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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.

 

Friendly and ‘friendly’

The friendly family doctor, dentist, and police officer properly convey what the term “friendly” means, that meaning going back to Beowulf. But the word can be used sarcastically and pejoratively.

ASIC and the government use the term that way, most recently referring to situations where directors appoint a

“‘friendly’ liquidator to wind up a company, with the liquidator then not investigating suspect transactions in the liquidation process”. 

That situation should more clearly be explained as one where, for example, a company liquidator acts unlawfully in administering the liquidation of the directors’ company, overlooking their theft of company assets, and finalising the liquidation quickly, and with some financial return on the side.  

In the same way, a government officer might favour a family member, or a politician a financial supporter, with more serious misconduct involving bribery.

Insolvency laws

The recent use of the term “friendly liquidator” is found in the call for submissions by the Assistant Treasurer and the Minister for Employment on ways to deal with what they call “sharp corporate practices” in exploiting the Fair Entitlements Guarantee (FEG) scheme for employees of insolvent companies.  The Ministers say that such practices are “not always strictly illegal”; others might disagree.  

… the media releases of politicians, the writings of journalists and the ramblings of vexatious litigants

Sarcasm is not an appropriate means to convey a legal meaning, certainly in formal communications.  Apart from the FEG side of government further demeaning the office of liquidator (see the Treasurer’s Insolvency Law Reform Act 2016), it is an example of the yellow press standard of explanation, found in the media releases of politicians, the news stories of journalists, the ramblings of vexatious litigants, and on this website, at times.  

Clearer meaning required

If the government is saying, in the FEG or phoenix company context, that a director may appoint a pre-arranged liquidator to wind‑up a company with that liquidator then conducting a feigned investigation of suspect transactions or conduct, then it should say that.

This assumes in any particular case that there is no explanation for the liquidator’s minimal investigation, for example lack of funding, or that a larger investigation would not be proportionate to the expected outcome.  While ASIC might spend over 30 court hearing days in achieving a $50,000 penalty against Mr Flugge, with no order as to costs, a liquidator would be criticised for doing so, even if it were possible on the funds available.

Friendly means friendly, for the moment

The debasement of the nice word “friendly” does not yet appear in the dictionaries, though, courtesy of the Australian government, it may soon do so.

We might then find that its new meaning is extended in a similar way to government officials, tax officers and politicians. 

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One Response

  1. Thanks Michael – you’re exactly right.

    The truth is that most liquidators are decent people trying to shine a light on the wrong doings of directors and others for the benefit of creditors.

    With the push towards “pre-packs” by unregulated middlemen and others, together with the government’s latest proposal for limited or no investigation liquidations for companies with debts of $250,000 or less, I wonder who is really being “friendly” and enabling the wrong-doers.

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