Liquidators:

A liquidator is a person appointed to wind up a company. When a company’s financial position is precarious, a liquidator steps in to realise various assets so that the company’s creditors’ accounts are settled. Liquidators therefore have a high standard of professional practice, and must discharge their duties carefully and diligently. The duty of care that liquidators must adhere to constitutes a high threshold for professional conduct. Negligence however can still be encountered among liquidators. In these situations:

• If a liquidator is being accused of negligent conduct, the allegation can seriously effect the liquidators business and reputation. In this case, steps must be taken to ensure what the allegation is based on and appropriate action taken. This may involve preparing a defence against a complaint or a legal suit against the liquidator. In the event that there is no evidence of negligence, the merits of commencing proceedings in defamation law may be investigated; and
• If a person feels that a liquidator is not conducting himself in accordance with the standards of best practice, the evidence must be considered in light of the law and the professional standards of that particular industry before any steps are taken to institute proceedings against the liquidator.

The Australian Securities and Investment Commission has published various guidelines for the conduct of liquidator’s business. [1] These include:

• Security Deposits;
• External Administration of a Company: Financial Reporting and Annual General Meetings;
• External Administration of a Company: Liquidators and Registration;
• External Administration of a Company: Reporting and Lodging; and
• External Administration of a Company: Deed of Company Arrangement Involving a Creditors’ Trust.

The Insolvency Practitioners of Australia is a body which has also drafted certain guidelines for the conduct of insolvency professionals practicing in Australia. A Code of Professional Practice has been prepared and can be accessed from their website. [2] The Code seeks to:

• “educate IPA members as to their professional responsibilities; and
• “provide a reference for stakeholders against which they can gauge the conduct of practitioners.”

These materials will assist in determining the scope and threshold of a liquidator’s duty of care, and in turn, determine whether or not a claim in professional negligence has any merit. The assessment process is not a simple on and depends greatly on the quality of the evidence available. For parties involved in a dispute concerning the alleged negligence of a liquidator, it is essential that a legal practitioner with expertise in this field be retained for legal advice and guidance.

If you need legal advice for a negligent liquidator matter you may wish to contact our office by telephone on (02) 9233 4048 or email us at info@navado.com.au.

[1] “Guidance for Liquidators”, Australian Securities and Investments Commission website (undated) <www.asic.gov.au> (accessed 20 November 2013).

[2] “Code of Professional Practice, 2nd Edition” Insolvency Practitioners of Australia website (undated) <www.ipaa.com.au> (accessed 20 November 2013). According to the website, an updated 3^rd edition of the Code will come into operation in early 2014; an advance copy of this Code can also be obtained from this website by practitioners

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