The conspicuous ubiquity of an abundance of caution

An abundance of caution. If ever there was a phrase that gets an airing in most if not all court applications it would be this, at least when those applications involve an insolvency practitioner seeking fee approval for work performed as both liquidator of a corporate trustee and receiver of the associated trust assets.

The reason for the phrase’s frequency is overlap. And as the NSW Supreme Court heard yesterday, in the matter of Black Lab Design Pty Ltd, applicant Tim Cook of Balance insolvency had been appointed liquidator via a creditors voluntary winding up and then receiver of the assets of the Black Lab Design Unit Trust.

Further, during the course of the administration Cook had undertaken work to preserve and recover those trust assets in both capacities – as liquidator and as receiver with the work performed and the fees that work incurred therefore overlapping.

While the Black Lab Design Committee of Inspection (COI) had approved the bulk of Cook’s fees, asset recoveries performed in the receivership phase need the court’s imprimatur and while Cook’s counsel Shelley Scott felt that an application to court was warranted out of “an abundance of caution” NSW Supreme Court judge Ashley Black responded that it in the circumstances the application may not be overly cautious and may be necessary.

Where work to secure and realise the same assets was done in the roles of both liquidator and receiver, there was an obligation on the applicant to seek orders from the court in the correct form, and given the frequency of roles and work performed overlapping this is a challenge for insolvency practitioners and their legal advisors that won’t go away until current legislation governing the winding up of insolvent corporate trustees is improved.

Treading warily Scott also took care to ensure the application included reference to proportionality.

The court heard that total remuneration claimed represented just 13 per cent of total realisations of $2.634 million, a percentage that would’ve silenced the carpings of even the most vociferous advocates of ad valorem.

With no appearance by any party likely to object the judge was prepared to make the orders ought, though he reminded Scott that her client’s claim for $30,000 in future remuneration was subject to an undertaking that he pay any or all of it back if the work he envisages is still required isn’t performed. A reminder motivated no doubt out of an abundance of caution.