Creditors can be told details of a $3.5 million confidential settlement between liquidator of Stonewood Homes and directors James Boult and Brent Mettrick which resulted in no payment for unsecured creditors, the High Court ruled.
In 2016, Stonewood Group went into liquidation. Reports filed by the liquidator identify $3.5 million recovered in an agreed out of court settlement with directors. Stonewood’s secured creditor has not been paid in full. There is nothing available for unsecured creditors.
In 2022, unsecured creditor Geoff Ball applied to the High Court for access to settlement details. Associate judge Paulsen said the better course of action was to ask Stonewood’s liquidator to release the information. Mr Ball is a member of Stonewall’s liquidation committee.
In any insolvent liquidation, unsecured creditors can vote for a liquidation committee. It provides oversight, both protecting creditor interests and assisting the liquidator. Unpaid creditors can provide industry insights, helping with the location and sale of company assets.
Mr Ball was joined by two other creditors on Stonewood’s liquidation committee requesting terms of the confidential settlement. When the liquidator indicated his intent to allow disclosure, Mr Boult and Mr Mettrick were back in front of Judge Paulsen claiming that disclosure was in breach of their settlement agreement and that the request was being made for an improper purpose, being the potential for legal action taken by individual creditors.
The liquidation committee has Company Act rights to inspect all liquidation records and documents, subject only to a liquidator having reasonable grounds to believe this would prejudice the company’s liquidation, Judge Paulsen ruled. There was no such prejudice here, he said.
The High Court was told the liquidator proposed members of the liquidation committee be allowed to read the file, but not take notes or make copies.
Boult & Merrick v. Cain – High Court (20.09.22)
22.165