1. The T documents (documents filed for purposes of s 37 of the Administrative Appeals Tribunal Act 1975) were before the Tribunal including a book of supplementary T documents. The applicant, Mr Rizzo, his accountant and the accountant to two of the corporations involved up until an administrator was appointed[4] and Mr Green, an investor in the same two corporations, gave oral evidence on behalf of the applicant. After commencing his oral evidence but before cross examination had concluded Mr Green drew to the Tribunal's attention that, owing to a medical condition from which he claimed to be suffering, he ought not have been called and stated that he felt that he could not continue. The Tribunal excused him subject to the production of a medical certificate. The Tribunal has not cited a medical certificate which was directed to be filed by the applicant's solicitors. There is, however, no reason to disbelieve Mr Green when he stated that his condition was such that his medical adviser had said he should not put himself under pressure by participating in legal proceedings. The respondent claimed in its final submissions that it was disadvantaged by not being able to complete cross examination of Mr Green. In order to address any unfairness the Tribunal has restricted its consideration to only that part of Mr Green's evidence which was given in the cross examination. The Tribunal has also taken into account, when considering Mr Green's evidence, that his ability to recall event and conversations accurately may have been limited as the result of his condition.
2. The respondent called Mr Nicol the liquidator for AAMIC, one of the corporations of which the applicant was a director at the date of liquidation to give evidence. Mr McDermott, the liquidator of the other two corporations AMI and MPP of which the applicant had been a director in the 12 month period preceding the commencement of the liquidation also gave evidence.

THE LEGISLATION AND THE PROCEEDINGS BEFORE THE DELEGATE

(1) ASIC may disqualify a person from managing corporations for up to 5 years if:

within 7 years immediately before ASIC gives a notice under paragraph (b)(i):

the person has been an officer of 2 or more corporations; and__while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) ... about the corporation's inability to pay its debts; and ASIC has given the person:a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and__an opportunity to be heard on the question; and__ASIC is satisfied that the disqualification is justified....

(2) In determining whether disqualification is justified, ASIC:

must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

_may have regard to:_the person's conduct in relation to the management, business or property of any corporation; and__whether the disqualification would be in the public interest; and

(iii) any other matters that ASIC considers appropriate.

1. The term 'director' is also relevantly defined in s 9 as:

(a) ...

(b) unless the contrary intention appears, a person who is not validly appointed as a director if:

• (i) they act in the position of a director; or

• (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.

1. There is no issue that AMI, MPP and AAMIC are 'related' for the purposes of s 206F(2)(a) to one another. They are not.
2. Clearly in conducting an administrative review before this Tribunal s 206F(1)(b) plays no part provided that the Tribunal is satisfied that the delegate has fulfilled the required prerequites. While it did not form part of the contentions filed on behalf of the applicant, when giving his oral evidence the applicant queried the adequacy of the opportunity the delegate extended to him to be heard. The transcript of the hearing before the delegate reveals that the delegate allowed a further one week period after the conclusion of the taking of oral evidence for the production of documents and for the filing of a further written submission by the applicant[5]. In a letter dated 21 September 2006[6] the applicant wrote to the delegate stating his solicitor who was helping him with the hearing and the solicitor engaged at the time of the liquidation both of whom had documents the applicant thought relevant were both overseas and would not be returning in the 7 day period. He also stated that he had been unable to secure a copy of the transcript of proceedings before the Supreme Court of Victoria concerning the making of the liquidation order which he considered to be relevant. The letter from the applicant to the delegate did not request further time in which to tender the material it only stated that he will be "disadvantaged in terms of preparation for the hearing"[7]. The sequence of events surrounding the hearing before the delegate are set out in paragraphs 1-13 of his statement of fact, findings and reasons[8] and need not be repeated here, other than to say that the applicant was represented by a barrister and that the barrister made no application for any further time other than the 7 days given by the delegate.
3. The granting of further time was a discretionary matter for the delegate. The Tribunal notes that the applicant had some several weeks from the giving of the initiating notice to the commencement of the hearing in which to obtain the documents he thought were relevant. There was no mention by the delegate of what attempts he had made in that period to obtain those documents. There is nothing either in the delegate's decision or before the Tribunal which leaves it satisfied that the applicant did not have sufficient opportunity to present his case to the delegate.

THE POSITION OF AAMIC AND THE CREDIT OF THE APPLICANT

1. The Tribunal is conscious of the fact that by the time the case came to a hearing approximately 18 months of the 2 year ban has passed. An earlier application by the applicant to this Tribunal for a stay of the ban pending the outcome of the hearing had not been successful. Given this and the decision the Tribunal has reached with respect to the applicant's involvement in AMI and MPP it has not been necessary for it to consider the applicant's involvement in AAMIC. The Tribunal has considered the respondent may have relied on the evidence called with respect to AAMIC as part of testing the overall credit of the applicant. Without expressing any view as to the applicant's credit in relation to the oral evidence he gave in respect of AAMIC the Tribunal has carefully considered his evidence in respect of AMI and MPP. Relevantly his evidence has not played any determinative part in the Tribunal's consideration of the applicant's involvement in the latter mentioned corporations. Where it has been relied on the Tribunal has taken particular care to scrutinise it carefully.

1. AMI was incorporated in on 13 September 2000. The relevant directors are:

The applicant was a director in AMI between 13 September 2000 and 2 January 2003.

Mr Green commenced on 2 January 2003 and ceased on 6 March 2006.

Mr Rizzo commenced on 19 April 2001 and ceased on 9 April 2002.

Mr J Malacria commenced on 29 June 2001 and ceased on 2 January 2003.

Mr F Occhiuzzi commenced on 13 November 2000 and ceased on 2 January 2003[9].

1. AMI was placed under administration on 4 February 2003. One month later on 4 March 2003 Mr McDermott was appointed the liquidator. The company was deregistered on 6 March 2006.
2. It was the applicant's evidence that from the establishment of the business to his resignation as a director the applicant was responsible for the operation of the engineering aspect of the business[10].
3. It was Mr Rizzo's evidence that prior to his resignation as a director of AMI in 2002 he formed the view that the company was likely to face financial difficulties in the future. He said AMI needed to either increase its turnover or raise extra money from the unit holders[11]. Mr Rizzo said that he recommended the sale of the business to the other directors.
4. AMI's business was conducted at two premises. One was from the premises owned by MPP in Macaulay St North Melbourne. The other was from leased premises in Essendon.

1. About the same time as MPP decided to sell the Macaulay St property, in mid-late 2002[12], a decision was made to sell the businesses operated by AMI. That which was located at Macaulay St was sold for $400,000 to Messrs Malacria, Clark and Rizzo. The two former mentioned people had been involved in the day to day operations of the business. According to the evidence of the applicant he was unaware at the time of the sale that Mr Rizzo was involved in the purchase. However it was the evidence of both the applicant and Mr Rizzo that the sale price represented a fair market value for the business. There seems to be no controversy concerning the sale of this part of the business. The fact that Mr Rizzo was one of the purchasers would seem to indicate that he was satisfied that, despite the concerns expressed at the time of his resignation as a director, the business was operating satisfactorily. The business was relocated to another site at Airport West. There is no evidence which suggests that the applicant had any further association with the relocated business.

That part of the AMI business located at Essendon was, on or about 30 July 2002, sold to Messrs S and M Procida.[13] The evidence establishes that the contract of sale was either part written and part oral or that representations about the turnover of the business were made at or before the sale which representations were relied on by the purchasers in buying the business. Mr Rizzo in his oral evidence stated that while the turnover figures for the business were provided to the purchasers' accountants and solicitors no contractual representations were made[14]. It is not necessary for the Tribunal to resolve this aspect of the conflicting evidence between Mr Rizzo and the applicant's understanding of what was agreed by or represented to the purchasers and whether or not it formed part of the formal contract. Mr McDermott stated that both Mr Green and the purchasers referred him to the applicant to identify the oral arrangements[15]. It is sufficient to say that Mr McDermott accepted either that the contract was part oral and part written and or that representations were made to the purchasers as to the turnover on which the purchasers relied when buying the business.

1. The written part of the contract of sale[16] evidences an immediate lump sum payment of $15,000 to be followed by a further payment of $55,000 by 7 August 2002 and the balance of $80,000 by 36 monthly instalments of $2,222.22. Of that purchase price $100,000 was noted as being allocated to the value of the equipment and $50,000 for goodwill. Clause 2(c) of the Special Conditions relating to the contract provides that the vendors were to hold the equipment under a mortgage or charge in favour of the purchasers. Legal advice provided to Mr McDermott[17] confirmed that security by way of mortgage was taken by the vendor over the equipment.
2. The $70,000 deposit was distributed to the unit holders. The liquidator made no criticism of this procedure. Once that distribution had been made AMI was dormant and existed solely for the purpose of receiving the outstanding instalments from Messrs Procida. The outstanding creditors of AMI were to be paid from the money received from the instalment payments, before any further distribution was made[18]. The creditors were NRMA, which was owed $8,104 and the ATO which was owed $11,304[19].
3. No monthly payments were made. Approximately six months later AMI went into administration. The business purchased by the Procida's faulted and was abandoned. The purchasers maintained to Mr McDermott that the representations made to them at or about the time of sale transpired to be misleading. The applicant disputes this. It is not necessary for the Tribunal to resolve this issue. What is important to take account of is what the liquidator determined and what action he then took.
4. It was Mr McDermott's evidence that he investigated the likelihood of recovering the outstanding instalments from the purchasers. He concluded that the risk involved in undertaking court proceedings was too great. In part this was because Mr McDermott concluded that the purchasers of the business may have a point about the representations as to the turnover which may weaken the case for recovery. Additionally Mr McDermott's enquiries revealed that even if court action was successfully undertaken the purchasers were unlikely to have sufficient assets against which any judgment could be executed[20]. These reasons are accepted by the Tribunal as being in accord with what could be expected from a liquidator in the circumstances which confronted Mr McDermott.
5. Much of the cross examination of Mr McDermott was aimed at questioning his actions in conducting the liquidation. In respect of AMI this focussed particularly as to his decisions not to pursue the purchasers and/or sell the equipment which remained in situ after the purchasers abandoned the Essendon business. Presumably this was aimed at establishing that at the time of winding up there was in fact no debt owed by AMI. Whether or not there was no debt owed may be considered irrelevant for purposes of s 206F(1)(a)(ii) of the Act as it is the liquidator's report which excites the provision. Neither ASIC nor this Tribunal standing in ASIC's place are authorised, when conducting their respective reviews, to interfere with the liquidator's reporting function. However in the determination of whether disqualification is justified under s 206F(2) ASIC and the Tribunal may have regard to "any other matters considered appropriate". If it could be demonstrated that, in fact, AMI was able to pay its debts then this becomes, or may become, a relevant matter for consideration with respect to whether a disqualification is justified. It is on that basis that the Tribunal has considered this aspect of the evidence.
6. It was Mr McDermott's evidence that he obtained legal advice that it was open to the liquidator to take possession of the equipment at the premises abandoned by the purchasers.[21]. However Mr McDermott maintained that the value and the likely costs associated with dismantling and sale of the equipment would, or may, have exceeded any sum secured from their sale. It appears from Mr McDermott's evidence[22] that no formal examination of either the value of the equipment or the costs involved in dismantling it were specifically undertaken. It was Mr McDermott's initial evidence that he thought the equipment to be worth $2,500[23]. However he found after checking his documentation that he had been advised by an auctioneer, to whom he had sent a list of the equipment, that had a likely value of $17,900[24]. The estimates were given without the auctioneer visiting the premises and inspecting the items. Costs associated with dismantling and removing the items from the premises were estimated to be $2,200[25] and further costs associated in the conducting of an auction would have been incurred.
7. Mr McDermott took no further action in respect to the sale of the equipment. This was because he assessed the commercial risks were too great and that there was insufficient money arising from the liquidation to warrant taking the risk.
8. The Tribunal is troubled by this explanation. There is a considerable disparity between the valuation of the equipment at the time of the sale and the indicative valuation obtained by Mr McDermott. Aside from an adverse implication arising from an assertion made by Mr McDermott in the s 533 report that the purchasers (Messrs Procida) were known to the applicant (an implication which for reasons expressed in paragraph 29(ii) herein the Tribunal does not accept), the sale price was agreed between the AMI and the purchasers in a transaction occurring at arms length. The Tribunal see no reason to doubt the expressed value of $100,000 represented the market value of the equipment at the time. There was only a relatively short time between the sale and the corporation going into liquidation and nothing suggests that the equipment was subject to undue wear and tear or any abuse in the intervening time.
9. In the end, however, bearing in mind it is not the role of the Tribunal to stand in Mr McDermott's place when examining his decisions, the decision he made with respect to the sale of the equipment may have been justified as part of the liquidator's role. On the balance of probabilities the evidence does not lead the Tribunal to conclude that if Mr McDermott had decided either to take action against the purchasers for recovery, or sold the equipment located at the Essendon premises AMI would have been enabled to pay its debts.

1. The main concern of the Tribunal is the liquidator's conclusion that the applicant should be deemed a director of AMI. The evidence upon which Mr McDermott based his conclusion is set out in his s 533 report to ASIC and is threefold. The first is that the director (Mr Green) required considerable assistance in his administration from the applicant. The second is that Mr McDermott believed that the applicant was familiar with the purchasers of the business and, by implication, there was something improper about this. Finally Mr McDermott stated that the applicant engaged in the company's affairs subsequent to Mr McDermott's appointment without obtaining Mr McDermott's consent.
2. The Tribunal addresses each of these concerns seriatim as follows:

(i)(a) Mr Green became a director in AMI on the same date that the applicant, Mr Occhiuzzi and Mr Malacria resigned their directorships ie 2 January 2003. Mr Green told the Tribunal, and there is nothing which suggests otherwise, that he became a director in order to protect the investment he had made in AMI. Mr Green, unlike Messrs Occhiuzzi, Malacria and the applicant, had no qualifications in any of the fields associated with the motor vehicle suspension business. Mr Green's evidence rejected the proposition that Mr McDermott had concluded that he (Mr Green) had relied on "significant assistance" from the applicant in the administration of AMI[26]. Mr Green maintained that he did not rely on the applicant to undertake administrative functions because:

is not thorough, he doesn't follow through on things very well...I wouldn't rely on ... [the applicant] to administer anything actually"[27].

Green's evidence on this point was rather confused. He strongly denied Mr McDermott's conclusion[28] that he (Mr Green) was unable to provide necessary information without obtaining the applicant's instructions[29]. At another point, Mr Green said he relied on both the applicant and Mr Malacria to provide advice about the industry generally and with respect to technical detail[30]. Mr Green also stated rather than relying on the applicant that he relied on advice from Mr Rizzo in relation to payments made in the course of the liquidation[31].

(b) Mr Green was an investor and again unlike the other investors in AMI had not been involved with the day to day business operations. The provision of technical information by either or both of the applicant and Mr Malacria does not constitute any breach contemplated in the Act. In any event Mr Green maintained that the applicant played no part in the day to day running of the business, or giving directions to the staff and that those functions were carried out by Mr Malacria.[32]

(c) Following the sale of AMI's businesses the evidence shows that AMI was dormant[33]. There was therefore no work or management function in which the applicant could be involved in respect of AMI.

(d) If the applicant assisted Mr Green in the provision of information to the liquidator, then that per se does not amount to conduct which would result in the applicant becoming a deemed director. Further it is hardly surprising given Mr Green required some assistance with the provision of technical and indeed other information connected with the operation of the business as he was not a director at the time either during which the business was operational or at the time of the sale to the Procidas. It would be an odd result if anyone providing information to a director for purposes of informing a liquidator about past events was to be considered a deemed director as that would discourage information, in this case historical, from being made available to assist a liquidator. The Tribunal is satisfied that the actions of the applicant do not amount to him providing assistance in the administration of AMI.

(ii) The evidence demonstrated that those engaged in the day to day activity in the motor vehicle repair and panel beating business, including motor vehicle suspension were familiar with others also engaged in that business[34]. This was particularly so with the applicant who held franchises of over 30 business (of which AMI had been one). It was not surprising that the applicant may have known Messrs Procida. The mere awareness of a proposed purchaser does not create any liability for a director of a corporation engaged in the sale of its business. No such conclusion was drawn by Mr McDermott with respect to Mr Rizzo, Mr Malacria or Mr Clark being the purchasers of AMI's Macaulay St business. While in the s 533 report Mr McDermott uses rather strange language to describe that part of the contract made orally or the representations made (ie "a semi terms contract" and "agreement discounting the ultimate sale price of the business"[35]). There was no evidence to suggest that the applicant received any, or any improper, return in a personal, or in any other capacity, from the sale or that he negotiated any sale contract with Procidas. The evidence establishes that the applicant lost the same proportion of profit as was lost by the other unit holders in AMI.[36]

(iii) In respect of the last concern Mr McDermott described in his oral evidence what it was that constituted the applicant engaging in the company's affairs subsequent to Mr McDermott's appointment. He stated that the applicant had discussions with the purchasers of the Essendon business concerning the representations said to have been given at or prior to the sale[37]. He said he concluded this as the result of correspondence received from the solicitors acting either for the purchasers or AMI[38]. However after checking his records Mr McDermott found the correspondence was directed to Mr Rizzo and took place after the commencement of the liquidation[39]. When asked why Mr Rizzo had not been nominated as engaging in the affairs of AMI without the knowledge or consent of the liquidator Mr McDermott stated "...I understood it was ... [the applicant] who was behind the...continued issues" and later "....I understood Mr Rizzo was somehow acting on [the applicant's] instructions at the time"[40]. No explanation was given as to how the understanding arose and there is no material or evidence which supports any such conclusion.

1. The above leaves the Tribunal satisfied that evidence does not support Mr McDermott's conclusions that the applicant should be classified a deemed director of AMI. That being the case not any of the three matters identified by Mr McDermott are sufficient to leave the Tribunal satisfied that the disqualification on those grounds are justified[41].

2. Clearly however the applicant was involved with the operation of the businesses of AMI prior to their sale. This falls within the 7 year period provided for in s 206F(1)(a) of the Act. There is however no evidence before the Tribunal which suggests any impropriety in the conduct of the applicant in relation to the management, business or property of AMI during this period. Indeed the contrary is the case. The Tribunal accepts the applicant's evidence that he sold his interest AMI at the suggestion of the other directors, in particular Mr Occhiuzzi and Mr Malacria[42]. The applicant explained that he sold his interest because of litigation between another of the applicant's companies (AAMIC) and AAMI, the latter being substantially involved in the vehicle insurance business and the user of AMI's services. The other directors felt that the applicant's continued involvement in AMI may stand to jeopardise AMI keeping the business it received from AAMI. Further it was Mr Rizzo's evidence that while he questioned the strategies adopted by AMI [43] he was satisfied that the day to day operations were being managed by Messrs Clark and Malacria in to a satisfactory level[44]. Mr Rizzo was also satisfied that AMI was not operating while insolvent[45].
3. The Tribunal is satisfied that there are no grounds arising from the applicant's association with AMI which justify his disqualification.

1. The circumstances surrounding the MPP directorships are not dissimilar to those of AMI. On the same day (2 January 2003) that the applicant resigned as a director Mr Green was appointed and became the sole director. On that day the two other directors being Mr Malacria and Mr Rizzo also resigned. Additionally Mr Rizzo had been the secretary since March 2002 and he resigned from that position on 2 January 2003.
2. The evidence establishes that MPP was not a trading company but the trustee of a unit trust, the trust being the registered proprietor of a property located in North Melbourne at Macaulay St. AMI occupied and operated that part of its business from the property owned by MPP and paid rent equivalent to the mortgage repayments. There were a number of investors in the unit trust. Aside from Mr Rizzo and Mr Green the other investors were people involved in the day to day operations of the motor repair industry, including the applicant and Mr Malacria. It was Mr Rizzo's evidence that he represented unit holders' interests when a director. He also acted as the accountant for MPP.
3. The MPP property was sold at or much the same time as the AMI business ie at or within a short time after mid or late 2002. After the repayment of a mortgage, and other expenses, the balance was distributed to the unit holders. According to Mr Rizzo, Mr Green and the applicant the investment was profitable and all of the unit holders in the trust received a return.
4. Mr McDermott agreed with a proposition put by the applicant's counsel that it was more appropriate that MPP be the subject of a voluntary liquidation[46]. This was because Mr Green was reluctant to certify the corporation was solvent (a necessary step when undertaking a voluntary liquidation). This is curious given that in his evidence Mr Green maintained that he was not owed anything by MPP, yet he is listed as a petitioning creditor. Mr Rizzo was the accountant for MPP. It was Mr Rizzo who, following the sale of the building, advised the vesting of the trust. He arranged the payment of the creditors and approached Mr McDermott concerning the liquidation of the company[47]. The payment of the creditors included payment of the professional fees incurred by Mr Rizzo a firm for the work undertaken as set out in the profit and loss statements for the six month periods ending 30 June 2002 and 31 December 2002[48]. Curiously Mr Rizzo maintained that despite being listed as a creditor he was not owed any money from MPP[49]. After that he then determined the distribution of the balance between the unit holders according to the number of units they held.
5. In cross examination Mr McDermott conceded that in hindsight there were no creditors for MPP and that it was unnecessary for the company to be the subject of a creditors' petition. Mr McDermott also conceded that, there was no evidence that MPP had been mismanaged. Mr McDermott was satisfied, and stated in his report for s 533 to ASIC that there were proper books of account and records. He reported that he was unaware of any offences having been committed in respect to the corporation.
6. It is clear that at the time the corporation went into administration and then liquidation that the applicant was not a director and not acted in that capacity since his resignation from that position. No mention is made in Mr McDermott's s 533 report to ASIC[50] of the applicant being a deemed director of MPP after the applicant's resignation as a Director.
7. Given that the Tribunal is satisfied, as was Mr McDermott apparently despite his advice to the contrary to ASIC in the s 533 report, that there were no creditors of MPP then it cannot be the case that MPP was unable to pay its debts. It follows that the liquidator was incorrect in reporting to ASIC as a necessary condition had not been fulfilled for the operation of s 533(1)(c) of the Act. It also follows it was not open for the respondent or its delegate to find that the applicant was liable for disqualification under the provision of s 206F(1)(a)(ii) of the Act in respect of MPP.

1. For the reasons stated the Tribunal is satisfied that there is no conduct or actions of the applicant which justify his disqualification under the provisions of s 206F(2) of the Act. It is unnecessary to consider the circumstances surrounding the applicant's involvement in AAMIC as s 206F(1)(a)(i) applies only where a person has been an officer of two or more corporations and the other requirements set out in the section have been met.
2. The decision under review is set aside. The applicant is not disqualified from managing a corporation.

I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of

Signed: .....................................................................................

Dates of Hearing 17 and 18 January, 28 January 2008

[1] Documents filed for purposes of s 37 of the Administrative Appeals Tribunal Act 1975 (the 'T' documents) at 79-80, 90 (T5)

[13] The written part of Contract is dated 1 July 2002 (Exhibit R2 at RJM-11). In Mr McDermott's affidavit sworn 3 August 2007 it states the sale date as being on or about 31 July 2002 (Exhibit R2 para 17).

[15] T documents at 148 (T5.7), question 3 and T documents at 150 (T5.8), answer 3

[18] according to Mr Rizzo Transcript pg 91

[21] Transcript pgs 321-322 and Exhibit R6

[26] Transcript pg 99 (cross examination)

[28] Statement of Mr McDermott Exhibit R3 at para 16

[29] Transcript pg 106 where Mr Green states "I don't and never have taken instructions from [the applicant]"

[36] There is on the evidence and material before the Tribunal no support for Mr McDermott's conclusion to ASIC on this point.

[43] by which he explained he meant 'where all the work was coming from' transcript pg 81

[49] Mr Rizzo maintained an employee of his lodged a claim and attended the creditors' meeting with the liquidator Transcript pgs 70 and 80