Liquidator exceeds fee cap, repels misleading claim

The Federal Court has refused to find that Victoria Project Pty Ltd (VPPL) liquidator Stephen Dixon and his firm misled shareholders when he told them his fees to complete a members voluntary winding up (MVL) would be capped at $50,000 plus out of pocket expenses and GST.

As is disclosed in Dixon (Liquidator), in the matter of Victoria Project Pty Ltd v Austhome Group Pty Ltd [2023] FCA 42 a subsequent application to the court by the Hamilton Murphy partner saw a judicial registrar in 2021 fix Dixon’s fees at $273,584.50 plus GST.

“What is obvious is that a professional indemnity insurer has responded to the cross-claim against Mr Dixon and Hamilton Murphy. For future noting, leave should have been applied for in this matter.” Justice Shaun McElwaine.

Unsurprisingly, the party who brought the claim for misleading or deceptive or unconscionable conduct was the same party who was required, under a deed of settlement the VPPL shareholders had entered into, to indemnify Dixon for any costs of the liquidation exceeding $60,000.

What the February 1, 2023 judgment of Justice Shaun McElwaine reveals is that the attack that the court has refused to endorse was largely driven by the failure of VPPL director Xue Bin “David” Wu to provide Dixon with a detailed understanding of the extent of shareholder disputes when the pair first met to discuss the proposed MVL on April 16, 2018.

“Central to the cross-claim is whether Mr Wu made full disclosure to Mr Dixon of all that he knew as relevant to the fee cap, if he did not, whether in that circumstance the fee cap representations made by Mr Dixon were objectively misleading or deceptive or unconscionable and whether I should accept that Mr Wu and Austhome relied upon those representations in their decision to enter into the Deed and with it to accept the fee indemnity obligation,”the judge said.

Both Dixon and Wu were cross-examined at trial about their recollection of the meeting.

Dixon wasn’t able to provide much detail but what he was able to point to was the fact that his fee estimate was based on the information Wu had provided and that he had warned the director the estimate would have to be increased if what he thought would be a straightforward in-specie distribution of assets to shareholders in accordance with the deed turned out to be more complex.

At the trial, Dixon and Hamilton Murphy had separate representation, something Justice McElwaine tolerated but said should not have been undertaken without obtaining court approval.

“Mr (Christopher) Brown appeared for Mr Dixon upon the trial instructed by CLH Lawyers. Ms (Catherine) Pierce also appeared for Mr Dixon, not with Mr Brown and separately instructed by Moray & Agnew Lawyers. Despite my drawing attention to that unusual method of representation, no party objected,” the judge said.

“It would seem a common assumption that the interests of Mr Dixon and his firm Hamilton Murphy Advisory Pty Ltd (Hamilton Murphy) as respondents to the cross-claim are sufficiently distinct so as to permit, and indeed require, separate representation.

“In the absence of any objection, I was content to allow the division of responsibility in that way whereby Mr Brown assumed carriage of the construction question and Ms Pierce dealt with the cross-claim.

“However, it should not be generally understood that proceeding in this way is appropriate. As noted by Bowskill J in Australia Pacific LNG Pty Ltd v Sooner Insurance Company [2021] QSC 43 (which contains a pellucid summary of the case law), leave may be granted for separate representation as an exception to the general rule that a party may only be singly represented.

“Dual representation “ought only be permitted when the interests of justice require it”: [14]. What is obvious is that a professional indemnity insurer has responded to the cross-claim against Mr Dixon and Hamilton Murphy. For future noting, leave should have been applied for in this matter,” his honour said.

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