Tietjens v Quigley
[2015] NZHC 3276
•18 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-003339 [2015] NZHC 3276
UNDER Part 19 of the High Court Rules and the
Companies Act 1993
IN THE MATTER
of the liquidation of Quigley's Technical
Services LtdBETWEEN
STEPHEN REX TIETJENS AND PETER CHARLES CHATFIELD
Applicants
AND
STUART GARY QUIGLEY AND KATRINA MARY QUIGLEY Respondents
Hearing: 2 July 2015 Appearances:
D R Bigio for Applicants
W C Pyke for RespondentsJudgment:
18 December 2015
JUDGMENT OF HINTON J
This judgment is delivered by me on 18 December 2015 at 3.00pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors:
Grove Darlow & Partners, Auckland
B O Bluett, Hamilton
Counsel:
D R Bigio, Barrister, Auckland
TIETJENS AND ANOR v QUIGLEY AND ANOR [2015] NZHC 3276 [18 December 2015]
Introduction
[1] Stephen Tietjens and Peter Chatfield are the liquidators of Quigley’s Technical Services Limited (“QT”). They have applied, by way of originating application, for various orders against Mr and Mrs Quigley, the shareholders and directors of QT.
[2] Mr and Mrs Quigley filed an interlocutory application to debar Grove Darlow (solicitors for the liquidators) from acting on the originating application and for an order requiring the liquidators to produce an affidavit of documents as to the funding arrangements between Grove Darlow and the liquidators.
[3] This judgment relates only to the application to debar Grove Darlow.
Background
[4] Most of the background is only indirectly relevant, but for its indirect relevance, I set it out. It is an unusual story.
[5] QT was incorporated on 5 October 1992. It was a small family building business.
[6] In 2005, QT provided building services to a company called Mariteq
Fabricators Limited (“Mariteq”).
[7] On 18 December 2006, QT issued proceedings in the District Court against
Mariteq, claiming a balance due in respect of the building services. On 16 March
2010, judgment was entered in favour of QT in the sum of $32,973.75. Mariteq did not pay the judgment debt and later failed to comply with a statutory demand made against it. In May 2010, QT commenced liquidation proceedings against Mariteq.
[8] When the liquidation proceeding brought by QT was pending, Mariteq, represented by Grove Darlow, proposed a compromise to its creditors. Despite QT’s objection, the requisite majority of creditors approved the compromise at a meeting of creditors on 11 November 2010. QT challenged the compromise, alleging it was
unfairly prejudicial and that it contained material irregularities. QT issued proceedings in which it sought a declaration under s 232(3) of the Companies Act
1993 that it was not bound by the compromise. Mariteq and QT agreed that an independent accountant would be appointed to report on whether QT would receive a greater dividend through liquidation or under the compromise. The parties agreed to be bound by the outcome of the accountant’s report and the firm of McDonald Vague was selected. A deed was entered into to this effect on 5 December 2011.
[9] Subsequently, Mariteq alleged that Mr Booth from McDonald Vague, who prepared the report required by the deed, had been partial. McDonald Vague then decided to withdraw as the investigative accountant. Mariteq sought the appointment of another accountant but QT refused to participate. It took the view that Mariteq’s actions that led to McDonald Vague’s decision to withdraw had the effect of frustrating the deed, with the consequence that the deed was no longer able to be performed.
[10] Mariteq, through Grove Darlow, then brought proceedings seeking specific performance, requiring QT to join in the appointment of a replacement investigative accountant pursuant to the deed. Mariteq was successful in this proceeding and QT was ordered to perform its obligations under the deed.1 2B scale costs which amounted to $24,682 were ordered in favour of Mariteq against QT. The costs order was not paid by QT.
[11] The Mariteq compromise went ahead. QT ultimately received a very modest part payment.
[12] The position by this stage was that QT as the original creditor, had a debt of
$32,9732 but owed Mariteq $24,682 for the costs order. Set-off was not available to
QT because of the creditors’ compromise. Hence, instead of being the hunter, QT
became the hunted.
1 Mariteq Fabricators Ltd v Quigley's Technical Services Ltd (No 2) [2012] NZHC 2996.
2 I note that Mr Quigley says the debt owing to QT was “up to 6 figures” after interest and costs
were taken into account.
[13] On 18 April 2013, Mariteq assigned the right to enforcement and collection of its costs order against QT to Grove Darlow, the solicitors who acted for it in the proceeding in which that costs order was made. Grove Darlow, acting in their own right, issued a statutory demand to QT on 30 April 2013 for the amount of
$24,682.50, which was not met. On 21 June 2013, Grove Darlow, acting in their own right, applied for QT to be put into liquidation under s 241(4)(a) of the Companies Act on the ground that QT was unable to pay its debts. By court order on
14 October 2013, QT was placed into liquidation and Messrs Chatfield and Tietjens were appointed as liquidators at Grove Darlow’s nomination. QT did not oppose the liquidation application. The sealed order records that there was no appearance by or on behalf of QT.
[14] Grove Darlow were then instructed by the liquidators to act in the liquidation.
[15] The Quigleys lodged a claim in the QT liquidation for $85,378. Grove Darlow either have or intend to lodge a claim and are a creditor for $24,682. One other creditor, SBS, has lodged a claim for $32,108. This debt is guaranteed by the Quigleys and also secured by mortgage over the Quigleys’ personal real estate. Mr Quigley has sworn on oath that the SBS debt has been largely paid off and will be fully repaid by him personally. The payments to SBS have been included in the Quigley claim. The liquidators say that because SBS filed a claim, they are treating the debt as still outstanding. They also say that there may be other proofs of debt to be filed. Mr Quigley says he believes there will be no further proofs of debt as he has paid trade and other creditors. The liquidators have not accepted or declined any proof of debt at this stage.
[16] On 20 November 2013, the liquidators of QT received a cheque for
$48,173.50 from a third party, the Bowe Farm Trust, which considered itself a creditor of QT. On 5 June 2014, Mr Quigley initiated proceedings in the District Court against the Bowe Farm Trust claiming that the $48,173.50 should have been paid to him personally, for engineering and construction services provided by him. The Bowe Farm Trust argues that QT carried out the work and that the money has been paid correctly to QT. The Bowe Farm Trust has joined QT as a third party to that proceeding.
[17] On 18 December 2014, the liquidators brought the originating application against Mr and Mrs Quigley. The originating application seeks:
(a) A charging order over any judgment sum that Mr Quigley may be entitled to in the Bowe Farm Trust District Court proceedings;
(b)In the alternative, an order for that judgment sum to be paid into court or placed on interest bearing deposit by the Registrar or held in a solicitor’s trust account pending further order of the Court;
(c) An order for examination of Mr and Mrs Quigley;
(d) An order setting aside payments made by QT to the Quigley Family
Trust (‘voidable transactions”);
(e) An order setting aside two journal entries in QT’s accounts; and
(f) An order that Mr and Mrs Quigley are to pay sums of money that are owed to QT.
Submissions
Mr and Mrs Quigley
[18] Mr Pyke, for Mr and Mrs Quigley, submits that Grove Darlow cannot act for the liquidators on the originating application because that firm is self-interested and therefore cannot bring independence and objectivity to the proceeding. Mr Pyke says that Grove Darlow is effectively in control of the proceeding as a party.
[19] He submits that the only creditor interested in pursuing Mr and Mrs Quigley is Grove Darlow.
[20] Mr Pyke submits that there is no precedent for a solicitor or firm, who is also a creditor, to act and appear for a liquidator in proceedings. He says that this is a case of a creditor directly using the liquidators’ powers as a mechanism of execution and enforcement. He submits that liquidators are officers of the court who must act
impartially and in the interests of the whole body of shareholders and creditors, and not be dictated to by a single creditor. Mr Pyke submits that Grove Darlow cannot give objective advice to the liquidators about the interests of other creditors. He refers to r 5.4 of the Rules of Conduct and Client Care for lawyers and says that the independence of the liquidators is compromised by the lack of independence of the solicitors.
[21] Mr Pyke submits that this Court and Mr and Mrs Quigley are entitled to know more about the fee “understanding” between the liquidators and Grove Darlow and the assignment of the $24,682 debt from Mariteq to that firm. As I have said, these discovery issues are to be determined separately.
[22] He raises the possibility of maintenance and champerty arising from the assignment of Mariteq’s debt and the alleged sharing of proceeds of the liquidation with Grove Darlow.
Liquidators
[23] In response, Mr Bigio submits:
(a) The statutory provisions that govern the role and obligations of liquidators have the effect that a liquidator does not have an arbitrary power to prefer one class of creditors over another class or to ignore legal rights that might operate to the benefit of one class over another class.
(b)Grove Darlow does not have a conflict with the liquidators’ duty; there is an alignment with the liquidators’ duty. They are simply collecting money for distribution, as a liquidator is required to do.
(c) The actions of the liquidators through its solicitors have been entirely regular. There is no evidence that Grove Darlow or the liquidators have acted any differently from any other solicitor/liquidator involved in a similar situation involving voidable transactions.
(d)There is no application before the Court under s 284(1) of the Companies Act to review any part of the liquidators’ conduct during the liquidation. Liquidators’ decisions are reviewable by the Court under that section and the appropriate mechanism, if Mr and Mrs Quigley are unhappy with any decision made by the liquidators (including the decision to retain Grove Darlow), is to apply under s 284. Mr Bigio submitted that the courts are slow to intervene under s 284 where matters of judgment and assessment on commercial
matters are concerned.3 The statutory regime under the Companies
Act favours allowing liquidators to make business decisions which they, as the persons appointed to exercise statutory responsibilities, are better qualified than the courts to make.4 He says under s 284(1) it would have to be shown that the liquidators have engaged in fraud, lack bona fides or are engaged in conduct that no reasonable liquidator would engage in. He notes that, if the liquidators accept
Grove Darlow’s proof of debt, Mr and Mrs Quigley may be able to
review that decision under s 284(1).
(e) A litigant should not be deprived of his or her choice of counsel without good reason. The originating application involves voidable historic transactions in which Grove Darlow has had no involvement. Therefore, the risk of one of the solicitors having to give contentious evidence during the substantive proceeding will not arise.
(f) If Grove Darlow’s advice will be coloured because they will be paid by the liquidators from the realisation in the liquidation, then solicitors would always be unable to advise a liquidator because they will always be conflicted, as their fees are a cost of the liquidation. If there are only sufficient assets to pay the costs of the liquidation, then Grove Darlow may not recover the debt due to it. The liquidators themselves are “creditors” since their costs of the liquidation are
payable from the realisation and recoveries in the liquidation.
3 Commissioner of Inland Revenue v Hulst (2000) 19 NZTC 15,693 at [25].
4 Levin v Lawrence [2012] NZHC 1452 at [54].
[24] Mr Bigio raised a number of miscellaneous points, including the fact that Mr and Mrs Quigley did not challenge the assignment of the Mariteq costs debt to Grove Darlow or oppose the liquidation proceedings and they have not tried to stop Grove Darlow from representing the liquidators in other proceedings, only in the originating application that involves them. There was also considerable focus on the detail and merits of the originating application against the Quigleys.
[25] Mr Bigio submits that the application to debar is unmeritorious and that criticisms of the liquidators and the firm are based on innuendo and not on evidence.
Relevant law
[26] In terms of the Court’s jurisdiction to debar solicitors from acting, the principles are reasonably well-settled. I agree with Woolford J in Deliu v The Auckland Standards Committee 1,5 that the leading New Zealand authority is the case of Black v Taylor.6
[27] In Black v Taylor a solicitor had previously acted for members of a family, including the plaintiff and his late uncle. The plaintiff brought proceedings against the estate of his late uncle. The plaintiff sought an injunction to restrain the solicitor from acting as either solicitor or counsel for the estate. The injunction application was brought as an interlocutory application in the proceedings against the estate, similar to the course adopted here. The application was made on the ground of conflict of interest based on the solicitor’s receipt of confidential information relevant to the issues in the proceeding.
[28] The three members of the Court of Appeal wrote separate judgments to similar effect. Richardson J stated:7
The High Court has an inherent jurisdiction to control its own processes except as limited by statute. As an incident of that inherent jurisdiction it determines which persons should be permitted to appear before it as advocates. In determining what categories of person may appear it does so in accordance with established usage and with what is required in the public interest for the efficient and effective administration of justice …
5 Deliu v The Auckland Standards Committee 1 [2014] NZHC 2530, [2014] NZAR 1473 at [14].
6 Black v Taylor [1993] 3 NZLR 403 (CA).
7 At 408–409.
Another aspect of the inherent jurisdiction is the control of a particular proceeding in the court. There the court’s concern is with the administration of justice in a particular case and in the generality of cases and with the associated basic need to preserve confidence in the judicial system. The right to a fair hearing in the Courts is an elementary but fundamental principle of British justice. It reflects the historical insistence of the common law that disputes be settled in a fair, open and even-handed way. …
An associated consideration is the fundamental concern that justice should not only be done but should manifestly and undoubtedly be seen to be done
…
The integrity of our system of justice depends on its meeting those standards. The assessment of the appearance of justice turns on how the conduct in question – here Mr Gazley’s wish to be able to act as counsel for the defendants against M A Taylor – would appear to those reasonable members of the community knowing of that background.
In making that assessment the court will also give due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause. The right to the choice of one’s counsel is an important value. But it is not an absolute.
[29] The following passage from McKay J is also helpful:8
It is essential to the functioning of the Court as a Court of justice that it must be able to prevent a barrister acting as counsel in a matter in which he has a conflict of interest, or in which he appears to have a conflict of interest such that justice will not be seen to be done. ….
The position in New Zealand is accurately expressed in the following passage in the judgment of a Divisional Court of the Ontario Court (General Division) in Everingham v Ontario (1992) 88 DR (4th) 755 at 761:
It is within the inherent jurisdiction of a superior court to deny the right of audience to counsel when the interests of justice so require by reason of conflict or otherwise. This power does not depend on the rules of professional conduct made by the legal profession and is not limited to cases where the rules are breached.
[30] In Accent Management Ltd v Commissioner of Inland Revenue, the Court of
Appeal summarised what it said was the applicable law in one paragraph:9
The Court has jurisdiction to debar counsel or solicitors from acting where that is necessary in order for justice to be done or to be seen to be done. Removal will usually be ordered where counsel will not be able to comply with his or her duties to the Court: where there is a conflict of interest, or where there is a real risk that a client will not be represented with objectivity.
8 At 418.
9 Accent Management Ltd v Commissioner of Inland Revenue [2013] NZCA 155, [2013] 3 NZLR
374 at [32].
The threshold for removal is a high one, requiring something extraordinary. The Court should guard against allowing removal applications to be used as a tactical weapon to disadvantage the opposing party.
[31] Again I agree with Woolford J in that I do not take this brief comment to detract from the principles extensively considered by the same Court in Black v Taylor.10 The brevity and language of the Court’s statement in Accent Management most likely reflects the Court’s negative view of the application in that case. That application was on technical grounds only and clearly advanced as a tactical weapon. While the Court referred to “something extraordinary” being required to meet the
high threshold for debarment, the Court also referred to a conflict of interest as a situation when removal will usually be ordered.
[32] Applications to debar lawyers are, of course, usually made by opposing parties and hence, as Cooke P said:11
Obviously it is a jurisdiction to be exercised with circumspection.
[33] The professional obligations of a lawyer, as set out in the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, can be relevant to a court’s decision whether to debar counsel.12 The pertinent rules deal with independence in litigation and conflicting interests which reflect the obligation on lawyers under s 4 of the Lawyers and Conveyancers Act 2006 to be independent in providing regulated services to clients and to act in accordance with all fiduciary
duties.
[34] The relevant Conduct and Client Care rules are:
Conflicting interests
5.4 A lawyer must not act or continue to act if there is a conflict or a risk of a conflict between the interests of the lawyer and the interests of a client for whom the lawyer is acting or proposing to act.
…
5.4.2 A lawyer must not act for a client in any transaction in which the lawyer has an interest unless the matter is not contentious and the interests of the lawyer and the client correspond in all respects.
…
10 See Deliu, above n 5, at [21].
11 Black v Taylor, above n 6, at 406.
12 Accent Management Ltd, above n 9, at [33].
Chapter 13
Lawyers as officers of court
13 The overriding duty of a lawyer acting in litigation is to the court concerned. Subject to this, the lawyer has a duty to act in the best interests of his or her client without regard for the personal interests of the lawyer.
…
Independence in litigation
13.5 A lawyer engaged in litigation for a client must maintain his or her independence at all times.
…
[35] Also relevant to the application of the debarring principles in this case is consideration of the duties of liquidators.
[36] The primary object of liquidation proceedings is the collection and distribution of the assets among unsecured creditors after payment of preferential debts.13 The long title of the Companies Act states it is an Act to reform the law relating to companies and in particular, inter alia, to provide straightforward and fair procedures for realising and distributing the assets of insolvent companies.
[37] The principal duty of a liquidator is set out in s 253 of the Companies Act:
253 Principal duty of liquidator
Subject to section 254, the principal duty of a liquidator of a company is—
(a) to take possession of, protect, realise, and distribute the assets, or the proceeds of the realisation of the assets, of the company to its creditors in accordance with this Act; and
(b) if there are surplus assets remaining, to distribute them, or the proceeds of the realisation of the surplus assets, in accordance with section
313(4)—
in a reasonable and efficient manner.
[38] The liquidator is an officer of the Court for the purpose of the liquidation.14
The liquidator has a duty to act impartially between all those concerned with a company’s liquidation. The High Court in Consolidated Technologies Development (NZ) Ltd v McCullagh said:15
… Such a duty may be encompassed by the overriding duty to act in good faith but at the very least a breach will be amenable to the power of the Court to interfere when a liquidator has acted unreasonably. The Court can review the decision of a liquidator who fails to act even-handedly as between the various groups whose interests he or she is required to advance or consider. Where those interests conflict, the duty requires the liquidator to act in good faith, in a fair and principled way, and consistently with statutory requirements.
[39] Gooch’s case also stated something similar:16
… it is of the utmost importance that the liquidator should, as the officer of the Court, maintain an even and impartial hand between all the individuals whose interests are involved in the winding-up. He should have no leaning for or against any individual whatever. It is his duty to the whole body of shareholders, and to the whole body of creditors, and to the Court, to make himself thoroughly acquainted with the affairs of the company …
[40] The liquidators must pay out of the assets of the company the expenses, fees and claims set out in schedule 7 and in the order of priority specified in that schedule.17 After paying preferential claims in accordance with that schedule, the
liquidator must apply any remainder assets in satisfaction of all other claims.18 The
pari passu principle governs the way in which an insolvent company’s assets are to be distributed among the general body of unsecured creditors. This is the principle that claims rank equally among themselves and must be paid in full, unless the assets are insufficient to meet them, in which case payment will abate rateably among all
claims.19 Any surplus is then paid to shareholders.20
14 Re Nautilus Developments Ltd (in liq) [2000] 2 NZLR 505 (HC) at [24].
15 Consolidated Technologies Development (NZ) Limited v McCullagh, (2006) 9 NZCLC 264,056 (HC) at [46].
16 Gooch’s case (1872) 7 Ch App 207 at 211; cited in Insolvency Law & Practice (online looseleaf
ed, Brookers) at CA260.03.
17 Companies Act, s 312.
18 Section 313(1).
19 Companies Act, s 313(1), (2).
20 Subject to the company’s constitution. See ss 36(1)(c) and 313(4).
Discussion
[41] There were a number of points traversed which I do not consider to be relevant, including the fact that Mr and Mrs Quigley did not challenge the assignment of debt by Mariteq to Grove Darlow or oppose the liquidation of QT and the merits or otherwise of the liquidators’ originating application.
[42] I also do not consider it relevant whether there is evidence of improper influence or “control”, as Mr Pyke put it, by Grove Darlow over the liquidators or whether there is evidence as to the liquidators’ actions being irregular in some way. In Black v Taylor itself, there was no finding of culpable conduct on the part of the lawyer, but nonetheless disqualification was held to be the remedy. Richardson J expressly said “the decision to disqualify is not dependent on any finding of culpable
conduct on the lawyer’s part”.21
[43] The question is a broader one of principle. Should a lawyer who is intending to file a proof of debt in a liquidation, represent the liquidators in an action brought against a party who is also proving or interested in the liquidation?
[44] In this case, Grove Darlow is interested in the repayment of the debt that is owed to it and therefore has an interest in the outcome of the originating application and of the liquidation generally. This brings sharply into play r 5.42 of the Conduct and Client Care Rules. Under that rule a lawyer must not act for a client in any transaction in which the lawyer has an interest unless the matter is not contentious or the interests of the lawyer and client correspond in all respects.
[45] Does Grove Darlow’s interest align in all respects with the liquidators, who have a duty to act impartially between all those concerned with a company’s liquidation, in good faith and in a fair and principled way?
[46] Mr Bigio says there is a complete alignment of interests between Grove Darlow and the liquidators and no conflict of interest. Both want to realise the assets of the company so that the proceeds can be applied pari passu to creditors.
[47] I agree that lawyers acting for a liquidator would not be able to bypass the pari passu distribution procedure. However, I do not consider the interests of Grove Darlow and of the liquidators correspond in all respects. Grove Darlow want to recover their debt or maximise recovery of it. The liquidators have an obligation to be even-handed among all potential claimants. Grove Darlow would not be able to give independent advice to the liquidators in their dealings with other claimants. If Grove Darlow are not independent the liquidators would not be seen to be making independent decisions.
[48] By way of example, Grove Darlow would not be able to independently advise the liquidators on whether they should accept the proof of debt (including quantum) filed by the Quigleys as a creditor. It is quite evident that the Quigleys’ proof of debt is contested. The quantum of the proof of debt may be affected by the outcome of the originating application. Grove Darlow would not be able to independently advise on the proceedings against the Quigleys. The bringing of those proceedings and the conduct of them is not mandated. The liquidators have the right to bring the proceedings but they are officers of the Court and have an overall duty to act impartially and in a reasonable and efficient manner. There could also be a perception that where liquidators are seeking to recover a debt and their lawyer is personally sharing in the net proceeds, inter alia with the party being sued, the lawyer might not be acting objectively in the incurring or rendering of fees where those fees are a preferential payment. I do not suggest or even consider this would be the case. It is the perception that causes the conflict.
[49] This case is different from an independent lawyer acting for a liquidator or even a creditor’s lawyer acting (under an independent arrangement) for a liquidator.22 Although a lawyer charges fees (which are number one in priority of the preferential claims), the charging of fees, on standard terms, is not a conflict. If it were, every lawyer would be endlessly conflicted unless they acted without charge. In both of the instances I cite, the lawyer is not self-interested in the liquidation.
[50] In my view there is a clear pecuniary conflict here.
[51] I have to consider matters beyond the conflict, to determine whether the firm should be debarred.
[52] The liquidators pointed out that the cost of briefing new counsel, should Grove Darlow be debarred, would be contrary to their obligation to conduct the liquidation in an efficient manner. Mr Tietjens in his second affidavit says that if Grove Darlow is debarred, it would be difficult to brief another firm on the history of this proceeding in a cost-effective matter. There was a suggestion from Mr Tietjens that it would not be possible to continue the originating application without Grove Darlow as solicitors, but a letter from Mr Allen, a partner at Grove Darlow, made it clear the application would still be able to proceed. There is nothing of course stopping Grove Darlow from funding the litigation, as can any creditor, but they cannot be providing advice on which the liquidators are dependent to enable them to act impartially. In my view the cost issues cannot outweigh the conflict here.
[53] I have to also consider the wider facts. I do not think it matters whether, as Mr and Mrs Quigley say, the only creditor interested in pursuing them is Grove Darlow or whether Grove Darlow is effectively “in control” of the proceeding as a party. In my view, it is sufficient that Grove Darlow is a material creditor. They were the petitioning creditor responsible for the appointment of these particular liquidators. Grove Darlow is not just a bit player in the liquidation. Further, Grove Darlow were the lawyers instrumental in the Mariteq compromise and all that led up to it. The outcome of all of this would undoubtedly be significant bad blood between Mr and Mrs Quigley and Grove Darlow. If any antagonism were just arising out of Grove Darlow’s role as opposing lawyers it would be irrelevant but in this case Grove Darlow have moved from being just opposing lawyers to being a “party” as well.
[54] There is nothing in the wider facts that militates against the conflict, rather the position is reinforced.
[55] In my view there is a conflict of interest here that justifies debarment. I
consider that debarment is necessary in order for justice to be done or be seen to be
done. I also consider the circumstances constitute “something extraordinary” and meet the higher threshold for debarment in Accent Management, if that is the applicable test.
[56] While Mr Bigio may be correct that an application could have been made against the liquidators under s 284 of the Companies Act, the Quigleys were equally able to bring this application, which proceeds on the debarring principles and on which they have been successful.
[57] I acknowledge Mr Bigio’s submission that the liquidators have brought an orthodox proceeding against the Quigleys and that there is no evidence that the firm or the liquidators have taken irrational steps. Mr Tietjens is experienced; he has 25 years of experience in the field of corporate insolvency. Grove Darlow is a long- established, well-regarded law firm. However, I consider debarring applications proceed on principle rather than on proven consequences of conflict.
Result
[58] There is a conflict of interest where the lawyer for the liquidators in an action brought against a creditor or interested party, is also a material creditor of the company in liquidation. In this case, that justifies a debarring order.
[59] An order is made debarring Grove Darlow from acting and appearing in this proceeding.
[60] The application is only made in respect of the originating application and I have made the order in the terms sought. However, it will be apparent from this judgment that the decision has broader effect in this instance. At least in material part this liquidation is in substance a contest between Grove Darlow and the Quigleys. It is not appropriate in my view for Grove Darlow to represent the
(impartial) liquidators in that contest.
Hinton J
4
1