Claiming remuneration for dealing with consigned property part 1

An Administrator undertaking a full stocktake of consigned property in an auction house does not have an equitable lien – that’s according to a Federal Court judgment handed down yesterday.

The consigned property did not belong to the company, meaning that the VA’s had to deal with around 4,000 consigned lots and the risk of not being paid for any of their work.

The VA’s noted that they had 4 options:

(1) disclaim the lots, thereby opening up the company to tortious claims;

(2) apply to court to be appointed Receivers over the lots;

(3) appoint themselves Receivers over the lots; and

(4) seek directions under the new Insolvency Law Reform Act.

The VA’s chose option 3, and applied to court (after the fact) seeking an equitable lien to cover their costs and fees; amounting to some $1 million.

The Court drew distinction to a VA claiming a lien for work performed in identifying company assets from consignment assets and then selling the company assets.

In that circumstance, the VA’s would be justified.

Here, there was no company property, only consignment property.

With the substantial shortfall expected to the secured creditor, the VA’s may never be reimbursed.

The cases’ analysis is compelling, but am interested in your thoughts! 



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