"Ambitious" preference pursuit derailed by judge

Hall Chadwick's David Ross. Preference claim
described as "ambitious" by judge.
Photo: Hall Chadwick

Liquidators can on occasion err in pursuit of a preference but incorrectly defining insolvency and testifying as one's own expert witness? The cake has well and truly been taken. Or at least it has if you accept the conclusions of the Federal Court's Justice Jim Edelman In the matter of FPJ Group Pty Ltd (In Liquidation).

His honour's judgement deals with a $153,554.00 claim for alleged unfair preferences launched by Hall Chadwick's David Ross and Shahin Hussain.

The pair were appointed liquidators of Queensland-based building materials supplier FJP Group in July, 2014 and their claim homed in on a series of payments made to FJP's supplier, CSR, between January and June, 2014.

If they'd been successful, the recovered preferences would have gone towards paying their and their lawyers' fees. Nothing particularly unusual in that. But Justice Edelman had other ideas.

"This litigation was unfortunate and uncommercial," he said in his opening sentence. "In some circumstances the public interest in recovery proceedings being brought by a liquidator might justify a risk being taken that legal costs might exceed recovery. But that public interest diminishes substantially where, as here, some of the liquidators’ claims are ambitious," he said.

"Ambitious"? Ross, who as lead appointee had conduct of the matter, told SiN yesterday that the judge's remarks were a shock.

"If he is suggesting that any preference payment for $150,000 is uncommercial, well that will change the industry entirely," Ross said."We used all endeavours to try and settle this matter. It (the judgement) ignores all efforts we made to settle it."

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.