A Federal Court judge has blasted Hall Chadwick insolvency accountants while shredding $1.1 million of bills for their 10-week administration of alleged scammer Chris Marco’s trust company.
After detailing Federal asset-freezing and receivership actions dating back to late 2018, Justice Michael Feutrill described Hall Chadwick’s bills for its work on AMS Holdings (WA) in the first quarter of 2020 as “excessive and unreasonable”.
Justice Feutrill said more than 1950 hours of billable work was carried out by administrators Cameron Shaw, Richard Albarran and Marcus Watters and 40 Hall Chadwick staff on a company whose assets were held in trust for investors.
Hall Chadwick’s work included investigating Mr Marco’s suspected liabilities to scheme investors allegedly owed more than $256 million, the judge said. Mr Marco faced these claims as “the person with whom investors deposited funds and made declarations of trust”.
“I cannot accept that any prudent business-person spending his or her own money would have embarked on work of the nature and extent the administrators performed,” the judge said of Hall Chadwick’s efforts.
Justice Feutrill ruled there was a lack of correlation between the costs to creditors and any likely benefit that could have resulted from Hall Chadwick’s work as administrators of AMS.
He slashed the bills payable to Hall Chadwick from $982,886 to $100,192 and cuts its expenses claim from $313,209 to $84,014.
Mr Marco appointed the Hall Chadwick team of administrators on September 29, 2020, as he was pondering seeking investor approval for a compromise deal purportedly supported by upwards of one-third of his backers.
The Australian Securities and Investments Commission quickly objected to the administration, claiming in a letter that the appointment appeared to be for the sole purpose of receiving a deed of company arrangement from Mr Marco or someone else.
Mr Marco put forward a DOCA proposal that was conditional upon ASIC terminating its action against Mr Marco and lifting asset preservation orders that had been in place for almost two years.
Those Federal Court orders had included insolvency accountants from McGrathNicol being appointed as receivers and liquidators of a suspected Ponzi scheme allegedly operated by Mr Marco and with assets allegedly held in trust by AMS Holdings.
Shredding Hall Chadwick’s bills, Justice Feutrill said a creditors notice of meeting sent out by Hall Chadwick in late October 2020 contained estimates of Mr Marco’s liabilities that were a “duplication” of information in reports filed by McGrathNicol and forensic accountants from KPMG.
Mr Marco’s proposal was favoured by 52 creditors claiming $67m and opposed by 39 creditors owed more than $112m at a meeting on November 26, 2020.
With the poll hung, Mr Shaw voted the proposal down.
Within a fortnight, the Hall Chadwick team had been ousted from their briefly-held role as liquidators.
Justice Feutrill said the Hall Chadwick team had “misconceived the extent of their statutory duties and functions” as administrators.
And the assets linked to the DOCA proposal were “subject of freezing orders that restrained Mr Marco and AMS from dealing with them”.