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.