Is that referral making you impartial? Lessons from ASIC v Franklin - .PDF file.
By Michael Hughes and Jon Karolczak
Glenn Franklin, Stirling L Horne and Jason G Stone (the first, second and third defendants) (‘liquidators’) are the liquidators of Walton Construction (in liquidation) and Walton Construction (Qld) (in liquidation) (the fourth and fifth defendants) (‘companies’). The liquidators were appointed as administrators of the companies on referral from the Mawson Group (Mawson), a business advisory and restructuring firm that services distressed companies.
Mawson had previously provided services to the companies, and companies related to the group had also engaged in asset sale and debt assignment transactions with the companies shortly before their administrations. Those transactions resulted in the transfer of a substantial portion of the companies’ businesses. Mawson had also previously referred six other voluntary administrations to the liquidators’ firm that involved similar antecedent transfers of assets and debt assignments to Mawson-related companies and that generated significant fees for the firm.
ASIC applied to the court pursuant to section 503 of the act seeking an order removing the liquidators, arguing that the liquidators would need to investigate Mawson’s involvement in the pre-administration transactions in circumstances where the liquidators’ firm had an ongoing commercial relationship with Mawson. That relationship, ASIC contended, gave rise to a reasonable apprehension of lack of independence in that the liquidators would, either consciously or not, favour interests associated with Mawson at the expense of the interests of creditors generally…
Click on the link below to read the rest of the Minter Ellison briefing.