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Jane Moir

The outgoing companies judge has attacked a 'monopoly' held by an elite band of accountants who take the cream of Hong Kong's liquidation work.

In a rare move, Mrs Justice Doreen Le Pichon has spoken out against the system of divvying up insolvency work and has aired grievances relating to the liquidation of 'pseudo-foreign companies' in the SAR.

She has also gone head-to-head with Official Receiver Eammon O'Connell by refusing to simply rubber-stamp his request for special managers to be appointed in the controversial Akai Holdings liquidation.

The judge has even publicly chided Mr O'Connell's conduct in the Akai case, calling his impartiality into question.

Mrs Justice Le Pichon has just been promoted to the Court of Appeal - the first woman to join the upper court - leaving the slot of companies judge open.

In one of her last written judgments in the companies post, she yesterday slated 'deficiencies in the present administrative scheme' relating to the existing method of farming out insolvency work. Under the present scheme, practitioners on the A Panel list - who come from a total of 14 firms - are the only ones entitled to carry out liquidation work involving companies with assets of more than HK$200,000.

'It is high time this 'monopoly' is reviewed,' Mrs Justice Le Pichon urged. 'Why liquidation work involving companies with assets over HK$200,000 should be the preserve of a privileged few is difficult to fathom.'

The situation 'cannot be in the public interest', she continued. Solicitors could easily do the same work, the judge said - and at the end of the day this would lead to increased competition.

This, in turn, 'is likely to drive down costs and simultaneously raise standards', she said.

Mrs Justice Le Pichon has been particularly critical of liquidation fees over the past few years, demanding justifications for sums charged and sparking an overhaul of accountants' billing processes.

KPMG partner Gabriel Tam explained, however, that the panel system was initially set up to enable liquidation work to be allocated to more firms.

Accountants are allocated the work on a roster basis. Panel B liquidators conduct insolvency work on companies with less than HK$200,000 in assets. In terms of Panel A, 'the reason there's only 14 firms is because over the years insolvency has not been one of the main areas of accountancy firms', Mr Tam said.

'There's only been a limited number of practitioners who have the resources and ability to do major sized liquidations.'

Mrs Justice Le Pichon also took a 'timely' opportunity in the judgment to call into question the present law governing the liquidation of 'pseudo-foreign companies' - those incorporated overseas but conducting their primary business in the SAR.

This covers about 60 per cent of all listed companies. When it comes to the liquidation of such a company, however, the Hong Kong arm normally would be regarded as ancillary to the foreign winding-up. The situation 'does not reflect reality', the judge said, posing the question: 'Is it not time for legislative reform?'

The Official Receiver also came under fire in the judgment. Mr O'Connell had made an application for special managers from Nelson Wheeler Corporate Advisory Services to be appointed to oversee Akai Holdings. Akai has been declared insolvent and a winding-up order granted. However, creditors fear assets have been stripped from the company and alleged fraudulent activity.

Mrs Justice Le Pichon has declined to grant Mr O'Connell's request, questioning the experience of the proposed managers.

She also criticised remarks made by Mr O'Connell in a report as 'discourteous and little short of an affront, unbefitting the holder of the office of Official Receiver'.

The judge later remarked that the Official Receiver 'did not seem able to approach this application from a wholly impartial standpoint'.

Mr O'Connell declined to comment yesterday.



Judge slams accounting elite