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Michael Murray’s on-going commentary on issues in corporate and personal insolvency law and related policy and law reform, in Australia and internationally. Given the scope of insolvency, this extends to business, consumer and professional conduct, and ethics, governance and regulation, criminal, tax, environmental and administrative law, and the courts and government.

 

Insolvency practitioners’ duties of neutrality

Liquidators and administrators, and trustees, when their appointments are challenged, have a duty of neutrality, to provide relevant facts to parties, and to the court, in order for the concern about the challenge to be determined on its merits.

The voluntary administrator’s appointment in Condor Blanco was successfully challenged, and some legal guidance was given in the reasons for judgment. But the Court has now said that the administrator did not response partially or neutrally to the challenge to his appointment and made costs orders against him: In the matter of Condor Blanco Mines Ltd (No. 2) [2016] NSWSC 1304. 

While allegations in support of the contention that the appointment should be terminated were not such as to require that he “simply vacate the field”, they did indicate that there were serious questions to be tried. He had indicated in correspondence that if anyone took proceedings, “he would give all necessary evidence and neither consent to nor oppose the grant of the relief sought”.

Having done this, he then abandoned it through his solicitor’s subsequent letters suggesting that costs might be sought against those taking the proceedings. 

“Such warnings (or threats) are standard issue weapons deployed by lawyers engaged by clients to run hard-fought adversarial litigation. By having his solicitor bring those weapons to bear as and when he did, [the administrator] obviously intended that the individuals should re-assess their commitment to the litigation. He thereby distorted the process in which he had originally said he would cooperate. He adopted an unambiguously adversarial stance”.

“There was, in that respect, a clear and grave desertion of the position of essential neutrality that it was [his] duty to adhere (scil to)”.

He

“did not act in and about the litigation in a way that constructively facilitated resolution of the important matter of Condor’s status. He abandoned a stated position of essential neutrality in favour of a partisan and adversarial role’.

The administrator was denied his legal costs of the proceedings, and he was ordered to pay half of the company’s costs. 

There was no issue raised in the judgment about his lawyer’s involvement in the partisan and adversarial role that he took. 

 

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