Ousted VA extracts fees despite demands for costs

Greyhouse Partners’ Ben Verney.

Commercial judgment appears to have won out in respect of a dispute over the fees of a former voluntary administrator (VA) who refused to comply with a costs order while his remuneration remained unapproved.

The recently resolved stand off involved Greyhouse Partners Ben Verney, who was formerly voluntary administrator (VA) of Icon Construction Australia (NSW) Pty Ltd (ICA NSW), the company’s major unsecured creditors, their lawyer Michael O’Neil and Icon’s current liquidators, Chris Palmer and Liam Bailey of O’Brien Palmer (OBP).

“We are not aware of any dissenting opinions in this regards, nor of any reasonable excuse for non-compliance by the former administrator with the consent orders that he agreed to.” Chris Palmer and Liam Bailey.

Details of the dispute and its resolution are contained in a recent update to ICA NSW creditors.

Verney had been the original VA but was replaced by Palmer and Bailey in December last year following consent orders made by the NSW Supreme Court. The OBP pair were subsequently appointed liquidators in February, 2021.

Those orders followed proceedings launched by two Owners Corporation’s – Otto 1 and Otto 2 – who are the company’s major unsecured creditors.

As a consequence of the consent orders the applicants were granted costs in the sum of $80,000, and in their September 23, 2021 Report, Palmer and Bailey describe what happened next.

“Following our appointment, Mr Michael O’Neill of O’Neill Partners, the solicitor for Otto 1 and Otto 2, made a number of written demands upon the former administrator to pay the amount of the costs order into his firm’s trust account for the benefit of Otto 1 and Otto 2. The former administrator refused to comply with these demands.

“Mr O’Neill is of the view was that this costs order (sic) was an expense of the former administrator incurred pursuant to Section 443A of the Act, such that the former administrator should have forthwith complied with Mr O’Neil’s demands and paid the costs order of $80,000 into his firm’s trust account.

“We are not aware of any dissenting opinions in this regards, nor of any reasonable excuse for non-compliance by the former administrator with the consent orders that he agreed to,” Palmer and Bailey said.

Verney of course might have thought his outstanding remuneration claims amounting to more than $200,000 represented a very reasonable excuse for non-compliance.

The Victorian confirmed to iNO that legal advice he received “questioned the priority of the costs order”.

As it turned out the OBP pair and Verney reached an agreement by which he would agree to release the the amount necessary to comply with the costs order from the $195,000 over which he has asserted his lien in exchange for Palmer and Bailey putting to creditors resolutions for the approval of a discounted fee claim.

Verney also has recourse to a $110,000 indemnity paid by Icon Construction Australia Pty Ltd upon appointment so he appears to have played the situation very well, notwithstanding adverse commentary in the OBP report, such as: “We are similarly concerned by the conduct of the former administrator in this regard, but owing to the fact the former administrator is withholding all funds under lien, we are without funds to commence proceedings to complete the former administrator’s compliance with the consent orders, but endeavoured to resolve the dispute commercially on the best terms to which the former administrator would agree”.

Creditors approved Verney’s remuneration claims, no doubt grudgingly, last month.

ASIC meanwhile received Palmer and Bailey’s report in respect of potential director’s breaches on August 12, 2021.

The same day Palmer and Bailey were advised that the regulator didn’t intend to take any action based on the report’s contents.

Further reading:

VA Verney Falls On Sword At 11th Hour

Proof Of Debt Decisions Could Cost Victorian A VA

RL’s Links With Referrer Upset ICON Directors

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