Receivers at odds over residual funds

residual
Pitcher Partners’ Bryan Hughes.
residual
Auxilium Partners’ Bob Jacobs.

Over in West Australia there’s been an interesting development in the stoush between the current and former receivers of Pluton Resources over the status of, and entitlement to, so-called residual funds.

In Robert Allan Jacobs as Receiver and Manager of Pluton Resources Ltd (Receiver and Manager Appointed) (In Liq) -v- Hughes [2018] WASC 414 (9 August 2019) Acting Justice Larissa Strk found that Pluton’s former receivers Pitcher Partners’ Bryan Hughes and Daniel Bredenkamp could hang onto almost $600,000 that current receiver Bob Jacobs of Auxilium Partners wanted the court to order be transferred to him.

The funds were all that remained from monies provided to Hughes and Bredenkamp via a funding deed entered into with a related party of their appointor.

The former receivers are concerned about potential liabilities and argued their equitable lien entitled them to retain the funds.

But because of how the funds provided and how they’ve been used raise questions around circulating assets and Section 433 of the Corps Act, the Commonwealth’s FEG Recovery Unit has been taking a keen interest.

“The Commonwealth’s position is that it may have a claim against the Former Receivers for breach of Corporations Act s 433, but the evidence filed by the parties does not contain the information necessary to determine the existence or quantum of such a claim nor enable the Commonwealth to take a final position on any claim,” Justice Strk said.

Ultimately, it seems Jacobs was unable to find a way to successfully mount his case given the absence of information available relating to Hughes and Bredenkamp’s use of the monies.

“I find that the Former Receivers are entitled to retain what they presently hold of the Residual Funds for the purposes of meeting any extant liability,” acting Justice Strk said.

“I do so on the basis that I make no findings as to whether the Former Receivers satisfied their obligations under Corporations Act s 433.”

We sought comment from FEG about its views of the decision and will update the story when and if a response comes through. Please take a moment to support INO’s continued chronicling of the insolvency sector.

Further reading:

PwC Pair Lose To Pitchers Duo In Pluton DoCA Fight

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.

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