Chinese businessman Richard Gu’s legal representatives filed a litany of complaints about Jirsch Sutherland partner Malcolm Howell’s conduct of liquidation on a letter dated on 11 May, stating “At his election, your client chose to make the Approval Application in secret as an ex parte application.”
In August, a meeting of creditors was convened, and the main pool voted to remove Howell, replaced by Matt Byrnes and Phil Campbell-Wilson of Grant Thornton.
Since Howell commenced his appointment as the liquidator of AXF Group in February 2020, he has been fighting fiercely. His ex parte application has indeed incensed the AXF creditors. The initial winding up order was stayed on five occasions between November 2019 and February 2020. After the five stays, the property tycoon sought to have the winding up order set aside.
It was unsuccessful, and Howell’s appointment finally came into effect Gu offered what his legal representatives described as “an undertaking which was effectively a self-imposed freezing order”.
But by that date Howell had already engaged Slattery Asset Management to repossess Gu’s 26 metre motor yacht Fat Fish for the benefit of secured creditor NAB.
Howell also arranged with Maurice Blackburn backed Claims Funding Australia to fund an application for freezing orders against Gu and various entities and an application for orders appointing him as receiver over the trust assets.
As at July 31, 2020 Howell estimated the associated legal proceedings had incurred fees of in excess of $800,000, which were to be paid by CFA under the funding agreement that would see the funder recover those costs plus 15 per cent.
Due to Howell’s conduct, a meeting of creditors was convened in August, in accordance with ss 90-15(1) and 90-21(2) of the Insolvency Practice Schedule following an application in April by Qi Liang Gu, a major creditor and father of sole AXF director Richard Gu. The creditors voted on Howell’s removal, apart from the Australian Tax Office (ATO) which is owed $13 million. But what incensed the Chinese entrepreneur in Australia is how Howell sought the court’s approval to enter into the agreement with CFA ex-parte without mentioning that creditors had issued a directive for him to call a meeting.
According to the May 11 letter: “Accordingly, your client, and you as an officer of the Court, had a duty to bring to the Court’s attention, all information that is material to the consideration of the Approval Application.
“This would undoubtedly include the issuance of the Group Meeting Direction on 28 April 2020, shortly before the Approval Application was heard.”
Howell did however subsequently seek the court’s guidance in respect of whether he was justified in refusing the directive and discovered that in this instance at least he was not.