Higher fees sees Judge reject Hall Chadwick

Deciding which party’s liquidator will be appointed has occupied the minds of more than a few judges so far this year, but the following is the first decision in which respective charge out rates have figured prominently in the judicial deliberations.

The matter comes courtesy of two directors who fell out and could agree only that their companies – BH Holdings QLD Pty Ltd (BHH) and BH Developments QLD Pty Ltd (BHD) – be wound up.

“There is evidence before me that the hourly rates of the partners, directors, and graduates of HLB Mann Judd are significantly below those of Hall Chadwick. There is also evidence that the quote that has been provided by HLB Mann Judd is also below the quote that has been provided by Hall Chadwick.” Judge Anthony McGrath SC.

Their accord didn’t however extend to the identity of the liquidator to be appointed and so the question came before NSW Supreme Court judge Anthony McGrath in The Matter of BH Holdings QLD Pty Ltd [2024] NSWSC 132.

As has been articulated on more than one occasion, a judge, faced with no clear differences between proposed liquidators, will generally agree to appoint the plaintiff’s nominee.

In BH Holdings QLD, the plaintiff had obtained consents Todd Gamble and Barry Taylor of HLB Mann Judd.

The plaintiff’s former friend and now foe however proposed that Hall Chadwick’s Blair Pleash and Marcus Watters be appointed and, knowing how courts favour plaintiffs nominees all other considerations being equal, sought to demonstrate why Pleash and Watters were the superior choice.

Because the directors’ companies are involved in developing a marina at Bundaberg, much was made of Watters’ supposed relevant experience, gleaned Judge McGrath heard from his involvement in two marina sales. The submission however failed to impress.

“The evidence in relation to that matter, however, is, to put it politely, very thin,” the judge said. 

“There is no direct evidence from Mr Watters of what involvement he had in each of those developments and how it would provide any benefit compared to the generalised experience of both Messrs Taylor and Gammel as liquidators of BHH and BHD. 

“In addition, Mr Watters’ CV does not identify any particular experience in relation to marinas and he has not drawn that directly to the attention of the court other than by assertions. 

“In circumstances where this Project has not proceeded to the development of the marina, it is by no means clear to me what difference any experience of Mr Watters in relation to any prior marina developments would have in the present case.”

Quite. But if evidence of experience in respect of marinas was lacking, there was no such dearth when the judge chose to consider evidence in relation to the liquidators’ schedules of fees.

“In the present case, there does not appear to be any difference between the respective fitness or qualifications of the proposed liquidators. There is, however, a difference in the costs that have been put forward by each of the prospective liquidators,” the judge said.

“There is evidence before me that the hourly rates of the partners, directors, and graduates of HLB Mann Judd are significantly below those of Hall Chadwick. 

“There is also evidence that the quote that has been provided by HLB Mann Judd is also below the quote that has been provided by Hall Chadwick. In my consideration, the differences in hourly rates are ones that may have a significant impact on the overall cost that might be incurred,” he said.

And if non-existent proof of marina experience and higher fees weren’t enough to disqualify Pleash and Watters, then perception of conflict was.

 “It is clear that in the present case, without making any aspersions or drawing any negative inferences at all, there are perceptions of conflict having to do with the relationship that exists between Bartier Perry (the solicitors for Benhollis) and Hall Chadwick, who have been proposed as liquidators by Benhollis,” the judge said.

“There is absolutely no suggestion — nor do I accept — that Bartier Perry would do anything other than act in accordance with their professional obligations. However, perceptions can be important, particularly in the circumstances of this case, where there is a significant amount of money that is owing to the substantial creditor, Beauwave. 

“I am also troubled (albeit only for the purposes of perception, rather than reality) that it is proposed in the present case that Hall Chadwick would be utilising the advisory services of Balmain. There is evidence before me that Balmain is a major shareholder in d’Albora Marinas, which could cause a perception of a potential conflict in the event that d’Albora were to be a proposed purchaser of the Project.

“Whilst I accept that Mr Pleash has been very open and transparent in relation to each of the matters of conflict, and I am grateful for that openness and transparency, the perception is important in the present case and as such has played a part in my consideration.”