A judge of the Supreme Court of Victoria has cracked a can of hurt after approving an application by a creditor to bring proceedings in the name of the company against the company’s liquidators.
Whilst ruling that the creditor must agree to indemnify the company in liquidation again any adverse costs, Justice Richard Attiwill found that the circumstances were sufficiently unique and unusual as to exercise the court’s discretion in favour of the the Daiwa Can Company (DCC), which has liquidators’ professional indemnity insurance in its sights.
“I do not accept the liquidators submissions that the granting of leave would likely produce little, if any, tangible benefit for the creditors. In the event that the claims succeed then Barokes may be entitled to substantial damages.” Justice Richard Attiwill.
The details are contained In the matter of Barokes Pty Ltd (in liq) [2022] VSC 642 which outlines the lengthy history of disputes between Barokes major shareholder DCC, its minority shareholders and now its liquidators, who DCC is seeking to sue for alleged actions and omissions by the liquidators during their sale of the business and assets of Barokes in 2019.
Naturally enough the liquidators – BRI Ferrier’s David Coyne and former liquidator James Koutsoukos – oppose the grant of leave, arguing that even if DCC is successful the result would provide little tangible benefit for creditors. Justice Attiwill disagreed.
“I do not accept the liquidators submissions that the granting of leave would likely produce little, if any, tangible benefit for the creditors. In the event that the claims succeed then Barokes may be entitled to substantial damages,” the judge said.
Effectively DCC is arguing that Coyne and Koutsoukos (who left BRI in 2020) were negligent when they chose to sell Barokes to a rival joint venture linked to Barokes’ minority shareholders, who’d been in dispute with DCC for years prior to the liquidators’ appointment.
The judgment’s lengthy but provides revealing detail in respect of the issues the courts will consider when deciding whether or not to exercise the discretion sought.
Interestingly the attitude of the liquidator in respect of the prospects of a claim are normally a key consideration but as Justice Attiwill pointed out, these are unusual circumstances given the liquidators are the targets of the claim and their attitude could hardly be considered objective.
“Based on all these factors, I am satisfied that the circumstances of this case are out of the ordinary and special,” he said.
“Further, if I am wrong and extraordinary or exceptional circumstances are required, based on all these circumstances, I am satisfied that the circumstances of this case are extraordinary and exceptional,” he said.
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