Judge unconvinced by SA liquidator’s exit plan

Exit plan awry after judge dismisses entirety of liquidator's caseAdelaide liquidator's exit plan involved smashing his joint venture partners in the courts.
Exit plan stymied by judge

Adelaide liquidator Nick Orfanos.

The demolition of the liquidator’s exit plan could not have been more sweeping or complete. In 500 plus paragraphs delivered on Monday, Justice Greg Parker of the Supreme Court of South Australia dismissed every argument of Adelaide liquidator Nick Orfanos in a battle commenced a decade ago.

Orfanos, accountant Michael Michaels and Willem (Bill) Ouwens, who as well as being an accountant is the Honorary Consul for the Netherlands in South Australia and the Northern Territory, are partners in a joint venture (JV) established primarily to provide office accommodation for the mens’ professional practices at 147 Frome Street, Adelaide.

In 2002 the men purchased the heritage property – built in 1883 – for $1.31 million and for about four years relations between the three were cordial at worst. Michaels conducted his business from premises on the ground floor while Ouwens and Orfanos occupied offices on the first floor.

Because there was more room on level one than they required, the companies controlled by Ouwens and Orfanos – Ouwens Corporate Services and Orfanos Corporate Services  entered a separate joint venture agreement in relation to the first floor tenancy.

This was known as OCS² and there was no formal agreement governing the OCS² joint venture, the precise terms of which Orfanos and Ouwens dispute and which have a significant bearing on Monday’s outcome.

“There is no claim made in these proceedings that directly arises from the OCS² joint venture,” Justice Parker said.

“However, the defendants rely on the conduct of Mr Orfanos connected with the termination of the OCS² joint venture as a basis for the Court to refuse relief on discretionary grounds.

“The difficulties that arose between Mr Orfanos and Mr Ouwens following the decision by Mr Orfanos to terminate the OCS² joint venture also place much of what followed in context. While the issues surrounding the OCS² joint venture are not central to the proceedings, they occupied much time at trial. It is also unavoidable that a substantial part of this judgment deals with those issues.”

In 2012 Orfanos sought to terminate the joint venture after what the judge described as “a series of disagreements between the parties” but the property’s co-owners stymied his efforts to exit.

He turned to the Supreme court claiming, amongst other things, oppression and breaches of fiduciary duties by his JV partners. He also sought an order that the JV company be wound up.

Justice Parker was having none of it, and while he agreed that Orfanos was entitled to sell his share in the property, it was not on terms the liquidator might have preferred for his exit plan.

“The result of my findings is that Mr Orfanos remains entitled to sell his interest in the joint venture in accordance with cl 9 of the joint venture deed (JVD). Thus, the contractual rights he obtained in 2002 when he entered the joint venture remain available to him.

“The fact that the sale price for a partial interest in the Property may be less than the value of a proportionate interest in the Property is a consequence of the joint venture agreement JVA.”


About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

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