Liquidator explains action to repay creditors

J. R. Aquilina has been appointed provisional administrator in the liquidation of Priceclub Operators Ltd, the latest step in the attempt to recoup assets and repay creditors.

The picture does not look good: it is estimated the company is owed about Lm8.5 million and had assets of about Lm300,000, which may be hard to realise.

The Times asked Dr Andrew Borg Cardona, the liquidator of Priceclub Operators Ltd, to explain the significance of the proceedings.

What is the current situation?

To answer this in context, one needs to describe, broadly, the duties of a liquidator under the law.

In essence, there are two such duties, which are to be carried out concurrently. The first relates to taking possession of the company's assets and establishing its liabilities.

After this part of the exercise is concluded, the assets are to be realised at the best possible price and a distribution of the available funds, after covering liquidation costs, made to creditors in the order of their ranking. I have started this part of the process of liquidation.

The second duty of a liquidator is to investigate the manner in which the company concerned was managed in the time preceding the effective date of liquidation.

The liquidator's duties, in a liquidation such as this which was ordered by the court on the application of a creditor, lie towards the creditors as a whole and the investigation is directed towards satisfying the obligations created by these duties.

In this latter context, I have sought the intervention of the court in a number of ways, which I am sure we will be discussing later in this interview.

What was the financial position of the company when you took office?

In my first report to the court following my appointment, I outlined the situation as I found it. In very broad terms, and I must emphasise that these are broad terms, the company owed about Lm8.5 million and had assets that did not, realistically, exceed Lm300,000. These figures are provisional and it should be stated that the liquidation of such assets as the company holds is not an easy process, given the nature of these assets, so the values may yet vary significantly.

A number of court cases have been instituted - what are they all about?

Leaving aside the original action, which was instituted by one creditor with the approval of the general body of creditors, as a result of which I was appointed in July 2002, there are a number of other actions I have started.

It would be inappropriate for me to comment on the substantive merits of the actions, so I will limit myself to describing the actions and stating the point at which they have arrived. The actions I am describing were all filed at the same time.

I have filed two actions against the former directors in their personal capacity. These actions are directed towards asking the court to establish that the directors are responsible for having traded wrongfully and/or fraudulently in terms of the Companies Act.

These two actions were accompanied by an application for the precautionary freezing of the directors' personal assets, where the court was requested to order the directors not to dispose of their immovable property or any shares they hold. These applications were upheld, while the actions on the merits are awaiting the first hearing.

I have also filed two actions against Priceclub Holdings Limited, which is the ultimate holding company of the Priceclub Group of Companies, including Priceclub Operators Ltd and other companies, which own the properties from which the Group traded.

In one action, I am asking the court to place Priceclub Holdings Ltd into liquidation due to inability to satisfy its obligations. This action, which is awaiting its first hearing on the merits, was accompanied by an application for freezing of the assets of the company, which was provisionally upheld, and an application for the appointment of a provisional administrator, which was upheld just last Thursday.

The provisional administrator now has control over all the assets of the Priceclub Group, except those I hold.

In another action against Priceclub Holdings Ltd, I have asked the court to declare that the company is unlimitedly liable for the debts of Priceclub Operators Ltd, on the basis of its abuse of the privilege of limited liability. This action was also accompanied by an application for freezing of assets, which was provisionally upheld.

Why were cases started against Priceclub Holdings Ltd when this is a separate company?

It has always been the contention of the creditors that the Group as a whole was liable for trading debts. The way the Group was structured led to a situation where the property-owning companies did not trade while the operating company, the one I am liquidating, was liable for all the trade debts.

It is a fact that the Group's properties are heavily hypothecated to the banks but, in consultation with my advisers, I felt it was appropriate to seek to involve the Group as a whole in the liquidation process, while recognizing fully and giving effect to the rights of the first-ranking creditors.