case that have been brought to the court's attention by the applicant for relief and by those who have an interest in the matter and who may be affected by the granting of that relief. One relevant consideration is whether substantial injustice would be caused by effectively validating an otherwise invalid appointment: McIntosh at [32]. 38 Mr Calabretta has brought to the Court's attention three matters which could cause, but which he submits would not cause in the present case, substantial injustice should an order be made to the effect that Part 5.3A of the Act is to operate in relation to the defendant as if Mr Calabretta had been validly appointed with effect from 1 October 2009. These matters relate to (a) the administrator's statutory indemnity and lien; (b) the administrator's remuneration, and (c) the consequences of a change in the relation-back day. 39 It is convenient to consider the first two matters together. 40 If an order of the kind that is sought by Mr Calabretta is made then he would be entitled to be indemnified out of the defendant's property for certain debts, liabilities, damages or losses, and remuneration as fixed under s 449E: s 443D. This right of indemnity (as opposed to any independent claim Mr Calabretta might have at general law to recover fair remuneration: see Sutherland v Take Seven Group Pty Ltd (1998) 29 ACSR 201 at 204) would have priority over all the defendant's unsecured debts, subject nevertheless to the priority regime provided by s 556 of the Act: s 443E(1). Section 443F of the Act provides that, to secure the right of indemnity given by s 443D of the Act, an administrator has a lien on the company's property. This lien can be asserted against assets in the administrator's hands without diminution by the statutory priority otherwise accorded by s 556: Weston v Carling Constructions Pty Ltd (in Liq) (2000) 175 ALR 202; Bell v Amberday Pty Ltd and Another (2001) 39 ACSR 25; Lockwood and Another v White (2005) 11 VR 402; Hamilton and Another v Donovan Oates Hannaford Mortgage Corp Ltd and Others (2007) 207 FLR 163. However, in the present case, Mr Calabretta made no recoveries. There are no assets in his hands. The result in practical terms is that if an order of the kind that is sought by Mr Calabretta is made, his right of indemnity will have the priority accorded by the Act but the statutory lien will provide no security. In turn, the utility of his indemnity will be dependent on whether and to what extent the liquidator makes recoveries. 41 Mr Calabretta submits that this outcome does not bring about substantial injustice that would militate against the granting of the relief he seeks. He submits that he has carried out the work required of an administrator, which has included the preparation of the two reports and the convening of the creditors' meeting to which I have referred. He submits that the work done in investigating the affairs of the defendant has been of value in providing information about the defendant's business, property, affairs and financial circumstances. I accept these submissions. 42 The Report to Creditors issued by Mr Calabretta on 6 October 2009 shows that Mr Calabretta does have the benefit of an indemnity and guarantee for the payment of his fees and expenses to a maximum of $30,000.00 for acting as administrator of the defendant. The indemnity and guarantee has been provided by Mr Castellino. This, however, is not a reason for not granting the relief that Mr Calabretta seeks. Moreover, I do not know what, if any, legal or practical difficulties might confront him in seeking to enforce this security, particularly in circumstances where, as I have found, his appointment as administrator was not a valid appointment. 43 I now turn to consider the change in the relation-back day. 44 Absent an order of the kind that Mr Calabretta seeks, the relation-back day will be 9 June 2009, being the date of the filing by the Deputy Commissioner of Taxation of the originating process seeking the order that the defendant be wound up in insolvency: s 513A; s 9. If an order of the kind that Mr Calabretta seeks is made, the relation-back day will be the later date of 1 October 2009, being the date that will be taken as the day on which the administration began: s 513C. A consequence of this shift will be that the period for recovery of voidable transactions pursuant to s 588FE of the Act will, correspondingly, shift because the determination of the relevant period in which such recovery can be made will necessarily be dependent on the relation-back day by reference to which the period ends. In short, absent an order of the kind that is sought, the prospect would exist for the liquidator to attack, as voidable transactions, transactions that occurred at an earlier point in time than would be the case if the order as sought were to be made. This is a significant consideration. 45 Mr Calabretta's investigations led him to report on possible recoveries available to creditors in the event that the defendant be wound up. In his Second Report to Creditors he identified a number of transactions that appeared to be possible voidable transactions in respect of which money, property or other benefits may be recoverable by a liquidator under Part 5.7B of the Act. These transactions were of two types. First, there were loans by way of vendor finance to various purchasers of home units in a development at 83 Marine Parade, Redcliffe, Queensland, which was the main undertaking of the defendant. The evidence indicates that the Redcliffe development was completed in January 2007. There is, however, no evidence as to when sales commenced or when vendor finance was provided. Secondly, there were transactions related to possibly misappropriated funds that were paid to a related entity of the defendant in January and February 2006. 46 Section 588FE(4), dealing with voidable related entity transactions, is likely to be available in respect of both types of transactions whether the relation-back day be 9 June 2009 or 1 October 2009, because the relevant period will be the four year period ending on the relation-back day which, looking at the matter practically, would seem to cover, in either case, the transactions in contemplation. The transactions that were related to possibly misappropriated funds were specifically identified as related entity transactions in Mr Calabretta's Second Report to Creditors. It is possible that one or more of the loan transactions with respect to the sale of units at the Redcliffe development were of the same character. 47 The position would be different if reliance were to be placed on s 588FE(3) dealing with voidable uncommercial transactions (as defined in s 588FB), where the relevant period is the two year period ending on the relation-back day. The difference would manifest itself in respect of loan transactions entered into between 9 June 2007 and 1 October 2007, or acts done in that period for the purpose of giving effect to loan transactions, with respect to the sale of units at the Redcliffe development. 48 Similarly, the position would be different if reliance were to be placed on the general provision in s 588FE(2) in relation to transactions entered into between 9 December 2008 and 1 April 2009, or acts done in that period for the purpose of giving effect to the transactions, whether or not the transactions are loan transactions with respect to the sale of units at the Redcliffe development. 49 However, in each case, the evidence does not reveal whether there are any relevant transactions. I am also mindful of the requirement that, in the case of both s 588FE(2) and s 588FE(3) of the Act, the transaction must be an insolvent transaction. There is no evidence before me which would enable me to know whether any particular transaction was an insolvent transaction as defined in s 588FC of the Act or an uncommercial transaction as defined in s 588FB of the Act. Thus all that is presented is the bare theoretical possibility that, if the order as sought is made, there may be some prejudice to the liquidator's ability to recover money or assets. 50 Balanced against the possibility to which I have referred is the fact that Mr Calabretta carried out substantial work and incurred costs in the not unreasonable belief at the time that his appointment as administrator was valid. That belief continued up to the time that he received notice based on the NPII search undertaken on 28 October 2009 that Mr Bartolotti was a bankrupt from 7 August 2009. Had Mr Calabretta's appointment as administrator been valid initially, the somewhat anomalous shift in the relation-back day would have occurred by force of the Act in any event. It has not been suggested that his purported appointment was made for the improper purpose of seeking to effect a change in the relation-back day for the advantage of third parties. I should add that there is no reason to think that the liquidator will not have available to him the usual remedies at law and in equity to recover the loans provided by way of vendor finance or any other debts. In so far as an unreasonable director-related transaction may be involved, the provisions of s 588FDA of the Act may also be available to the liquidator. 51 In all the circumstances I am not satisfied that substantial injustice would be caused by making an order of the kind that is sought. I am otherwise satisfied that it is appropriate that an order of that kind should be made.

DISPOSITION 52 In my view it would be appropriate to make an order pursuant to s 447C(2) of the Act declaring that the purported appointment of Mr Calabretta on 1 October 2009 as administrator of the defendant pursuant to s 436A of the Act was not valid, on the ground that the resolution on which that appointment was purportedly made was not a valid resolution of the board of directors of the defendant. 53 In my view it would be appropriate to make an order pursuant to s 447A(1) of the Act that Part 5.3A of the Act is to operate in relation to the defendant as if Mr Calabretta had been validly appointed as administrator of the defendant pursuant to s 436A of the Act on 1 October 2009. 54 I will hear the parties further, if necessary, as to the precise terms of these orders. 55 In my view Mr Calabretta's costs of this application should not be paid out of the assets of the defendant and, in effect, borne by the creditors. Whilst, on the evidence, Mr Calabretta carried out the usual searches on 2 October 2009, it was open to him to make further enquiries, including by conducting a NPII search on that day. Had Mr Calabretta carried out a NPII search with respect to Mr Bartolotti on 2 October 2009, I am satisfied that it would have revealed that Mr Bartolotti had been a bankrupt since 7 August 2009. The risk of acting on the basis of an ASCOT database search that may not be accurate because of a time-delay in data-matching with the NPII database, when more timely and, in the circumstances, more relevantly accurate information could be obtained by searching the NPII database itself, is one which Mr Calabretta should bear, not the creditors of the defendant. I am provisionally of the view that the costs should lie where they fall and that, for the avoidance of doubt, it should be ordered that Mr Calabretta should bear his own costs of this application. I will, however, hear the parties further on the appropriate form of the costs order, if necessary. 56 The only order I make at the present time is that the application be adjourned to a date to be fixed for the purpose of making orders in accordance with these reasons. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

Bankruptcy Act 1966(Cth)ss 55(4A), 57A

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