Liquidation case 'highlights flaws'

Last updated 05:00 03/08/2012

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Insolvency practitioners say unsuccessful High Court action against a Nelson liquidator is a case in point of why the law covering their industry needs reforming.

The government's insolvency agency, the Official Assignee, tried to have Pat Norris removed from the liquidations of eight companies, have him banned indefinitely as a liquidator, and make him repay fees.

Justice Jillian Mallon's decision records that the assignee alleged that Norris had charged excessive fees, sold assets at below value to himself and his associates, banked the funds from several liquidations into one account, and combined liquidation funds with his own business.

However, Justice Mallon has ruled that the assignee is not on the list of specified people able to take action under the Companies Act over a liquidator's fees.

She also ruled that the assignee had not served Norris with the correct notices over his alleged failure to comply with his duties, and it had not said whether it was claiming his breaches were persistent and serious.

Norris said there were questions over the credibility of the Registrar of Companies' initial investigations into the liquidations, and he was taking legal action.

"My view is their actions are misfeasance of a government body against a citizen. The difficulty comes down to certain persons within certain government departments who think that this is a dictatorship-style state and they can do what they like."

Commentators say the Norris decision is a good example of why new laws covering the unregulated insolvency sector are needed.

Murray Tingey, insolvency practice leader at Bell Gully, said the case highlighted the need for reform. "The current system is clearly causing issues both procedurally and substantively."

Shaun Adams, head of restructuring and insolvency at KPMG, said a regime requiring liquidators to be licensed was "absolutely paramount".

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