i-Prosperity giving Cor Cordis plenty to chew on

The old adage about biting off more than you can chew and chewing like hell came to mind this week as iNO digested the judgment of Justice Catherine Button in Nipps, in the matter of i-Prosperity Pty Ltd (in liq) [2023] FCA 1446.

Her honour was ruling on an application brought by Cor Cordis partners Jeremy Nipps and Barry Wight seeking to extend the deadline for making applications under s 588FF(1) of the Corporations Act 2001 (Cth) (the Act) in respect of two groups of claims they’ve identified in respect of the i-Prosperity Group, which collapsed in mid-July 2022.

As had been widely documented, i-Prosperty’s controllers – Menghong (Michael) Gu and or Zhou Zhang (Harry) Huang – departed the jurisdiction not long after Nipps and Wight were appointed and have not been contactable since.

But the absence of the directors is perhaps the least of the problems Nipps, Wight and their team at Cor Cordis are facing.

Justice Button’s judgment details a litany of challenges, starting with books and records which Nipps said in supporting affidavits “were not organised in any logical manner, were incomplete, and untrustworthy (eg in relation to transactions being misdescribed in narrations)”.

The liquidators have also had to involve themselves in various pieces of litigation, most of which has been initiated by other parties, have incurred more than $7.5 million in fees, clawed back less than half that in recoveries and even had their remote access to a critically important server ended shortly after their appointment when it was confiscated by the NSW Police’s Financial Crimes Squad.

That meant they were hostage to the lone third party consultant who had imaged the server data at the appointment date.

“The Liquidators have been, and are, faced with very difficult circumstances and it is in no way surprising that they have not been able to finalise their investigations and initiate claims without obtaining extensions,” the judge said. “They have had to, and have, prioritised their work.”

That prioritisation has included focussing their efforts on claims identified against the Crown and Star City Casinos, meaning potential claims against Sydney lawyer John Landerer and David Hetao Gong of Gong Capital have not been pursued with the same vigour.

Both Landerer and Gong are alleged by the liquidators to have received funds from i-Prosperity group entities and may yet be summonsed to appear for public examination and ultimately face claims for voidable transactions and in the case of Landerer, an alleged unfair preference.

But the liquidators’ decision to focus elsewhere was sought to be used against them in the extension application with Gong and Landerer arguing that any extensions the court was prepared to grant should include carve outs to exclude them from future pursuit.

In identifying a specific prejudice he would suffer if the liquidators’ application was granted Landerer also “claimed that the ongoing spectre of litigation by the Liquidators involving his firm was responsible for his inability to obtain top up insurance (other than very limited top up insurance at a very high premium),” the judge said.

“He also said that his association with i-Prosperity has been raised with him whenever he has applied for personal credit, although he has not been refused credit. Given that matter, and the lack of detail concerning any such applications for credit, I do not accept Mr Landerer has, or would, suffer personal prejudice in that regard,” he r honour concluded.

In the end Nipps and Wight won extensions to March and July 2025 in respect of the claims categories identified. Not as much as they wanted but time enough perhaps, if they can obtain further funding.

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