Liquidation case adds to MP's concerns
Parliament needs to get moving and pass laws governing liquidators, Nelson MP Nick Smith says.
His comments come in the wake of unsuccessful High Court action against Nelson liquidator Pat Norris over the way he handled the liquidations of eight companies.
In her decision, Justice Jillian Mallon records that the Government's insolvency agency, the Official Assignee, alleged Mr Norris 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.
The decision also records that in one liquidation, Just Tees Limited, the court was told Mr Norris claimed he was independent when in fact the director and shareholder of the firm was his daughter's former partner.
The Official Assignee tried in the High Court at Nelson to have Mr Norris removed from the liquidations, have him banned indefinitely as a liquidator, and make him repay fees.
But Justice Mallon has ruled that the Official Assignee (OA) is not on the list of specified people able to take action under the Companies Act over a liquidator's fees.
She also ruled the OA had not served Mr Norris with the correct notices over his alleged failure to comply with his duties, and that it had not said whether it was claiming his breaches were persistent and serious.
Mr Norris said there were questions over the credibility of the Registrar of Companies' initial investigations into the liquidations, and he was taking legal action against the agency.
"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. We have been used as a guinea pig.
"All I can say is while they're attacking me they're leaving every other insolvency practitioner alone."
Commentators say the Norris decision demonstrates why the Government needs to pass new laws covering the unregulated insolvency sector.
The Insolvency Practitioners Bill is still before Parliament, with no sign of it becoming law anytime soon.
"I have been quite concerned about the way some liquidations in Nelson have been done, where there has been inappropriate management, where there have been decisions that have disadvantaged creditors," Mr Smith said yesterday.
"Parliament needs to get on and pass the insolvency law changes so there are some checks. . . . We have got to have a tight regulatory framework in which liquidations are being done more fairly."
Law firm Bell Gully said the OA's case against Mr Norris highlighted the need for reform.
It showed that the Companies Act - currently the main way to enforce a liquidator's duties - was "highly technical and narrowly drafted".
Shaun Adams, head of restructuring and insolvency at KPMG, said a regime requiring liquidators to be licensed before they can practise was "absolutely paramount".
"There is too much work being soaked up by less desirable practitioners. They in turn attract undesirable insolvencies."
The current bill only calls for a negative licensing regime, whereby liquidators would be blacklisted if they did something wrong. But the insolvency industry body, INSOL, is in favour of a positive regime requiring practitioners to become registered in the first place, Mr Adams said.
Mr Smith said he was openminded about which was the more efficient means of ensuring proper standards.
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