02/12/2021 - 14:22

Judge rejects 'punitive' ASIC claim

02/12/2021 - 14:22

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The Supreme Court has rejected an attempt by the corporate regulator to overturn payments to insolvency experts Martin Jones and Andrew Smith.

Judge rejects 'punitive' ASIC claim
The court rejected ASIC's claim.

The Supreme Court has rejected an attempt by the corporate regulator to overturn payments to insolvency experts Martin Jones and Andrew Smith.

The case concerned payments to Messrs Jones and Smith in their capacity as voluntary administrators of Western Australian piggery business GD Pork.

The two men, represented by law firm Lavan, applied to the Supreme Court in 2019 to approve payments totalling $835,000.

The Australian Securities and Investments Commission intervened in the court hearings to challenge the remuneration determinations, which had already been approved by creditors of GD Pork.

In a judgement published this week, Justice Kenneth Martin said ASIC objected to their appointment in the first place, in October 2018.  

“ASIC's primary grievance is that Messrs Jones and Smith should not ever have taken up their appointments as voluntary administrators,” he said

The rationale was that their firm, Ferrier Hodgson, had earlier provided advice to GD Pork in a private capacity.

“On this basis, ASIC contends that conflict of interest and bias concerns arose and hence that the administrators' approved remuneration determinations by the creditors should be a subject of a court conducted review and to a corresponding substantial reduction in approved remuneration.”

Justice Martin said no person, including creditors, shareholders or even ASIC, had rendered any criticism at the value, quality and standard of work performed by the two men.

“Accordingly, there is no factual basis to sustain ASIC's contention that Messrs Jones and Smith, as the voluntary administrators, should not be entitled to receive all of the remuneration.”

He noted the creditors included EFIC and Bankwest. 

“Those secured creditors were commercially sophisticated organisations with commercial and business acumen and insight,” Justice Martin said.

“They held considerable commercial 'skin in the game'. 

“They were more than capable of rendering robust and reliable business judgments on matters such as the reasonable remuneration of the voluntary administrators.”

Justice Martin concluded that a review of the remuneration would be completely unnecessary and ultimately pointless.

“ASIC's efforts to ventilate a largely academic conflict and ostensible bias concerns against the administrators' level of reasonable remuneration for their work following their appointments via 'the back door, are ultimately not persuasive,” he said.

“I assess them to be in truth, punitive in their object, contrary to accepted principle.”

Justice Martin said that even if the conflict and bias arguments were established, that still would be an insufficient basis to deny the administrators their reasonable remuneration.

The administration of GD Pork ended in May 2019, when creditors resolved to wind it up.

Ian Francis and Michael Ryan of FTI Consulting were subsequently appointed as liquidators.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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