Gerry Rea & Partners insolvency specialists Simon Dalton and Matt Kemp wasted creditors’ money by pursuing an unmeritorious claim against Avanti Finance and by failing to accept a reasonable settlement offer when handling the liquidation of Fabri-Cell International, the High Court said. As punishment, legal costs awarded against Fabri-Cell were bumped up by just over thirty per cent and the liquidators told they should ‘fess up to Fabri-Cell creditors for their mistakes.
In September 2019, the two liquidators sued Avanti Finance Ltd over a debt-factoring agreement, claiming $208,650 following Avanti’s collection of Fabri-Cell client invoices but allegedly then failing to account by making payment to another company: JSR Group.
JSR Group was related to Fabri-Cell; it had been named in Fabri-Cell’s debt-factoring arrangements by mistake. A May 2020 trial determined Fabri-Cell had suffered no loss; JSR had paid Fabri-Cell’s bills. Avanti, already out of pocket for loans made to Fabri-Cell under the debt factoring agreement, did not have to refund the value of invoices it took over for collection.
Associate judge Bell said the case should never have come to trial. Avanti had explained the background facts to liquidators. It even went as far as offering $50,000 in settlement to get the problem off its back. This offer would have cleared liquidators’ legal costs and left something for creditors. The offer should have been accepted, Judge Bell said. Instead liquidators upped the ante, expanding their claim to $1.2 million stating they would not settle for less. At the High Court trial, Judge Bell described the liquidators’ claim as a ‘smoke and mirrors’ exercise; mis-describing transactions between Avanti and Fabri-Cell and failing to acknowledge Fabri-Cell had suffered no loss from Avanti’s actions.
Evidence was given that the debt factoring arrangement was a commercial disaster for Avanti. Another creditor held prior registered security over Fabri-Cell’s invoices.
re Fabri-Cell International Ltd – High Court (10.06.20)
20.101