Over in the West the pool of formal insolvency appointees might more correctly be described as a puddle and when a practitioner accepts a job involving related entities it can result in some entertaining DIRRIs indeed.
One example which recently caught iNO’s eye was a declaration from ex-Ferrier Hodgson partner Dermott McVeigh, who on June 8, 2021 appointed himself liquidator of Schlager Building Services Pty Ltd (SBS).
At the time of his self-appointment McVeigh, who left Ferrier’s in 2017 to start up his Avior Consulting brand, was already aware that SBS had problems.
This was because on April 14, 2021 he’d accepted an appointment as administrator of Schlager Group Pty Ltd (SG) and the parent company of SBS, Schlager Group Australia Pty Ltd (SGA).
In his DIRRI for SBS McVeigh states that he and his staff became aware of the conmpany’s financial difficulty through his role as “Liquidator of the Company’s parent, Schlager Group Australia Pty Ltd (In Liquidation) (SGA) and as Trustee of the Schlager Group Creditors’ Trust following the restructure of Schlager Group Pty Ltd (SGPL)” via a deed of company arrangement (DoCA).
The appointment as liquidator of SBS was effected on 8 June 2021 by way of a resolution by sole director Asher Schlager to hold a directors’ meeting, the purpose of which was to convene a members’ meeting.
“SGA is the sole member,” McVeigh declared. “As Liquidator of SGA I held the meeting of the Company’s members and signed the resolution that the Company be placed in liquidation and that I be appointed as liquidator.
“As the Company’s sole member, I resolved that the Company be wound up because it was evident to me that it was insolvent. I received no remuneration for this advice.
“The process leading to my appointment as the Company’s Liquidator was done at the insistence of Mr Schlager,” McVerigh added.
iNO asked McVeigh if he had sought independent legal advice before appointing himself but received no reply by our deadline.
We also wondered why McVeigh thought it necessary to declare that the steps to facilitate his self appointment were taken at the insistence of the director against whom McVeigh has identified a potential insolvent trading claim in respect of SGA.
Full and frank declarations are of course the minimum standard all appointees should meet without question but when some element of the declaration potentially creates a doubt doesn’t that risk rendering it defective?
Given his role as liquidator of SGA and SBS and his position as trustee of the creditors trust and the existence of loan accounts between the three McVeigh knew he was in a position where, if a dividend reared its unlikely head, conflict would follow. That was also dealt with in his DIRRI.
“Where that event arises and there is uncertainty about the value of the claim(s), a conflict of interest will likely exist,” he said.
“I may resolve the conflict by engaging an external insolvency practitioner to adjudicate the claim(s) and/or apply to Court for directions,” he said.
“I note there is no indication currently that any dividend will be payable in relation to the loan
accounts. Accordingly, I do not consider that a conflict of interest currently exists.”
No dividend, no conflict, no problem.
What you are suggesting is that there may be a conflict of interest and duty and this nromally would not arise where there was a 100% shareholding. Prima facie the actions taken are in the interests of all parties and he is correct in his statement regarding directions and possibly if there is a real conflict of interest and duty a new liquidator. It is the “duty” that creates the problem not the conflict without the duty.