Octaviar: $514 million proof of debt up for appeal

RSM's David Kerr has $514 million reasons
to smile

OCTAVIAR's general purpose liquidators Kate Barnett and Bill Fletcher were served a major setback in the NSW Supreme Court yesterday.

In handing down his judgement Justice Paul Brereton ruled that RSM's David Kerr - currently special purpose liquidator of Octaviar Limited (OL) - can apply to extend his powers, paving the way for an appeal of Barnett and Fletcher's rejection in April 2014 of a $514 million proof of debt (PoD).

The PoD was lodged on April 11, 2011 by OL's former receiver, Steve Parbery of PPB. The judge said that if Kerr were to appeal then the Bentleys pair - as general purpose liquidators of OL and its subsidiary Octaviar Administration (OA) - would be in an untenable position.

"It is plain enough that, in respect of any such appeal, the liquidators would be in a position of conflict - as liquidators of the appellant OCV (OL) prosecuting the appeal, and as liquidators of the respondent OA opposing it," Justice Brereton said.

The judge also raised the prospect that Barnet and Fletcher may have engineered their potential disqualification as liquidators of OL when they settled their long running litigation with Fortress Credit Corporation in May this year.

"The issue arises because the general purpose liquidators of OCV (OL) are, in their capacity as liquidators of OA, "officers" of OA, and it appears possible, although it is not entirely clear, that the settlement of the OA/Fortress proceedings involves OA taking an assignment from Fortress of security held by Fortress over the assets of OCV (OL).

"If so, the liquidators qua liquidators of OA may thus have become officers of a "secured party" of OCV (OL), so as arguably to be disqualified from acting as liquidators of OCV (OL) by operation of Corporations Act, s 532(2)(c)(ii).

"It suffices to accept that there is a presently unresolved and not insignificant possibility that the general purpose liquidators may be disqualified from continuing to act as liquidators of OCV (OL)," the judge concluded.

Octaviar: Kerr considering fresh tilt at Barnett and Fletcher

RSM Bird Cameron's David Kerr

HAVING recently secured a $12.35 million settlement from Fortress Credit Corporation, Octaviar Limited's (OL) special purpose liquidator is, we are reliably informed, contemplating resurrecting a $515 million proof of debt claim against the liquidators of Octaviar Administration (OA).

The NSW Supreme Court made orders on May 26, 2015, discontinuing proceedings first brought by OL's receivers against Bentleys partners Kate Barnett and Bill Fletcher in 2014.

The orders made no directions as to costs and crucially, the defendants were prevented from raising any time bar defence, meaning Kerr is free to re-litigate the proof of debt adjudication issue at the heart of the dispute.

In their statement of claim, PPB as OL's receivers had argued that at the date of OA's winding up on October 3, 2008 it owed OL, OA's ultimate holding company, $514,685,948.12c.

Barnett and Fletcher's defence listed multiple grounds showing why OA's debt should be offset, along with counter claims they argued meant OA's parent owed it money.

When contacted by SiN yesterday, Kerr declined to confirm or deny he was reviving the claim, saying only that he was unable to assist "at this time".

Octaviar liquidators bill $22 mill as Fortress claims settled

ANY insolvency that burns through five liquidators deserves special mention. When tens of millions of dollars - which might have been deployed beefing up creditor dividends - is instead spent pursuing a well-resourced, recalcitrant and foreign domecilled defendant, then the topic which so reliably provokes palpitations must be revisited.

Fees and expenses should be kept in the limelight. Like mushrooms they flourish in the dark. PPB Advisory's charges as receiver of Burrup Fertilisers - which became the focus of a judicial inquiry that wrapped up only last week - have again raised the question of whether creditors should focus more attention on liquidators' decisions to fund complex litigation from the coffers of companies in their control.

While there is no suggestion that the criticisms that led to PPB's expenses being scrutinised by Justice Antony Siopsis of the Federal Court apply in any way to the liquidators of failed property group MSF/Octaviar, there's also no doubt that given the modest settlements that recently concluded hostilities between Octaviar and US hedge fund Fortress Credit Corporation, scrutiny is justified.

Those settlements saw all proceedings mounted by Octaviar's liquidators against all Fortress subsidiaries dismissed by order of Queensland Supreme Court Justice Peter Applegarth on May 25, 2015. 

By good fortune, a large spreadsheet and a bundle of statements of accounts for Octaviar Administration (OA) recently unfolded on SiN's desk. Whilst some settlement terms have been kept confidential, the documents still make for illuminating reading.

To March 2015, Bentleys Bill Fletcher and Kate Barnett have racked up $22.75 million in remuneration since being appointed general purpose liquidators of OA and Octaviar Limited (OL). 

As at December 2012, they'd charged $15.7 million, meaning they've charged an additional $7 million in less than three years. The documents also show expenses incurred and disbursements paid in great detail.

In the most recent statement of accounts for example, expenses attributed to the liquidation included $7,981.79c for airfares, $5,542.87c for travel and $14,432.43 for "miscellaneous", spent during the period from September 2014 to March 2015.

In the same period $672,811.35c was paid to RSM Bird Cameron, under the terms of the "Funding Agreement Line of Credit". Law firm Henry Davis York (HDY) meanwhile raked in approximately $4.5 million.

When contacted, Barnett would say only that the liquidators' commercial arrangements are confidential and that Octaviar's committee of inspection "is responsible for approval of our fees".

Uninvited crash Octaviar’s ex-parte

Bentleys' Kate Barnet
Photo: SiN Images

SUPREME Court Acting Justice Peter Young has spiked the punch at the Octaviar liquidators’ ex-parte party.

In a recent judgement the judge criticised liquidators Kate Barnet and Bill Fletcher for a lack of candour, branded Barnet’s performance during cross examination as “so vague as to be of little value” and rejected the Bentley pair’s attempts to repel interlocutories filed by former Octaviar Administration Pty Ltd (OA) and Octaviar Limited (OL) directors David Anderson and Craig White.

Barnet was singled out perhaps because the judge had heard her unfortunate cross-examination earlier in the year.

“She did not acquit herself very satisfactorily and her evidence would suggest that she had really very little day to day contact with this matter,” the judge wrote, before offering up some more conciliatory speculations.

“That may be unfair to her because it would seem that she did not realise that she was going to be called to give evidence before me and was involved in some other court case or conference immediately before she stepped into the witness box in my court at 10:38am.”

Bentleys' Barnet examined on viable voidables

Bentleys Katherine Barnet leaving the Supreme Court
Photo: SiN Images

Being cross-examined can’t be fun for any liquidator and Katherine Barnet won't feel like the one who dodged the bullet after fronting the NSW Supreme Court yesterday. 

The insolvency specialist and director at Bentleys Corporate Recovery was brought in to talk about failed property investment group Octaviar.

She began by getting confused about which of the two witness boxes to occupy.

Perhaps the courtroom atmosphere was distracting. It smelt like the aftermath of a prolonged inundation.

Then, having been sworn in and seated, Barnet faced six senior counsel - including Bernie Coles QC.

Along with her Bentleys’ colleague William Fletcher, Barnet is official liquidator of Octaviar Administration Pty Ltd and Octaviar Limited.