Midland HWY- why ASIC objected to Hall Chadwick appointment

Hall Chadwick partner
David Ross

THE corporate regulator challenged the appointment of two Hall Chadwick partners as voluntary administrators (VAs) to a Victorian land banking scheme because of the closeness of their referral relationship with the lawyers behind the scheme.

On Tuesday, August 4, Richard Albarran and David Ross resigned as VAs of Midland HWY Pty Ltd, neutralising an application brought by the Australian Securities and Investments Commission (ASIC) in the Federal Court, which sought a ruling that their appointment was invalid.

Ross told Fairfax Media that he was disappointed that ASIC had not advised either he or Albarran that it was investigating Midland HWY "prior to them lodging an application to have us removed".

ASIC made the application after the first meeting of Midland's creditors on July 14. At the meeting a resolution to replace the company's initial VAs, Nick Martin and Craig Crosbie of PPB Advisory, with Albarran and Ross was approved. An ASIC officer attended the meeting.

Tim Mulally, ASIC's head of enforcement - financial services said the regulator became concerned after Ben Skinner, principal of Melbourne law firm Evans Ellis Lawyers, told the meeting that he referred 50 per cent of his insolvency work to Hall Chadwick.

Liquidation's outcome 'profoundly disturbing" says On Q Group judge

Matthew Gess
Photo: Worrells 

LIQUIDATORS' remuneration and deeds of company arrangement (DoCAs) are again in the spotlight following the publication of a judgement relating to the failed ASX-listed IT outfit, On Q Group Limited (In Liquidation)(Subject to Deed of Company Arrangement)

The judgement - handed down last Friday by NSW Supreme Court Justice Paul Brereton - ruled on the application of Danny Vrkic, a Wollongong-based insolvency practitioner seeking to terminate the winding up of On Q Group so as to facilitate the effectuation of a DoCA. 

Paul Burness
Photo: Worrells.

But while outlining his reasons for ultimately granting Vrkic's application, the judge expressed multiple reservations about how On Q Group's insolvency has played out.

One concern related to the remuneration of On Q Group's liquidators, Worrells' Matthew Jess and Paul Burness, who were appointed liquidators via a creditors voluntary winding up on December 23, 2008. Justice Brereton questioned the liquidation's purpose.

"Thus the practical effect of the liquidation has been to

recover in excess of $725,000 of assets and transfer it to the liquidators, their agents and advisers, with no benefit at all to those for whose benefit the liquidation is supposed to be conducted. I find this profoundly disturbing," he said.

Prior to the judgement Jess and Burness presented evidence to justify their remuneration, with Jess filing an affidavit on October 1 2014 which laid out the complexities of the liquidation and the work done. The judge however seemed unconvinced.

"But even assuming that every dollar of remuneration can be supported on the basis of time spent at their usual rates, it is difficult to see how it can be justified having regard to considerations of proportionality," he said, referring to his recent decision in the matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 (No 2) [2014] NSWSC 1270 (17 September 2014).

In a statement provided to SiN, Worrells shed more light on the background to On Q Group's complicated clean up.

"Prior to us accepting this appointment, we are aware that at least one other major insolvency firm had refused to consent to act due to the significant risk and uncertainty associated with the appointment," the firm said. 

"The Voluntary Administration and subsequent Liquidation of the Company was burdened with a number of complexities, including several separate legal proceedings, and significant costs that we were required to personally fund (at our expense and risk) as there were no recoveries until more than 12 months following our appointment.

"Worrells supports proper scrutiny of liquidators remuneration and we welcome open discussions on insolvency matters."

Justice Brereton's judgement, following hard on the heels of the AAA Financial decision, also drew a quick response from the Australian Restructuring, Insolvency & Turnaround Association (ARITA).