A recent case in the Federal Court of Australia (Federal Court) has shed light on the admissibility of a proof of debt by a liquidator regarding related companies.

In the case of Barnden (Liquidator), in the matter of Masonry Works Pty Limited (in liquidation) [2020] FCA 575, the Federal Court considered the performance of a liquidator’s duties in a quasi-judicial capacity to determine the true liabilities of a company.

Background

Andrew Barnden was the sole liquidator of both Masonry Works Pty Ltd (in liq) (Company) and Masonry Profiles Pty Ltd (in liq) (Profiles). The liquidator made an application to lodge a proof of debt of Profiles which concerned a discrepancy of the recorded amounts of a loan paid by Profiles to the Company. The contention was whether or not Mr Barnden as liquidator of both companies, could admit to proof in the liquidation of a claim by one company against the other company.

Decision

The application was granted pursuant to the power in s 90-15 of the Insolvency Practice Schedule which justifies a liquidator in accepting a proof of debt (In the matter of Daily Planet Pty Ltd (In Liquidation) [2019] VSC 265). The Court stated that Mr Barnden was obliged to assess Profile’s proof of debt in his capacity as a liquidator of the company, in a quasi-judicial capacity.

The liquidator was entitled to protection of the Court, recognizing that the liquidator had faithfully performed his duties, conducting thorough investigations of the incomplete and conflicting evidence to examine the discrepancy of the loan amount.

The Court, therefore, allowed the proof of debt in the liquidation of the company to be admitted.