Waiting for Disclosure

By Wessel Robertson | Director

When liquidation happens mid-litigation, silence can be costly

Litigation can sometimes feel like a long-running stage production. Pleadings are exchanged, attorneys correspond, dates are diarised, costs are incurred and everyone continues playing their part.

But what happens when one of the actors has, legally speaking, already left the stage?

In a recent matter, litigation had been ongoing for some time before it emerged that the opposing parties had already been liquidated months earlier. No formal disclosure had been made. No withdrawal had been communicated by their attorneys. The matter simply continued, despite a material development that should have changed the way the litigation was approached.

That creates an obvious problem.

Once a party is placed in liquidation, the legal and practical position changes. The liquidator steps into the picture, creditors’ interests come to the fore, and active proceedings may need to be reviewed, paused, amended, or pursued through the correct insolvency process. Continuing as if nothing has happened can cause unnecessary costs, procedural confusion, and prejudice to the other litigants involved.

It is not merely an administrative courtesy to inform the other side. It is a material development that affects the conduct of the matter.

For creditors, the risk is that time and money may be spent pursuing litigation that should instead be dealt with through the liquidation process. For litigants, it may affect strategy, enforcement prospects, settlement discussions, and the identity of the proper party to deal with. For insolvency practitioners, it highlights the importance of quickly identifying active claims and proceedings involving the company in liquidation.

The takeaway is simple. Liquidation is not something that should be discovered by accident halfway through litigation.

When liquidation proceedings commence, all active litigation should be reviewed immediately. Attorneys, liquidators, directors, and creditors should ensure that relevant parties are informed, the correct procedural steps are taken and unnecessary legal costs are avoided.

In litigation, surprises are sometimes unavoidable. A liquidated opponent should not be one of them.

For assistance with litigation affected by liquidation, insolvency proceedings or creditor recovery, contact Wessel Robertson and the Fairbridges Dispute Resolution team.