The proceedings were brought pursuant to section 536 of the Corporations Act 2001 (Cth) (which is now reflected in section 90-10 of the Insolvency Practice Schedule), which allows the court to perform an inquiry into the external administration of a company . In BL & GY International Co Ltd v Hypec Electronics Pty Ltd  NSWSC 959, Barrett J identified three stages in these types of proceedings:
Despite this, Stewart J stated that the Court will not merely proceed on consent orders and must be satisfied that there is a proper basis for them (stage 3). His Honour considered the conduct of Mr Iannuzi and ultimately made the orders sought by consent, removing Mr Iannuzi from the register and disqualifying him for ten years, and a costs order in favour of the Commissioner of Taxation.
"It is fair to say that Mr Iannuzzi made little or no effort other than to go through a set of standard procedures and without paying attention to whether his enquiries were bearing fruit or to whether further or different enquiries were warranted. On many occasions he failed to make even the most basic enquiries about a company’s assets such as previous bank accounts or real property, or who its real directors were. His supervision of his staff on whom he relied to do much of the work was patently inadequate."
"It goes without saying that Mr Iannuzzi’s conduct in defending the matter until very near the end has taken up a considerable amount of time and effort of the Court which is to the detriment of other litigants, and it has put the Commissioner to considerable effort and costs not all of which will be made good by the party/party costs order to which he has consented."The Court found that the delay in Mr Iannuzi's acknowledgement of wrongdoing was relevant on the question of what orders should be made. In finding that the consent orders proposed by the parties were appropriate, the Court stated that:
"A significant factor in my assessment that the agreed orders are within a range of appropriate orders is the lateness of Mr Iannuzzi’s insight into his wrongful conduct. As indicated above, the approach that he took to this proceeding until the eleventh hour caused the Court, other litigants in other matters before the Court and the Commissioner considerable inconvenience and/or expense. Moreover, it is an adverse reflection on Mr Iannuzzi’s character, and thus on whether he is a fit and proper person to be a liquidator, that he has come to the insight that he now has at such a late stage and only when faced with a potentially significantly more serious case including allegations of being party to a proposed scheme to defeat or hinder creditors. It also shows the possible precariousness of that insight such that it is necessary to protect the public from Mr Iannuzzi acting as a liquidator for a long period of time."
The liquidator’s essential functions are to identify, take possession of and realise the company’s assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority… A court-appointed liquidator is an officer of the court, through whom the court itself notionally conducts compulsory liquidations… This has particular implications for the standard of conduct expected of a liquidator. The liquidator is entrusted with the reputation of the court for impartial and proper dispatch of their duties… The position of liquidator is a repository of public trust; the public is entitled to trust a liquidator to perform their functions to a high standard and with scrupulous attention to obligations of candour, honesty and integrity.
When a liquidator falls short of the standards expected of them, the public’s trust in the office of liquidator is eroded. That in turn has a corrosive effect on the administration of the body of insolvency law, and consequently on the administration of justice.
A liquidator’s duties include both general law and statutory duties to act with reasonable care and diligence, good faith, proper use of their position, proper use of any information obtained and not to act recklessly or dishonestly. Liquidators also have a fiduciary duty to act with complete impartiality between creditors and not to allow the liquidator’s personal interests to conflict with the liquidator’s duties.Mr Iannuzzi's conduct set out in Stewart J's judgment resulted in a failure to satisfy these duties, and lead to his removal and disqualification.
McCabe Curwood has extensive experience in advising both liquidators and creditors in relation to the duties of liquidators and disputes regarding external administrations.