But another creditor ‘went for the throat’. The insolvency firm now has a claim for fees that exceed the total debts, so probably end of the road for that business. But, whichever way my colleagues and I look at it, we cannot understand the size of the fees, unless insolvency firms charge one hours fee for licking a stamp.

Surely this creditor just destroyed any chance they had of getting paid. One would conclude that if they did this out of spite then the liquidator offered them good value, but if they were genuinely expecting to recover their losses they might have learnt a lesson.

Most of the legal system seems either directly or indirectly built around mutually assured destruction, so this seems to fit with the scheme reasonably well.

AN INVESTIGATION by the corporate plod has resulted in high-profile accountant Dean McVeigh of Foremans Business Advisors being banned from acting as a voluntary administrator or liquidator for 18 months.

The Companies Auditors and Liquidators Disciplinary Board found that McVeigh ”failed to carry out or perform adequately and properly the duties of a liquidator” during the administration of 10 companies between 2001 and 2007.

The board adjudicates on registered auditors and liquidators who are reported by the Australian Securities and Investments Commission or the Australian Prudential Regulation Authority.

In its 227-page report, CALDB found McVeigh failed to disclose to creditors his relationships with companies, company directors and professional advisers while involved in liquidations.

The board found that McVeigh should not have accepted several liquidations because of such conflicts.

He ”failed adequately and properly to investigate the business, property, affairs and financial circumstances” of several companies after being appointed liquidator.

Of the 52 breaches alleged by ASIC, the CALDB panel found 48 were established ”to our satisfaction”.

The name Dean Royston McVeigh has popped up several times over the years.

In 2005, he was liquidator of the Melbourne University Student Union Inc and issued a writ against former MUSU presidents Andrew Landeryou and Ben Cass.

McVeigh claimed a ”conspiracy in relation to the alleged diversion of profit from the union bar and food outlets to Landeryou and Cass” through various firms.

McVeigh also took action against Cass for contempt of court over comments he published about the MUSU liquidation in a blog.

Justice Elizabeth Hollingworth found the blog comments had a ”strong degree of factual accuracy”. It was a remarkable court victory for Cass, a part-time student who represented himself in the proceedings.

”At the heart of [Cass'] concerns is his assertion that the liquidator started with about $6 million in assets and $4 million in liabilities, but instead of simply paying out creditors has spent millions of dollars on professional fees pursuing this litigation against impoverished or impecunious defendants,” Justice Hollingworth said.

In 2008, McVeigh’s name appeared in the papers after Carlton’s Rathdowne Tavern went bust. Creditors from Laanecoorie Vineyard noted that the owners, Nicholas and Jody Harvey, were trading in the same business, using the same name, in the same building, and were ”driving around in a very fancy black Mercedes”.

McVeigh was the liquidator of the business.

According to yesterday’s CALDB decision, several of the private companies that McVeigh liquidated faced bills from the Tax Office. One, called IDKF, faced legal action from the NSW Minister for Commerce over a claimed $2.8 million debt.

ASIC raised questions about fund transfers out of the companies before they were wound up.

The panel, in its explanation of its decision, found that several of McVeigh’s actions were ”contrary to the applicable professional standards and to law”.

In addition to his 18-month ban, McVeigh was ordered to complete additional ”continuing professional development”. When his suspension has ended, he will be subject to peer reviews of his next five voluntary administrations and next five creditors voluntary liquidations.

McVeigh, who has denied any wrongdoing, runs a business called McVeigh Corporate Advisory.

Read more: http://www.theage.com.au/business/administrator-liquidated-for-18-months-20100209-npvx.html#ixzz1fFiiCkJO

5 years of fees and counting.

Readers would also be interested to know that there are now no defendants to any litigation commenced by Mr McVeigh after he dropped action against all original named parties to a Statement of Claim regularly the source of much amusement amongst legal circles.

Of the twelve original defendants, eight ‘settled’ for zero and of the remaining four, the highest amount agreed to was the grand sum of $25,000 after consideration of the legal fees involved in defending the matter, however spurious the Claim may have been.

One can only wonder when this sad and disgraceful chapter will end.

Thank you,

Benjamin Cass

Not sure of the details of this particualr matter other than it has only recent been published.

:)

Gerard.

I am a chartered accountant and registered liquidator who has been working in the profession for over 20 years. I have been disgusted by the abuses and the disregard for ethical standards in the profession. Too many insolvency practioners simply pay lip service to the law and to best practice standards. Moreover, their professional association has perfected the art of schmoozing the regulators, ASIC and ITSA.

Obviously something needs to be done. But I don’t think the answer lies in setting up a division of ASIC to take the place of insolvency practitioners in private practice.

Once upon a time, liquidators were appointed by the Court on a rotation system. Such a system would mean that if a creditor puts a company into liquidation, or the company puts itself into liquidation, the liquidator who gets the job is the one who appears next on the court’s list. In this way he or she is more likely to act independently. I think this system should be given serious consideration again, because independence is crucial and obviously cannot be achieved just by official exhortation.

I have published a number of articles on my own blog, which is titled Australian Insolvency Practice and Malpractice and is at http://goingbroke.blogster.com.

The point being that there were never any “missing millions”. I only wish. If I did I wouldnt be in this financial position now!

What must be understood about the MUSU farce is the alternate scenario if a Liquidator with any scruples had taken control……MUSU has $6 million in cash and assets. MUSU had $4 million in debts and liabilities. A Liquidator (not McVeigh) realises the assets, pays out a 100c dividend and distributes the balance in favour of the new student organisation. The time to undertake such an excercise? About 2-3 months.

Who would have lost out of this scenario? Creditors? No. They would have received 100c in the dollar. The new student organisation? No. They would have received the balance after MUSU’s assest were realised and MUSU’s debts were paid.

So the only loser than would have been …..(drum roll please) one Dean Royston McVeigh and Graeme Levy of Madgwicks Lawyers. The two firms have billed in excess of $7.2 million in professional fees over three years. This is a mind boggling figure to wind up a solvent student organisation.

The point of course is that without a long winded legal case involving multiple parties and multiple complications (namely that the tabloid headlines of ‘missing millions’ were not reflected in the statement of claim) Dean McVeigh and Graeme Levy would not have walked away with millions, they would have walked away with tens of thousands of dollars.

Greed, and only greed, were the motivations for a lengthy liquidation based on bizarre legal grounds that are routinely the source of humour for any lawyer who has ever taken the time to read the Statement of Claim.

Holding absolutely no prior expertise in this area and without any legal training other than three years of being self represented against the supposed best of the best, I have a number of very firmly held beliefs as to how the system can be reformed to genuinely aid distressed companies and their creditors.

Thank you for the opportunity of posting and I would only be too pleased to answer any questions form either yourself or your readers.

Benjamin Cass

An example of ASIC’s uselessness is seeking advice on how to deal with the intestate death of a sole shareholder/director.

No, whatever the solution, and I agree that the whole liquidation process must be examined, the suggestion that ASIC become involved would lead to even more disaster.

One possible solution that will appeal to your socialism is work out the average return in small (say less than $15 million) liquidations, and have ASIC pay this amount plus eg 5 cents in the dollar to all creditors and chase up all debts themselves.

PS I also agree that this is a case of at best pots and kettles. But insolvencies are very tricky, mainly because the whole idea is that people must lose some of their money. Which is in turn on of the reasons for the high fees of liquidators. Another argument they make is that they do a lot where there is simply nothing, and accordingly don’t get paid at all, so they have to charge to reflect this.

Indeed, and such seems to be clearly the case, IMO. While McVeigh is plainly doing little, or worse, for MUSU creditors, to style him as the (main) bad guy is a travesty.

Here, my suss-ometer scale reading went to “eleven” upon reading this exculpatory attempt by Cass: “$2M … is how much McVeigh reckons he will get out of suing bankrupts, near bankrupts, insolvent companies and 20 year olds!”

I was gearing up to challenge one of them, but a learned colleague told me that his experience is that the Court does not wish to scrutinise the fees charged by the Trustee in Bankruptcy. Plus my client accepted a deal, so end of fight.

In the other, I am now a creditor, but with a deal of sympathy for the debtor, and I would like him to keep running his business. But another creditor ‘went for the throat’. The insolvency firm now has a claim for fees that exceed the total debts, so probably end of the road for that business. But, whichever way my colleagues and I look at it, we cannot understand the size of the fees, unless insolvency firms charge one hours fee for licking a stamp.

The insolvency practitioners are accountable to whomever or whatever appoints them, but those people/bodies seldom, if ever, hold the practitioner responsible. The reason/mechanics of that are articulately put by KP.

A directive by a Chief Justice that the taxing Masters are to carefully scrutinise the practitioners fees would be a good start. Followed by a taxation of fees-if need be, funded and run by legal aid. The tools to correct the problem are there, but no-one has the both the desire and the ability to use them.

Obviously, ours works best for large companies with well-heeled creditors. After all the genius of our law is the efficient harnessing of individual self-interest as a proxy for ‘fairness’. In any situation where there is no effectively counter-weighting self-interest, I’d agree that there is a prima facie problem.

One possible cure? Contingency fees for suing them – but again, the actual amounts are often not going to interest lawyers. Another would be making the first creditor’s meeting compulsorily appoint a new liquidator in small liquidations, and pay a fixed statutory amount to the provisional liquidator who first takes over. It loses on efficiency, or so they will say, but maybe it gains a teeny bit on accountability.

One possible solution that will appeal to your socialism is work out the average return in small (say

Power corrupts. Absolute power attracts the absolutely corruptible.

In my limted experience they definitely need sorting out, their vague status as officers of the court is not good enough to redeem them currently. Excellent post.