The Federal Court handed down judgment last Thursday in Australian Securities and Investment Commission v Franklin (liquidator), in the matter of Walton Construction Pty Ltd (in liq)  FCA 68 (13 February 2014).
ASIC sought Orders removing the Liquidators of the subject companies on the basis of an apprehension of a lack of independence and impartiality, and (or in the alternative) a declaration that the Liquidators had contravened their obligations in relation to their DIRRI (Declaration of Relevant Relationships).
They key issues related to the belief that the referring business advisors had worked with the companies prior to liquidation (including in relation to transactions which may require investigation such that the transactions, the directors and the business advisors may need to be challenged by the liquidators) and the business advisors had referred several other voluntary administrations to the liquidators’ firm previously, which generated a significant volume of fee paying work. ASIC argued that due to the ongoing commercial relationship, generating significant fees, there may be a reasonable perception that the Liquidators may (consciously or not) wish “not to bite the hand that feeds them”.
The Court found that no logical connection was made out for any apparent conflict, and they were “not persuaded that there is any substance in the claim of apprehended lack of independence”. Further, the Court refused the request regarding the DIRRI, finding that the DIRRI was adequate under the statutory requirements. ASIC are currently reviewing the judgment, so we will watch this space.
The original judgment can be accessed here.
Breaking news: on 26 February 2014, ASIC filed an appeal with the Federal Court of Australia. No date has been set for the hearing of the appeal, so watch this space.