Important Case on Bank Guarantees - Special Leave to Appeal to High Court
In the matter of The Retail Group (Darlinghurst) Pty Limited & Cohort D Pty Limited (the Companies), a director of the Companies brought an application to have the Companies wound up on just and equitable grounds.
The application was not opposed by the other director of the Companies and an interested party who were joined as defendants. Kemp Strang acted for these parties (Kemp Strang Clients).
The only significant issue between the parties after some discussion, was the appropriate liquidator.
The plaintiff provided a consent for an insolvency practitioner from a large firm with rates of $580 per hour at partner level.
The Companies were small proprietary companies. Accordingly the Kemp Strang Clients considered that an insolvency practitioner from a smaller firm with more economic rates was more appropriate. This course was opposed by the plaintiff. The Kemp Strang Clients provided two alternative consents to the Court, the more cost effective consent of the two was from a practitioner from a small firm with rates of $480 per hour at partner level.
During argument on the issue of the appropriate appointee, Counsel for the plaintiff made submissions to the Court that:
- the Court should adopt the usual course that a plaintiff's nominee should be appointed; and
- the difference in hourly rates was negligible and not an important consideration when considering the appointment.
Brereton J stated that the difference in hourly rates was actually one of the most important considerations when appointing insolvency practitioners. His Honour considered the difference between the hourly rates as a percentage that could be returned to creditors.
His Honour, accordingly appointed the Kemp Strang Clients' nominee with the lesser hourly rate.
In delivering judgment his Honour held that there were significant public policy considerations in liquidations being conducted in an economic way. Having reference to that consideration, his Honour held that practitioners who provide lower estimates should be preferred.
The case is important for all practitioners and particularly petitioning creditors, as it demonstrates that the Court:
- will not simply appoint a petitioning creditor's proposed appointee in circumstances where a defendant provides a consent from a more cost effective insolvency practitioner;
- the Court will consider the appropriate appointment having reference to, among other things, the hourly rates of the practitioner and the size of the company; and
- the Court is inclined to appoint a practitioner with more economic hourly rates as this may mean a greater return to creditors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
