Machinery is now in place to force compulsory licensing of insolvency specialists and the back biting is starting. The High Court dismissed claims by Auckland insolvency specialist Damien Grant that a rival should be prohibited from all future insolvency work.
Damien Grant paid twenty dollars to take assignments of two debts owed by an insolvent Auckland property developer to then sue rival liquidator Kevin Davies alleging Davies was incompetent and dishonest and should be barred from all insolvency work.
In February 2019, Rahman Investments Ltd went into liquidation leaving a part-finished Remuera property development. The building site was sold by a secured creditor for $665,000 with mortgages totalling some two million dollars secured over the property left only partly repaid and unsecured creditors claiming hundreds of thousands of dollars left out of pocket.
The High Court was told a creditors’ meeting called early in the liquidation descended into chaos. Mr Grant was in attendance representing an unpaid creditor, seeking to be appointed liquidator himself. There were allegations Mr Davies in the chair solicited proxies from creditors to confirm his appointment as liquidator and that he dismissed votes from creditors seeking his removal. One creditor recorded the meeting. Mr Grant subsequently purchased disputed debts from aggrieved creditors through his company Tempest Litigation Funders Ltd. In the High Court, Tempest challenged Mr Davies performance as liquidator demanding a full itemisation of creditor lists together with a court order that Mr Davies be denied any remuneration and be prohibited from ever again doing insolvency work.
Associate judge Andrew refused Tempest leave to challenge Mr Davies work. While the creditors’ meeting arguably was run in an irregular manner, the evidence fell well short of demonstrating any serious issue of bad faith or material procedural irregularity justifying court intervention, he said. Tempest itself failed to follow correct Companies Act procedures when suing Mr Davies, Judge Andrew said.
Rahman Investments was hopelessly insolvent. Unsecured creditors would receive nothing. There was substance to Kevin Davies complaint that Damien Grant initiated legal action against him for improper and personal reasons, Judge Andrew commented.
Tempest Litigation Funders Ltd v. Davies – High Court (24.04.20)
20.071