DEWR dollars to fund liqs’ claim against PwC

PwC
Hogan Sprowles partner Michael Hogan.
PwC
HoganSprowles partner Christian Sprowles.

It’s taken them more than one attempt but the liquidators of failed education provider Cornerstone Investment Aust Pty Ltd (Cornerstone) are finally dealing from a competitive position if not one of outright strength in their pursuit of PwC.

” …. these documents disclose the confidential agreement reached between the plaintiffs and the Department, as well as the reasoning process of the plaintiffs in agreeing to enter into that agreement. These documents also disclose information concerning the likely costs of, and prospects of success of, the Supreme Court proceedings against PwC.” Justice David Yates.

Late last month Federal Court judge David Yates made orders approving the entry into a funding agreement between Cornerstone’s liquidators Michael Hogan and Christian Sprowles, Cornerstone and the Department of Employment and Workplace Relations (DEWR). See: Sprowles, in the matter of Cornerstone Investment Aust Pty Ltd (in liq) [2022] FCA 1008

Given it was only in November lat year that the pair were licking their wounds after PwC had their first $43 million professional negligence claim struck out in the NSW Supreme Court, the judge’s ruling represents a leap forward off the kind Mao Tse-tung might applaud, and the red chairman knew a thing or two about attempting great strides, though not much about completing them.

Additionally, the funding approval casts the spotlight on that rarest of beasts – Commonwealth funding for liquidators that doesn’t come from either ASIC, FEG or the ATO.

In this case the money to fund the liquidators is coming out of the newly-formed DEWR which came into being on July 1, 2022 following the elevation of the Australian Labor Part (ALP) to government.

The purpose of that funding is to allow the liquidators to pursue their professional negligence claim against PwC in respect of a $30.5 million dividend Cornerstone’s sole shareholder and director Jin Heung Yang paid himself on December 31, 2015. The dividend was accompanied by a $13.5 million franking credit.

At the date of that payment PwC was already engaged as the company’s registered tax agent and two weeks after the dividend payment PwC provided Yang with an asset & liabilities statement.

The dividend was also paid after the Australian Competition and Consumer Commission (ACCC) commenced an investigation into the company’s affairs.

In the years 2014 to 2016 Cornerstone experienced rapid growth, thanks mostly to revenue generated from VET FEE-HELP Advances from the then Department of Education action & Training (DE&T).

Under previous governments, those advances were paid via the Department of Education & Training. In their 2018 report to creditors the liquidators confirmed they had accepted a proof of debt from DE&T for $5.9 million.

In making the orders last month Justice Yates also agreed to confidentiality orders sought bye the liquidators in respect of Hogan’s affidavit in support of the application.

” …. these documents disclose the confidential agreement reached between the plaintiffs and the Department, as well as the reasoning process of the plaintiffs in agreeing to enter into that agreement,” the judge said.

“These documents also disclose information concerning the likely costs of, and prospects of success of, the Supreme Court proceedings against PwC.”

Be the first to comment on "DEWR dollars to fund liqs’ claim against PwC"

Leave a comment

Your email address will not be published.


*