Long shots in the insolvency caper can be costly. Just ask the two Grant Thornton partners who sought the adjournment of a hearing of a winding up application on the day the winding up application was potentially to be heard.
The reason for this heroic and 59th minute of an 11th hour intervention was simple.
Phil Cambell-Wilson and John McInerney had been appointed voluntary administrators (VAs) of Ming Tian Real Property Pty Ltd the day before NSW Supreme Court judge Ashley Black would potentially have heard the winding up application, though the matter was originally scheduled only for directions.
In that context their first act as VAs had to be to avert any insolvency practitioner who wasn’t either of them being appointed as Ming Tian’s liquidator.
“… it is difficult to see how the Administrators could have formed the view that the adjournment application was in creditors’ interests, where they had been in office for only a day and the funding of the proposed DOCA depended on a borrowing by another company that Mr Dai did not control of substantially more than a property that it was to acquire was worth, and then diverting the additional amount borrowed (which was previously to be made available to the Company) to Mr Dai to fund the DOCA.” Justice Ashley Black.
iNO readers who have read VA’s Professional Skepticism AWOL On Adjournment Bid will be aware that the Grant Thornton pair were not successful in their Hail Mary chuck of the dice.
After hearing the adjournment application the judge ordered Ming Tian be wound up and BPS Recovery’s Max Prentice appointed liquidator. But what was not resolved was the question of costs.
In finalising his orders for the winding up and Prentice’s appointment Justice Black told the parties he was minded to order that the one day VAs pay the costs of the adjournment application.
He was however also minded to give the Grant Thornton pair and their legal advisors at Piper Alderman a brief period in which to formulate any submissions they might wish to make in support of orders that would see Ming Tian’s creditors foot the bill.
A few days later the parties returned to the fray. Ming Tian’s petitioning creditor and three other creditors which had supported a winding up were unsurprisingly opposed to any order that could potentially deplete the still hypothetical returns Prentice might ultimately recover.
But the one day VAs were equally motivated to avoid paying the costs of the adjournment application, arguing that the application was the company’s, not their’s and that generally courts have ordered that the costs of adjournment applications made under sections 440A or 467 of the Act be paid for out of the assets of the company.
His honour, who was well aware the unsuccessful VAs were sitting on an indemnity was having none of it.
“I am satisfied that the order that I originally proposed is the proper order, for three reasons,” the judge said.
“First, Mr Campbell-Wilson’s affidavit had recognised that the Administrators were, in substance, the proponents of the adjournment application.
“Second, as is implicit in my findings, it is difficult to see how the Administrators could have formed the view that the adjournment application was in creditors’ interests, where they had been in office for only a day and the funding of the proposed DOCA depended on a borrowing by another company that Mr Dai did not control of substantially more than a property that it was to acquire was worth, and then diverting the additional amount borrowed (which was previously to be made available to the Company) to Mr Dai to fund the DOCA.
“Third, and importantly, I have referred above to the Administrators’ submission that the costs of the administration would not be to the disadvantage of the Company’s creditors, because Mr Dai had provided a capped indemnity for their costs.
“It would be inconsistent with that submission for Luckyfloor’s costs of the adjournment application now to be borne by creditors as costs in the winding up, rather than by the Administrators who may rely upon the indemnity they had obtained from Mr Dai to meet those costs. For these reasons, I will not vary the costs orders that I made on 19 July 2021.”
Campbell-Wilson yesterday confirmed to iNO that there would be no appeal, saying “all parties were aware of the risks and costs are covered”.
He added that faced with similar circumstances he wouldn’t do anything different. “Creditors should always have a choice,” he said with the caveat that he treats “every potential appointment based on its circumstances”.