Louttit FOIs FEG in battle over liquidation fees

Jamieson Louttit is grimly determined in his battle with FEG over fees.FEG and insolvency profession battle over rights to fees.
Liquidator Jamieson Louttit

Liquidator Jamieson Louttit: refusing to capitulate in FEG fee stoush.

With final submissions to the Department of Employment’s Reforms to address corporate misuse of the Fair Entitlements Guarantee (FEG) Scheme discussion paper due today, SiN thought it appropriate to revisit the tooth and nail struggle in which Sydney liquidator Jamieson Louttit has been engaged since receiving a $500,000 claim from the Department’s FEG Recovery Unit.

The FEG recovery team are of the view that appointees are generally not entitled to apply the proceeds of circulating asset realisations to cover general liquidation expenses. FEG recovery team chief Henry Carr is threatening to haul Louttit in for a public examination over his liquidation of a thing called Equada.

Louttit meanwhile has most recently been exchanging pleasantries with lawyers from the Federal Attorney General’s Department in relation to their decision to refuse him access to a sack of legal correspondence between FEG and various law firms on the basis the contents are subject to legal professional privilege.

The correspondence involves a plethora of lawyers, which is by far the politest collective noun SiN can identify. Arnold Bloch Liebler, Mills Oakley, McInnes Wilson and HopgoodGanim. Also, King & Wood Mallesons, Clayton Utz, Dibbs Abbott Stillman, HWL Ebsworth and Henry Davis York.

Louttit describes the legal opinion that FEG is relying on – supplied by Arnold Bloch Liebler (ABL) – as “clearly in direct conflict with established industry practice over 30 years” and thinks some of the opinions contained within the privileged correspondence might support his case.

In correspondence obtained by SiN (without any FOI palaver we might add) Louttit advises Peter Krizmantis of the DoE’s recovery and litigation branch and James Mason from Treasury’s Financial System Division that: “It is my understanding that FEG has also received advice from other lawyers (or advisors) on other matters (ie Other than the Company) that contradict, or at the very least, differs in opinion to that provided by Arnold Bloch Leibler (ABL).”

He also refers to comments Carr made to members of the Association of Independent Insolvency Practitioners (AIIP) about “honourable trading losses” meaning losses incurred in unsuccessful attempts to increase creditor returns, reimbursement for which would supposedly rank above FEG’s subrogated employee entitlement rights in the creditor priority waterfall. See: FEG Chief Open To The “Honourable Trade On”

The capacity for a broad interpretation would seem to be backed up by the discussion paper which states: ““There is currently uncertainty regarding the priority of employee entitlements over the claims of the security holder and the general remuneration, costs and expenses of a liquidator or receiver from the realisation of assets covered by a circulating security interest.

“The priority order is governed by section 433 (for receiverships) and section 561 (for liquidations). This uncertainty is reflected in the case law (including recent cases) on the provisions.”

In a response to Louttit ABL however insisted that “The Department (ie FEG) has not made a general concession that all trading losses, however incurred and in whatever circumstances, will have the priority afforded to costs and expenses incurred in realising secured assets.”

SiN had intended to question Carr yesterday at the ARITA NSW/ACT divisional conference and dinner where Carr was scheduled to present on the FEG scheme. However Carr withdrew at the 11th hour.

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.

5 Comments on "Louttit FOIs FEG in battle over liquidation fees"

  1. Not sure about all of the claimed uncertainty – even ASIC’s Information sheet 54 says “If the receiver is appointed under a security comprising both fixed and floating charges, which is common, there will be costs and fees of the receivership that cannot be directly allocated to realising the fixed or floating charge assets. These costs are allocated in proportion to the fixed and floating realisation amounts.”

  2. Same principal surely?

  3. Dr Garry Hamilton | 3 July 2017 at 6:20 am | Reply

    FEG’s position is correct. An analogous section in the UK Insolvency Act was held by the House of Lords in Bulcher v Talbot to have the effect contented for by FEG. The English legislation was later amended to partially allow for the effect contented for by James Louttit. There has been no amendment to the Australian provision.

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