Unresponsive liq to pay indemnity costs personally

We hear much about first responders but not so much about non responders.

We might however hear a bit more after a Victorian liquidator was ordered to personally pay more than $21,000 in indemnity costs after he repeatedly failed to respond to a creditor’s correspondence.

Given that the creditor had wanted the meeting to consider a resolution to replace the incumbent and the liquidator was under the impression that he’d already been replaced, it’s clear that the protagonists in this curious tale were operating at cross purposes.

But as you will see, that didn’t absolve the hapless practitioner who a judge of the Supreme Court of Victoria said had placed himself in a position of conflict and breached his obligation to act independently.

This latest eyebrow raiser comes courtesy of a judgment delivered last week and made public on Tuesday.

In the matter of Good Home & Property Pty Ltd ACN 604 707 048 in Liquidation determines an application for costs brought by the creditor against Melbourne liquidator Peter Goodin.

“Goodin knew as of 1 September 2021 that he was still the appointed liquidator, but he did not inform the plaintiff’s solicitor of what had occurred or what steps were proposed be taken to rectify the situation. If he had, it is more than likely that the plaintiff would have held off bringing her application. Indeed, it seems that if Ms Dong had not raised the matter with him, he would have continued to consider he was no longer the liquidator indefinitely.” Associate Justice Simon Gardiner.

Ms Min Wen was the only creditor of significance of Good Home & Property Pty Ltd after obtaining a judgment debt for almost $100,000 from the Magistrates’ Court of Victoria in February, 2021.

Two months later lawyers acting on her behalf issued a statutory demand which went uncompiled with and on June 11 2021 Wen’s lawyers obtained a garnishee order for $102,285 plus interest.

The garnishee was Hiways Australia Pty Ltd trading as Hiways Lawyers, the company’s lawyers.

Hiways held $159,024.12 on trust for the company in respect of a separate proceeding in the Supreme Court of Victoria and whilst the the trust funds were the subject of a freezing order made by Justice Jim Delany on 15 April 2021, Associate Justice Simon Gardiner said in the judgment that the order didn’t prohibit the company from paying Wen’s debt.

Despite this it wasn’t paid, maybe because June 2021 was a busy time for the company, shares in which were being dealt with by the executor of the estate of the sole director and shareholder who died in 2018.

ASIC records showed that on June 11, 2021 Goodin was appointed as “care-taker director” of the company by the estate executor.

Then on June 29 Goodin signed a declaration of solvency acknowledging that the company owed a total $102,285.17 to unsecured creditors, an amount equal to Wen’s judgment debt plus interest and costs under the garnishee order.

A day later at a meeting of the company’s members Goodin, in his capacity as sole director, had used a proxy of the deceased estate of the 100% shareholder of the company to pass a resolution that the company be wound up and that Goodin be appointed liquidator.

No notice of meeting was sent to the creditor and according to Associate Justice Gardiner, no notice was published on the ASIC website. But Wen and her lawyers proved tenacious.

By August they’d obtained a consent to act from Charles & Co director Ned Talic and fired off correspondence to Goodin in what turned out to be a vain attempt to get him to convene a meeting.

We say vain because as Goodin told the court in his defence to the costs application, he had already been instructed by the estate executor to resign as liquidator of the company one day after he was appointed.

Goodin said that over the following couple weeks he had arranged for Lowe Lippmann’s Matt Sweeney and Gideon Rathner to replace him. Or at least, he thought he had.

As it turned out, the critical appointment documents he thought he’d emailed to Sweeney in July had never been attached to the message. Goodin had taken off to the Territory on a five week break, oblivious to the fact that he was still the liquidator.

After he returned he was no doubt bewildered to discover letters and emails from the creditor and her lawyers requesting he convene a meeting.

As he had left instructions for all matters relating to Good Home & Property to be forwarded to Sweeney and Rathner he largely ignored the correspondence.

But by September he must’ve been feeling uneasy, as evidenced by an email exchange with Sweeney helpfully reproduced by his honour.

“On 4 September 2021, Mr Sweeny wrote to Mr Goodin, stating: ‘I’ll have IT look into the emails of the 12th but not in my spam/junk folder. Is there any benefit appointing us if the only creditor has their nominated liquidator?

“In response, Mr Goodin stated: ‘I think a change in appointee will make the creditor happy. Perception because I was the director. Given there’s still 159K in the bank, it should be worth your while & you should be able to retain it’.”

On September 14, 2021 Wen commenced proceedings in the Supreme Court to have Goodin removed. On the 18th he told her lawyers he was no longer the liquidator.

When the creditor confirmed this with an ASIC search she wrote to Goodin suggesting that he agree that the proceedings be discontinued on the basis that he pay her costs.

A Calderbank offer for $9,700.00 was included in that correspondence but lapsed on September 27 without being responded to by Goodin so Wen applied for orders requiring Goodin to pay her costs on an indemnity basis without recourse to the assets of the company.

In determining the application in the creditor’s favour the judge was scathing.

“I observe at the outset that the appointment by Mr Goodin, the sole director of the Company, of himself as liquidator of the Company gives rise to an obvious conflict, the judge said.

“This conflict quickly became apparent to the Estate’s Administrator and her solicitor very shortly after Mr Goodin’s appointment.”

“Very shortly after his appointment as liquidator, Mr Goodin states he ‘was instructed by the [E]state’ to resign as liquidator of the Company on 1 July 2021 by reason of matters arising in respect of the Victorian Supreme Court proceedings.

“I observe that Mr Goodin was required to act independently in his capacity as liquidator and have regard to the interests of creditors. It was not a matter of him resigning on the instructions of the Estate’s Administrator.”

The judge also took aim at Goodin’s general unresponsiveness. Even when the creditor – but this time the plaintiff – emailed a copy of her application to Goodin on September 14 asking if he would accept service by email – he didn’t respond.

“His explanation was that, as with other correspondence dealing with the liquidation, he did not read it, but merely forwarded them on to Mr Sweeny. This is in the context of an originating process seeking his removal from an insolvency administration and the disallowance of his remuneration,” the judge observed.

Despite all of this, the judge’s analysis showed that courts are generally restrained in respect of the ordering of indemnity costs in favour of one side when the primary question – in this case whether or not liquidator should be removed – is never put before the court.

Goodin argued that the facts didn’t support a departure from the general approach which is to order that each party pay their own costs. But the judge wasn’t having it.

“I consider that the evidence adduced by the plaintiff would have led to the removal of Mr Goodin as liquidator and his replacement by reason of his clear conflict as both director and liquidator of the Company,” the judge said.

“Moreover, the plaintiff was, at that time at least, the sole creditor of the Company and any court considering her application would clearly have had regard to her application for his removal. As such, I consider that the application for principal relief would have succeeded.

“The evidence seems clear that Mr Goodin only became aware that his resignation had not been effected when Mr Sweeny informed him of this on 1 September 2021.

“He criticises the plaintiff for commencing this proceeding because the matters the subject of the proceeding were matters that ‘could have been sorted out without commencing proceedings’. I do not accept this. The evidence is that throughout the timeline, Mr Goodin was unresponsive to communications from the plaintiff’s solicitor. I regard Mr Goodin’s conduct as not meeting the requisite standard of a registered liquidator,” the judge concluded.

We emailed Goodin asking him if he was considering appealing the judgment. As at the time of iNO’s deadline there had been no response.