iNO readers enamoured of circulating asset blow ups will find much in the latest decision of Federal Court judge Shaun McElwaine into which to sink their fangs.
“As is usual, the defendants secured a deed of indemnity for their appointment from 1st Cash. However, the appointor denies the obligation to indemnify the defendants in respect of this claim. That is the subject of a cross-claim by the defendants, which need not be further mentioned in these reasons.” Justice Shaun McElwaine.
His honour’s judgement in Department of Employment and Workplace Relations v Howell, in the matter of Castel Electronics Pty Ltd [2024] FCA 566 stems from an application for damages brought by the FEG Recovery Division against Jirsch Sutherland Melbourne partner Malcolm Howell and former Jirsch Sutherland partner Liam Bellamy.
The proceedings were commenced after Howell and Bellamy, in their capacities as receivers of Castel Electronics Pty Ltd, used funds they’d recovered to pay their remuneration and expenses and to repay their appointor 1st Cash Pty Ltd, a subsidiary of ASX-listed Earlypay Pty Ltd.
By the time Howell and Bellamy were appointed on January 25, 2018 Castel had been in dispute with business partner TCL Air Conditioner (Zhongshan) Co Ltd (TCL) for some time, winning a substantial award at arbitration and then, after China-based TCL refused to pay, court judgment to enforce its rights under the award.
The amount owed by TCL exceeded $3 million but after being appointed Howell and Bellamy settled for what Justice McElwaine described as “an amount much less than the total sum due plus interest”.
Six months after the receivers were installed Castel was wound up and Richard Lawrence of Hall Chadwick was appointed liquidator.
Subsequent to the winding up the Commonwealth made payments pursuant to the scheme established by the Fair Entitlements Act (FEG Scheme) totalling $631,169.42.
But despite lodging a proof of debt with Lawrence, the Commonwealth received no payments for the FEG Advance from him of from the Howell and Bellamy, the defendants in their former capacity as the receivers and managers of Castel.
Unsurprisingly the FEG Recovery Division examined the circumstances in relation to the monies Howell and Bellamy recovered via sales of inventory and the settlement with TCL.
It formed the view that the recoveries were circulating assets, that the payments the receivers made to 1st Cash and themselves were misdirected and in judgment delivered yesterday Justice McElwaine agreed.
The upshot is that Howell and Bellamy have a big bill to pay and a new mountain to climb, as was alluded to by his honour.
“As is usual, the defendants secured a deed of indemnity for their appointment from 1st Cash. However, the appointor denies the obligation to indemnify the defendants in respect of this claim. That is the subject of a cross-claim by the defendants, which need not be further mentioned in these reasons.”
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