WA liquidator gets all clear on conflict

West Australian liquidator Greg Quinn has secured the result he wanted following a court application to resolve a clear conflict.

The HLB Mann Judd partner is the liquidator of Flexi Staff Pty Ltd (Flexi Staff), as well as the liquidator of its related entity, Texpoint Pty Ltd (Texpoint).

“A liquidator has a conflict of duties in exercising any power to adjudicate upon and admit a proof of debt in the liquidation of a company which is submitted by another company of which they are also the liquidator. Where this occurs, an issue of propriety or reasonableness will tend to exist.” Judge Jenni Hill.

Both companies share the same ownership structure with Texpoint providing administrative and support services to Flexi Staff. Flexi Staff didn’t have any permanent management or administrative employees.

After being appointed liquidator of both Quinn determined that Texpoint’s primary business was providing those services to Flexi Staff.

When Quinn received a proof of debt in the liquidation of Flexi Staff from Texpoint in the sum of $1.472 million he knew it was time to seek judicial direction because adjudicating on such a claim would place him in conflict.

As is explained In RE Gregory Paul Quinn as liquidator of Flexi Staff Pty Ltd (In Liquidation); Ex Parte Gregory Paul Quinn as liquidator of Flexi Staff Pty Ltd (In Liquidation) [2023] WASC 362 Supreme Court of West Australia judge Jenni Hill agreed.

“In general, a liquidator of one company must not exercise his or her powers for the benefit or gain of another company of which they are liquidator,” the judge said.

“A liquidator has a conflict of duties in exercising any power to adjudicate upon and admit a proof of debt in the liquidation of a company which is submitted by another company of which they are also the liquidator. Where this occurs, an issue of propriety or reasonableness will tend to exist.

“As was noted by Black J in Re Go Energy Group Ltd (in liq), the court has an inherent power to authorise a liquidator to perform an act that would otherwise involve conflict, although that power will only be exercised rarely. In seeking to be excused from their fiduciary responsibility, the liquidator has an ‘onerous and exacting’ task.

“Subject to the liquidator making full and fair disclosure of the material facts, the effect of a direction is to protect the liquidator from claims that they have acted unreasonably, inappropriately, or in breach of their duties; it does not determine rights and liabilities that arise out of the proposed transaction. Put another way, the order of the court sanctions a proposed course of conduct by the liquidator,” the judge concluded.