Friday, 4 July 2014

Albarran and Pleash prepare to defend DoCA allegations

Richard Albarran
Photo: Hall Chadwick
WHEN insolvency practitioners recommend a Deed of Company Arrangement (DoCA), it's generally based on their expectation that applying the oil of deed administration will facilitate a troubled company's passage to resolution.

For Blair Pleash and Richard Albarran however, no amount of commercial and accounting acumen has been sufficient to free up seized property developer Joe & Joe Developments.

Since the Hall Chadwick partners were appointed voluntary administrators to Joe & Joe on February 9, 2009, they and their solicitors have generated about $1.4 million in fees administering the company, which remains subject to the terms of a DoCA designed to achieve what the company’s owners couldn’t - concluding on mutually agreeable terms - their commercial and residential property development at Narrabeen on Sydney’s northern beaches.

Blair Pleash
Photo: Hall Chadwick
Pleash and Albarran became Joe & Joe’s deed administrators on March 31, 2009 but the company’s two shareholder families were locking horns as early as 2008. 

Those frustrations came to a head when one family – the Kossaifis – initiated winding-up proceedings in the NSW Supreme Court.

Liquidation posed a threat to the livelihood of members of the other shareholder – the Elias family – who are builders, and following attempts at mediation the matter was brought to Hall Chadwick in early 2009.

More than five years on, the families remain at loggerheads, Joe & Joe is still subject to the terms of its DoCA  and the mounting costs have so enraged the Elias family that it is suing Pleash and Albarran in the NSW Supreme Court, alleging the two have managed the affairs of Joe & Joe in a way prejudicial to the company’s creditors and its members. The Hall Chadwick duo reject the allegations.

Specifically the plaintiffs claim Pleash and Albarran allowed their legal advisors – Etienne Lawyers - to amass $790,000 in fees in the DoCA's first three years. The plaintiffs claim this is excessive. They also say that the administrators prejudiced their interests in relation to what the plaintiffs say is an unreasonable deed of release. 

In their statement of claim filed with the court, the plaintiffs are seeking declarations from the Supreme Court that Pleash and Albarran be replaced, that the DoCA be concluded and that Joe & Joe's members and creditors be paid out, plus damages and costs.

Pleash and Albarran attempted to have many of the allegations - which are summed up in this interlocutory judgement handed down by Justice Paul Brereton on November 4, 2013 - struck out when the plaintiffs sought to amend their statement of claim last year.
It should be noted that Etienne Lawyers is not a party to the current proceedings and there is no suggestion of wrongdoing on its part. 

As can been seen from the Brereton judgement, the amended claim was largely allowed and a hearing on the matter is now imminent. To support their allegations, the plaintiffs have engaged a number of expert witnesses to assess the administration of the DoCA and the fees, including David Young from Young Business RIT, Richard Brien of Nicols + Brien and John Woodward of Turnbull Hill

Among the claims to be tested will be the plaintiffs' insistence that Joe & Joe was solvent when Pleash and Albarran were appointed voluntary administrators and that one Elias family member was told Joe & Joe could be progressed through the VA process in about one month, at a cost of approximately $50,000.

Suffice to say, Pleash and Albarran reject the allegations. In their Points of Defense document they deny Joe & Joe was solvent when they were appointed, highlighting the fact that the company owed the Australian Tax Office $258,883.00, part if not all was due and payable. Company records show that at the time of their appointment as VAs, Joe & Joe had non-cash assets valued around $2.6 million and $111,603.00 in the bank.

Pleash and Albarran maintain that a solvency recital showed the company was technically insolvent or in danger of become insolvent.

Further, they reject the allegation that an Elias family member was assured a resolution would take 30 days and cost $50,000, and point out that the plaintiffs were fully involved in the process of drafting and settling the terms of the DoCA, and that the Elias’s sought and obtained independent legal advice about the DoCA and its consequences.

According to the defendants, the Elias family has not lived up to its end of the bargain in terms of a proposed share buyback, thereby stalling the operation of the DoCA and increasing the costs of its administration. Pleash and Albarran may well produce expert witnesses who think the legal fees are unexceptional and the defendants' management adequate.

Pleash did not respond to telephone messages and emails seeking comment for this story. Albarran, who indicated he was overseas when contacted, directed enquiries to his co-appointee.

The pending court hearing over the cost of administering Joe & Joe under the DoCA - which was originally brought to Pleash by solicitor Farshad Amirbeaggi as a potential creditors voluntary winding up (CVL) or members voluntary winding up (MVL) - has also caught up others. 

Hall Chadwick staffers Jovan Singh and Tim Cook have provided lengthy affidavits on subpoena and since the plaintiffs' claims in part involve fees paid to Etienne Lawyers, Pleash and Albarran have lost the services of regular go-to man, Etienne owner Steven Brown, who in July 2013 relinquished representation to Hicksons Lawyers to eliminate any perception of conflict.

Squaring off against Hicksons on behalf of the plaintiffs will be Grant Butterfield and his team from Marsdens. 

Originally Rod Sutherland and Trajan Kukulovski of Jirsch Sutherland were primed to replace the Hall Chadwick duo as deed administrators if the court so ordered. However the consent to act was either never completed or withdrawn. The matter is set down for a six-day hearing, beginning on August 5.

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