It takes little effort to imagine FEG czar Henry Carr – who’s currently executing a confidential mission within the Department of Employment and Workplace Relations (DEWR) – butting heads with Lowe Lippmann partner Gideon Rathner. Litigation lawyers are bloody minded. Liquidators more so.
“There is nothing in the provisions of the Insolvency Practice Schedule that suggest any limits were to be placed on what information or documents may be requested or must be provided to the Commonwealth under ss 70-55(2) and 70-55(3) beyond the requirement that the information or documents are “in relation to” the external administration,” Justice Penelope Neskovcin.
So when Carr sought access to documents generated prior to Rathner’s appointment as voluntary administrator (VA) of Mentor Education Pty Ltd on March 20, 2023 the latter released some but withheld others on the basis that ss 70‑45 and 70‑55 of the Insolvency Practice Schedule apply to documents created from the date of appointment.
Pre-appointment material Rather argued fell within the bounds of Section 486 of the Corporations Act, meaning a creditor must obtain a court order requiring a liquidator to disgorge the information sought.
Having paid out more than half a million to Mentor employees and lodging a proof of debt in the liquidation Carr had written to Rathner seeking certain pre-appointment communications; documents associated with securities relied upon by secured creditors; a consulting services agreement with, and information about payments to, the sole shareholder’s related entities; and information about the Company’s cashflow and transactions.
As is explained in Department of Employment and Workplace Relations v Rathner as liquidator of Mentor Education Pty Ltd at the hearing in the Federal Court on September 18 Rathner’s counsel Sergio Freire argued that despite the repeal of s 531 of the Corporations Act and the introduction of Div 70 of the Insolvency Practice Schedule, a hard line between pre- and post‑appointment documents remains and should be maintained.
But presiding judge Penelope Neskovcin disagreed, saying “There is nothing in the provisions of the Insolvency Practice Schedule that suggest any limits were to be placed on what information or documents may be requested or must be provided to the Commonwealth under ss 70-55(2) and 70-55(3) beyond the requirement that the information or documents are “in relation to” the external administration,” the said.
Quoting submissions from counsel for FEG Gillian WaLker SC her honour said:” ” .. the Department submitted, requiring a creditor to seek a court order under s 486 would entrench the regulatory barriers to information access that the legislature intended to remove through the reforms that were introduced by the Insolvency Practice Schedule”.
The questions resolved and Rathner’s asserted hard barrier hurdled, the judge ordered Rathner to disgorge in accordance with ss 70‑45 and 70‑55. Trophy for Carr. Ice pack for Rathner.
Further reading:
I would not have thought having regard to restrictions on prior involvement, that there would be much documentation to be produced.