commentary James Packer and Lachlan Murdoch are unlikely to be tracking the latest career move by insolvency expert Paul Weston, but they know who he is and must dread what he is about to do.
Weston's task is to investigate whether there is a course of action ... to recover funds in relation to the renounceable rights issue that was cancelled by One.Tel
Weston this week left Deloitte and joined the middle market firm, Pitcher Partners, as a partner in their Sydney business recovery and insolvency team. One of his first significant tasks after joining the new firm will be to serve a legal claim against Packer and Murdoch to recover $132 million relating to a rights issue that was cancelled by One.Tel on the day the company went into administration in July 2001.
Weston has already filed the claim with the NSW Supreme Court but has yet to serve it upon Packer and Murdoch who were directors and shareholders of the failed phone company.
The One.Tel matter is a peculiar one because Weston was not called in until a year and a half after the company appointed Ferrier Hodgson as administrators. The Supreme Court found that Ferrier Hodgson partner Steve Sherman had a conflict of interest and appointed Weston in 2003 as a special purpose liquidator. Sherman had been at the table inside One.Tel when the rights issue was discussed.
Weston's task is to investigate whether there is a course of action for creditors to recover funds in relation to the renounceable rights issue that was cancelled by One.Tel on the same day it went into administration on 24 July 2001.
Weston has to make a recommendation to creditors about whether a course of action has been established against interests associated with Packer and Murdoch as both directors and shareholders of One.Tel. His activities and powers have been monitored by the court, which recently extended the deadline for a decision on legal action over the rights issue by six months from 25 May to 25 November.
It is believed Weston is confident of serving the claim against Packer and Murdoch, although he has in the past had a mixed response from litigation funders.
Weston's case may or may not be helped by a judgement that is expected soon from Judge Robert Austin in the case of Australian Securities and Investments Commission versus Jodee Rich, who was the managing director of One.Tel.
There is talk in legal circles that the judgement will be delivered in the next week or so. Some think it will have significant ramifications for Weston's case even though it relates to matters that occurred well before the decisions were made in relation to the rights issue.
ASIC vs. Rich has certainly slowed down Weston's work, which had an original deadline of 2007. The ASIC vs. Rich case was meant to finish by the end of 2005 but the case dragged on for years, forcing Weston's investigations to be put on hold through 2004 and 2005. He returned to the task in 2006 and the matter is now approaching a denouement.
Creditors of One.Tel are keenly awaiting Weston's annual report for the year to June 2009, which will include his opinion of the strength of the case.
Weston's move from Deloitte to another firm has been the talk of the tight-knit insolvency world for months. It was well-telegraphed because Weston was very thorough in his due diligence on the various middle market firms.
It is a tribute to Pitcher Partners that they were chosen by a person with a reputation as an "old-style liquidator", unafraid of challenging the status quo and taking on the big banks. Weston will bring to Pitcher Partners extensive contact among leading insolvency lawyers.
Weston joined Deloitte after its merger with the Sydney office of accounting firm Horwarth two years ago. He is a middle market accountant who wants to get back to his roots.
This article by Business Spectator's Tony Boyd is reproduced on ZDNet.com.au courtesy of a reciprocal publishing agreement.
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