Case Commentary

Deed proposal highly discriminatory and creditors to be drip fed over a year ...: The reasons the court wound up this company instead of allowing a deed to proceed are contained in these comments from the Judge. see DCT v Rohy's Contracting [2010] NSWSC 782: 14 The real effect of the proposed deed is thus that the sole director and his wife will forego their debts of about $35,000;... Read More »
Independence of court appointed receivers, and their fees: In a winding up application of ASIC against managed investment schemes, the question of the independence of a court appointed receiver and manager was raised; and the basis of the receivers' remuneration: ASIC v Letten [2010] FCA 140. ASIC opposed a receiver – Mr Templeton - not because of any actual conflict of interest but because... Read More »
Golden Star Resources v Rosel - receivers' remuneration and the IPA Code: Golden Star Resources Limited & Anor v Rosel [2010] QSC 28 is a recent (1 Feb 2010) Queensland case where the Court approved remuneration of receivers of around $200,000. In doing so, the Court referred to and relied upon the IPA Code in determining that all the remuneration was reasonable. The Judge set out,... Read More »
Octaviar - no ASIC notification of security variations required - High Court: The Queensland Court of Appeal in Re Octaviar Ltd (No 7) [2009] QCA 282 allowed the appeal from the trial decision of the Queensland Supreme Court in Re Octaviar Ltd; Re Octaviar Administration P/L [2009] QSC 37. The High Court has now agreed with the Court of Appeal, that is,... Read More »
Keeping good financial records: The importance of directors ensuring their company maintains proper financial records is shown in this decision, where the ATO succeeded in recovering over $70k from a director under s 588FGA of the Corporations Act: Cooper v Commissioner of Taxation [2009] NSWSC 880. The circumstances were that the company [now in liquidation] did not produce financial... Read More »
while Bleak House was fiction, this bankruptcy case is all fact: This bankruptcy case is “reminiscent of the infamous litigation immortalised in Charles Dickens’ Bleak House. Regrettably, whilst the Dickens tale may have been partly fiction; the present tale is all fact”. Bankruptcy practitioners will be aware of it as the litigation between Dr Wenkart (whose solicitors are Bruce Stewart Dimarco) and the bankruptcy trustee Mr Pantzer. See... Read More »
Former bankrupt can apply to review trustee's conduct: 22.7.10: A person discharged from their bankruptcy may still apply under s 179 of the Bankruptcy Act for an order that the court inquire into the conduct of their trustee in relation to their bankruptcy and remove the trustee or make other orders; at least in circumstances where the trustee’s administration of the bankrupt estate is continuing:... Read More »
The nature of a cap on prospective remuneration - NSW Court of Appeal s 449E: 1.9.10: The NSW Court of Appeal has dismissed the director's appeal from the decision explained below: Paul's Retial v Morgan [2010] NSWCA 217. In particular, the Court said: 62 The evidence adduced on behalf of the Administrator was clearly capable of showing that the Administrator had performed a great deal of work after 1... Read More »
Priority given to funding creditor over liquidator - s 564 Corporations Act: A liquidator recovered $86,500. He had an indemnity from the ATO of $30,000 but a further indemnity was declined. Under the agreement with the ATO, the liquidator applied under s 564 of the Corporations Act for priority payment for the ATO, notwithstanding that he argued that property recovered by him in the course of the winding... Read More »
Full Federal Court decision in favour of bankrupt: Ms George became a bankrupt on 24 February 2006 on a debtor’s petition. In the course of the administration of her estate a dispute ensued between her and her trustee Mr Fletcher as to whether particular real and personal property formed part of her estate. Mr Fletcher applied to the Federal Magistrates Court about the ownership of real... Read More »
ASIC v Rich - notice of intention to appeal by ASIC: ASIC has not pursued an appeal in this matter. The decision of Justice Austin stands. --------------------------------- says it has lodged a Notice of Intention to Appeal in the NSW Court of Appeal in respect of the 18 November 2009 decision below of Austin J's decision dismissing ASIC’s civil penalty proceedings against One.Tel’s former joint managing... Read More »
contrary to the interests of creditors and an affront to commercial morality: This judgment involves what the Judge initially thought a run of the mill application to terminate a liquidation; but when he detected the names of the personnel involved, including James Warren Byrnes, he became concerned. It was an application under s 482 Corporations Act for the termination of the liquidation of Modena Imports Pty Ltd (in... Read More »
Important judgment on the remuneration of insolvency practitioners: The decision in Roslea Path Ltd (in liq) of 17 December 2009 is an important judgment on the remuneration of insolvency practitioners. The decision, of the High Court of New Zealand, refers to both NZ and Australian and UK law in determining the relevant principles and processes involved. The Court revisited its two earlier decisions... Read More »
Recent cases - insolvency practitioners' remuneration and expenses: These three recent cases deal with varying aspects of insolvency practitioners' remuneration and expenses. Post liquidation rent In Timbercorp Securities , [10 July 2009], the question was whether the liquidator had retained possession of land for the purposes of the liquidation such that the rent should be treated as an "expense properly incurred"... Read More »
Appointment as trustee in bankruptcy and liquidator of bankrupt's company: The Federal Court has appointed as liquidator of a company the trustee in bankruptcy of the company’s director: Pascoe v Ambernap Pty Ltd [2008] FCA 1975. The bankrupt was the sole member and director of the company. The shares therefore vested in the trustee and s 1072C of the Corporations Act determined... Read More »
Recovering disputed tax debts through bankruptcy: The Queensland Court of Appeal has criticised the ATO for trying to proceed to bankrupt two taxpayers while they were attempting to appeal to the Federal Court against their tax assessments: DCT v Denlay [2010] QCA 217. The Court rejected the ATO’s argument that there was no hardship imposed on them by “the loss of their... Read More »
Successful insolvent trading judgment - Sims v Khattar: On 23 February 2010, the NSW Supreme Court gave judgment for the liquidator in relation to insolvent trading claims against three directors. The liquidator initially sought recovery of over $3 million, or in the alternative $1.4 million. The first amount was the amount of debts alleged to have been incurred from 30 January 1999 to the date... Read More »
Insolvent trading claim dismissed: A liquidator’s claim for insolvent trading against a director was dismissed in Playspace Playground Pty Ltd v Osborn [2009] FCA 1486. The Court found that the liquidator had not proved that the company was insolvent at the relevant time. The decision contains some useful discussion of issues concerning the assessment of... Read More »
Rejection of trustee's proof of debt in a liquidation: A trustee in bankruptcy has failed in challenging the rejection of his proof of debt in the liquidation of the bankrupt’s company: Burness, In the matter of Research Investments Pty Ltd (ACN 089 605 863) (In Liq) [2009] FCA 1041. The debt was claimed to arise from loan funds of over $250,000 claimed to... Read More »
Inspector-General overturned on bankrupt's income contributions and objection to discharge: In Grant and Inspector-General in Bankruptcy [2009] AATA 605, the AAT has: set aside the Inspector-General’s decision upholding a bankrupt's income assessment made by the Official Trustee. The AAT issued a nil assessment. The Inspector-General had relied upon an entry in a loan application showing the bankrupt's income as $6,806 per... Read More »
Conduct of litigation by practitioners: In a recent case, the Official Trustee refused to consent to a bankrupt’s appeal from a Magistrate’s decision being filed out of time. The decision concerned a bankrupt’s review of the OT’s decision under s 178 of the Bankruptcy Act . The bankrupt was unrepresented. In granting leave to the bankrupt to appeal, the Judge... Read More »
Sins of the Sons - US Commentary on the Sons of Gwalia: Link to Story Australia: The Sins of the Sons (of Gwalia) Are Visited on Creditors Yet Again July 27, 2007 Australia is sometimes referred to as "down under" for obvious geographic reasons. In the investment community, however, Australia is becoming known as "upside down" due to the Sons of Gwalia (SOG) insolvency proceedings,... Read More »
Casting vote and practitioner remuneration; proxies etc: 6.7.10: A liquidator can use their casting vote in favour of their own remuneration without being in breach of their fiduciary obligation to creditors: Williams as liquidator of C & D Global Protection Pty Ltd (in liquidation) v CD Protective Services Pty Ltd & Ors (No 3) [2010] QSC 224. In this case, 99.9% in value... Read More »
Court endorses IPA Code on remuneration/disbursements and pre-appointment work: The Federal Court has confirmed statements of the law in the IPA Code that legal fees are not “remuneration” for the purposes of approval by the court; and that work carried out prior to the date of the administrator’s appointment cannot be claimed as remuneration. In making these findings, the Court relied extensively on the IPA Code which... Read More »
Little v Edwards Concreting - Court's concern about liquidation addressed: On 11 February 2009, the NSW Supreme Court expressed concern about the administration of a liquidation and made orders preparatory to deciding whether it should exercise its powers under s 536(3) of the Corporations Act to conduct examinations of the liquidators, and of the directors. The concern arose from the liquidators not knowing of or notifying... Read More »
Width of 'debts incurred' in insolvent trading: The NSW Court of Appeal has held that a quantum meruit liability is a “debt” within section 588G Corporations Act which a director may 'incur' and which can found a s 588G liability against that director. The Court said that it would not assist the statutory purpose of s 588G by taking a narrow or... Read More »
Bankruptcy prosecution - property bought with after-acquired income: The Supreme Court of Western Australia has found that an undischarged bankrupt is obliged to disclose to his trustee after-acquired property purchased with income which the bankrupt was permitted to retain for his own use by reasons of the operation of Part VI Div 4B of the Bankruptcy Act : see Rodway v White [2009] WASC... Read More »
Hall v Poolman - appeal allowed: The NSW Court of Appeal has allowed the appeal by the liquidator from a decision that there be an inquiry under s 536 of the Corporations Act into his conduct: Hall v Poolman [2009] NSWCA 64, 31 March 2009. The background to the trial decision, as earlier explained on the IPA website, is set... Read More »
Pre-appointment advice - no lack of independence: 11.8.10: Pre-appointment advice by an insolvency practitioner to an insolvent person or company is an important independence issue. An administrator’s appointment was unsuccessfully challenged on the basis that his advice to the company some 4 months prior to his appointment resulted in him not being independent. See Huxtable, in the matter of Calnan Oldfield Pty... Read More »
Industrial relations claim admitted under deed: The Court has used s 447A to allow a proof of debt of an employee – Sutton – based on her claim under s 106 of the NSW Industrial Relations Act to be admitted under a deed, even though the claim was a 'mere expectancy': Sutton v BE Australia WD Pty Ltd (admin apptd) [2010] NSWSC 772... Read More »
Refusal to allow bankrupt to leave the country - trustee's decision upheld: The Federal Magistrates Court has upheld a trustee’s decision to refuse permission to a bankrupt to travel overseas. The decision was based on the fact that the bankrupt had not provided evidence of his income, there were concerns raised from the liquidator of companies of which the bankrupt had been a director, and which were a... Read More »
ABC Learning - pay-roll tax records ordered to be produced: The administrators of ABC Learning have succeeded in having the NSW Commissioner of State Revenue produce ABC's pay-roll tax records under s 597(9) of the C orporations Act . Under the Taxation Administration Act 1996 (NSW) section 81 prohibits certain disclosures of information subject to s 82, which relevantly provides: Section 82... Read More »
Assessing proofs of debt: These are two recent decisions on assessing proofs of debt. Foster v Parbery; Foster v Elliott [2009] NSWSC 1304 involves former a employee who sought to prove in liquidation of two companies – T and C - which each rejected his proofs of debt for employment entitlements; each company submitted that the other was the... Read More »
Post-dated and bounced cheques - no suspicion of insolvency: A liquidator’s application for recovery of preferences has been dismissed by the Federal Court, for reasons including he was unable to show that the company's post-dated and bounced cheques would have caused a reasonable person in the circumstances of the defendant to have had reasonable grounds for suspecting insolvency: s 588FG. The use of post-dated cheques is not... Read More »
ASIC v Storm Financial Limited (R & M) (in Adm) [2009] FCA 269: The Federal Court has, on ASIC's application, wound up Storm both in insolvency, and on the 'just and equitable' ground. Messrs Worrell and Khatri were appointed liquidators. In coming to its decision the Court examined the s 439A report of the administrators, which recommended winding up, against a deed of company arrangement proposed by the directors in an... Read More »
Automatic reinstatement of directors: 5.8.10: ASIC has been criticised for requiring a trustee in bankruptcy to apply to court to reinstate a company when the Corporations Act did not in fact require this. The Judge said that ASIC “should not make requirements contrary to the provisions of an Act of the Parliament in what, I assume, is a standard-form... Read More »
Timbercorp - duties of liquidators to creditors vs investors: This is a link to the judgment of Justice Finkelstein in Timbercorp Securities Limited (in liq) v WA Chip & Pulp Co Pty Ltd [2009] FCA 901, comments from which were reported in the press this week. http://www.austlii.edu.au/au/cases/cth/FCA/2009/901.html Sections 601FC and 601FD of the Corporations Act set out obligations of a responsible entity... Read More »
Disputes over appointments of liquidators: The Court will generally appoint the creditor’s nominee as receiver or liquidator where there is a contest about the appropriate appointee and there is nothing to be said between the competing nominees as to their respective fitness, qualification or cost. In a recent case in the NSW Supreme Court - Glenwood Village Pty Ltd v Glen Alpine... Read More »
Bankruptcy Act - s 116(2)(c)(iii) decision: Section 116(2)(c)(iii) of the Bankruptcy Act is a rarely used provision. It allows the court to determine that the bankrupt's tools and equipment be excluded as divisible property even though they are worth more that the prescribed value - about $3,350. Here they were worth well over $6,000. The, under s 116(2B), upon the making of... Read More »
Remuneration - national fee rates, interstate travel, etc - s 449E: Remuneration issues concerning the amount of fees claimed for 3 days work ($22,727 incl GST from 7 July to 5.30 pm on 9 July 2008), interstate travel, and personal time spent by the appointees are canvassed in two recent related decisions. Supreme Court decision Pleash & Anor v Gold Coast Property Investments & Management Pty Ltd... Read More »
Lanepoint v ASIC - winding up set aside: In Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) v Australian Securities and Investments Commission [2010] FCAFC 49, Lanepoint has succeeded in staying a winding up order made against it on ASIC’s application. By majority, the Full Court found that issues raised by ASIC in the trial proceedings, leading to Lanepont being wound up... Read More »
Company wound up in face of Part 5.3A appointment: A company as wound up in the face of its appointment of an administrator the day before the hearing: DCT v Bedroff Pty Ltd ACN 079 158 955 (No 2) [2009] FCA 1399. The Federal Court decision traverses: Public Trustee of Queensland v Octaviar Ltd (2009) 69 ACSR 621 ; ... Read More »
Dispensing with words: In De Vries re TMPL Pty Ltd [2009] NSWSC 818, the company applied under s 450E to dispense with having the words “subject to a deed of company arrangement” after its name. This section was introduced in the December 2007 reforms. As the Court explained, the reason for s 450E was to provide a means... Read More »
ABC Learning - reasons for extension of the administration to 31 March 2010: The chronology in ABC Learning was this: 6 November 2008 - administrators were appointed to the ABC Group; 6 November 2008 – receivers and managers were appointed by banks to whom charges had been granted as security for advances made to the ABC Group by the banks. 27 November 2008 - Court ordered that the... Read More »
Court refuses to appoint creditor's nomineee as liquidator: Generally, a creditor’s nominee will ordinarily be appointed as liquidator by the court – see Parkinson v Morkaya [2008] NSWSC 1183; Glenwood Village Pty Ltd v Glen Alpine Constructions Pty Ltd [2009] NSWSC 526 ; Leveraged Capital Pty Ltd v Modena Imports Pty Ltd [2009] NSWSC 509].... Read More »
Section 181A transfer of estate from ITSA to registered trustee valid: The Federal Court has rejected a challenge to the appointment of Mr John Burke, trustee, pursuant to s 181A of the Bankruptcy Act on a transfer of the bankruptcy from the Official Trustee: Coshott v Coshott [2010] FCA 300. Under s 181A(1) the current trustee of a bankrupt's estate may, with a written... Read More »
Controlling trustee appointed as bankruptcy trustee - no conflict: One issue in this case was whether a Part X controlling trustee, who had applied to bankrupt the debtor, should be the trustee of the bankruptcy. The application was made under s 221 of the Bankruptcy Act, which relevantly says that where a Part X agreement does not proceed, the controlling trustee may apply to the court for... Read More »
Betcorp - successful US cross-border application by liquidators: A successful application has been made to the US Bankruptcy Court by the Australian liquidators of a members’ voluntary winding up. Simon Cathro and Simon Wallace-Smith of Deloitte are the voluntary liquidators of Betcorp. A US creditor of Betcorp sued it in the US for alleged breach of patent, claiming substantial damages. ... Read More »
New form of consent to act in bankruptcy: In Condon v Watson [2009] FCA 11, discussed below, the Federal Court raised an issue concerning joint consents of trustees. The Court said that the form of consent [ITSA Form 12] did not ask trustees signing the form to indicate whether they were consenting jointly, or jointly and severally. The Court queried whether... Read More »
Reviews of sequestration orders - and stays on trustees' duties: What is a trustee to do when there is a challenge to a sequestration order? Seek a court stay of their attention to their duties may be one option. In Calia v Cicio [2010] FMCA 385, a sequestration order was made on 5 February 2010 in the absence of the debtor, Mrs Calia. It was... Read More »
Removal of liquidators -: The Federal Court has ordered the removal of liquidators under s 503 of the Corporations Act based on what the Court described as their“troubling” conduct: Independent Cement and Lime Pty Limited v Brick and Block Company Ltd (In Liq) (Receivers and Managers App’d) [2010] FCA 352. The ultimate question under s 503 is whether the removal... Read More »
Winding up -: In what were always "ill-fated proceedings", a creditor applied to wind up Perpetual Trustee Co Ltd in insolvency for failure to respond to a statutory demand. Perpetual is a major public company and its solvency seemed to be assumed. Emotions ran high, between the lawyers. They reached the point where Perpetual’s lawyers - Corrs Chambers... Read More »
One.Tel - High Court decision in favour of One.Tel: 4.8.10: The High Court has given its decision in relation to a Deed of Arrangement under old Part X of the Bankruptcy Act , effectively agreeing with the NSW Court of Appeal, which itself allowed an appeal from a single judge: CGU Insurance Limited v One.Tel Limited (In Liq) [2010] HCA 26. In 2004, the... Read More »
Replacing resigning liquidators - s 503 Corporations Act: The Court has replaced liquidators who are resigning from PricewaterhouseCoopers with other liquidators from that firm. Mr Philip Carter and Mr Stephen Longley were liquidators of the Bridgecorp companies. On 10 November 2009, they each resigned from the PricewaterhouseCoopers partnership and those resignations will become effective on 30 June 2010, although they will leave the firm... Read More »
Octaviar - considerations in appointment of new liquidators: The Queensland Supreme Court, on 9 Sept 2009, appointed liquidators to Octaviar: see Public Trustee v Octaviar (No 10) [2009] QSC 283. The judgment is enclosed . The Court had previously set aside a deed of company arrangement on the application of the Public Trustee, a creditor of the company: Public Trustee v Octaviar... Read More »
Duties of liquidators, and of committees of creditors: A recent decision has addressed responsibilities both of a liquidator in responding to valid queries from a committee of creditors, and the committee itself, in terms of its statutory duties to make a decision. Under the Corporations Act , the function of fixing remuneration in a winding up can lie with the committee of inspection. Ultimately... Read More »
DCT v WPS Motorsport Pty Limited [2009] FCA 476 � s 440A: An application to wind-up a company was made by the ATO. An administrator was appointed on the day before the hearing of the winding up application. The Court had to decide whether it was satisfied that it was in the interests of creditors for the company to continue in administration rather than to be wound up: s... Read More »
Section 139ZQ notice - outcome of High Court judgment: As we explain below, a section 139ZQ notice was served on Mr Vale by a bankruptcy trustee claiming around $270,000. Vale challenged that, although the facts seem to show he was transferred property by the bankrupt for payment of 7 dollars. A Federal Magistrate found for Vale. The trustee appealed to the Full... Read More »
Creditors nominated liquidator appointed: This is another court decision replacing a liquidator in favour of the creditors’ preferred appointee. Directors had nominated a provisional liquidator – Gary Anderson - who was duly appointed. Although nominated by the directors, the law does not then allow creditors to vote to change liquidators, as it does in creditors’ liquidations and voluntary administrations.... Read More »
Solvency on a knife's edge - s 459C: The Federal Court has wound up a company which failed to rebut the statutory presumption created by operation of s 459C of the Corporations Act that it was insolvent because it had not complied with a winding up demand served on it: Turco & Co Pty Ltd v Pendella Holdings Pty Ltd; In the matter of Pendella Holdings... Read More »
Practitioners' oversights - who pays?: A trustee overlooked signing an authority under s 188 of the Bankruptcy Act ; and the signature of the debtor had not been witnessed. The relevant documents were also not properly filed with ITSA. This came to light after the debtor had complied with the terms of the personal insolvency agreement that was approved by creditors. On the... Read More »
Income contributions - Court decision in favour of bankrupt - ss 139L, 139M, 139W: The Federal Court of Australia in Inspector-General in Bankruptcy v McGushin [2009] FCA 662 has dismissed an appeal by the Inspector-General from the 2008 AAT decision in McGushin and Inspector-General in Bankruptcy [2008] AATA 769, 18 June 2009. The Federal Court agreed with the AAT that, in the case of the bankrupt... Read More »
Judicial concern about creditors' trusts: A comment on creditors’ trusts In a decision of 24 March 2009, Justice Barrett of the NSW Supreme Court has raised concerns about the use of creditors' trusts as an outcome of a Part 5.3A voluntary administration: see Parkview Constructions Pty Ltd v Tayeh & Ors [2009] NSWSC 186. Justice Barrett... Read More »
Creditors ... have no interest and no reason to be interested - court fixes remuneration where committee loses interest: Do the Court's comments below describe a common attitide of creditors? 15 With the committee of inspection having declined to act further in relation to the matter of the liquidator’s remuneration, it is open to a meeting of creditors to act by resolution (see s 499(3)(b)). The liquidator refers in his affidavit to reasons why he considers... Read More »
Lease is not necessarily repudiated by service of s 443B notice: Mere service of a section 443B notice does not serve the repudiate the lease, although other facts may indicate a repudiation. Such a notice “is nothing more than an indication by an administrator that he will not ‘use’ the leased property and a statement that he does not accept personal liability for the... Read More »
Section 459C(2) + the: The NSW Supreme Court has declined to follow previous authority in coming to an interpretation of s 459C(2)of the Corporations Act. The Court also applied the “informal effective service rule”. Section 459C(2) says that the court “must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was... Read More »
A person subject to a bankruptcy notice can be prevented from leaving Australia: The Full Federal Court has today found that the general power given to a court under s 30 of the Bankruptcy Act can be used to restrain a person against whom only a bankruptcy notice has been issued from going overseas and to require them to give up their passport. After a bankruptcy notice has issued and not been... Read More »
Golden Star Resources v Rosel - receivers' remuneration and the IPA Code: Golden Star Resources Limited & Anor v Rosel [2010] QSC 28 is a recent (1 Feb 2010) Queensland case where the Court approved remuneration of receivers of around $200,000. In doing so, the Court referred to and relied upon the IPA Code in determining that all the remuneration was reasonable. The Court said that... Read More »
Preferences, insolvency, reasonable grounds, running account, and more ...: Trinick as liquidator of Australian Foods Company Pty Ltd (in liq) -v- Keller [2009] WASC 298 and Trinick as liquidator of Australian Foods Company Pty Ltd (in liq) v Williams & Sons [2009] WASC 297 are both usefuland detailed judgments from the WA Supreme Court on the recovery of unfair preferences, and questions of the... Read More »
Lehman Bros - High Court's reasons why a DOCA cannot release 3rd parties: The High Court has given its reasons why a DOCA cannot release 3rd parties from claims that creditors under the deed may wish to bring against them. See Lehman Brothers Holdings Inc v City of Swan & Ors; Lehman Brothers Asia Holdings Limited (In Liquidation) v City of Swan & Ors [2010] HCA 11 The issue... Read More »
Re Heat Exchanger Services - NZ remuneration decision: This is a decision of the High Court of New Zealand of 18 March 2010 deciding upon an application made by the Official Assignee (“OA”) for approval of his remuneration and for approval of certain charges which he incurred with a law firm and an accounting firm. The OA was appointed interim liquidator by order... Read More »
Do you need to do a bankruptcy search before accepting a VA?: The Federal Court has accepted as good industry practice that it is not necessary to conduct a bankruptcy search on a director before a liquidator accepts an appointment as voluntary administrator. In this case, the director was in fact bankrupt, and had no authority to resolve to appoint the administrator: s 206B Corporations Act .... Read More »
Receivers not excused under s 419A(7) for company's use of scaffolding: Receivers have been found liable under s 419A of the Corporations Act for rent and other amounts payable by the company for the hire of scaffolding: Rapid Metal Developments (Aust) Pty Ltd v Rildean Pty Ltd [2009] NSWSC 571. The receivers gave no notice under s 419A(3). The Judge found the receivers should... Read More »
The Rivkin bankruptcy - cross-border options for trustees: This concerns letters of request and applications under the Model Law on Cross-Border Insolvency in a bankruptcy. The deceased estate of Mr Rene Rivkin went bankrupt on 7 November 2006 under s 247 Bankruptcy Act . The trustee needed to pursue investigations in the UK. He could have simply applied for a letter of... Read More »
Euclidean geometry and statutory demands: Section 459G(2) of the Corporations Act says that an application to set aside a statutory demand may only be made within 21 days after the demand is served. The Court cited Euclid in computing whether there was any point to an argument that the application made on 7 April was made within time. The statutory demand was... Read More »
Separate consents to act: Problems arose when competing consents to act were filed with ITSA, a consent from a creditor applying for a sequestration order, then, a joint consent from the debtor following on from a failed Part X. The Court said that ITSA should not accept two different consents. This is because on the making of a sequestration order,... Read More »
Part 5.3A convening period extensions - two recent decisions: In Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 (Friday 12 June 2009), Justice Lindgren of the Federal Court has usefully summarised the considerations a court takes into account in deciding whether to extend the convening period to hold the second meeting of creditors in a Part 5.3A voluntary administration. The... Read More »
Service of tax penalty notices - DCT v Soong: The NSW Supreme Court has held that director penalty notices under s 222AOE of the Income Tax Assessment Act 1936 were served on a director on the date they were posted , not the date on which they were received : Deputy Commissioner of Taxation v Soong [2009] NSWSC 495, 10... Read More »
Statutory notices - 'oppressive and cannot be justified'.: Section 77C of the Bankruptcy Act enables the Official Receiver to issue notices on behalf of trustees requiring persons to attend before the Official Receiver to give evidence on oath and to produce relevant books and records. Trustees regularly have the Official Receiver issue such notices for them for the purposes of their investigations. ... Read More »
Solicitor liable for being involved in phoenix company - 6 year ban on managing companies: On 24 September, the Court ordered that Mr Somerville be disqualified from managing companies for a period of six years: see ASIC v Somerville (No 2) [2009] NSWSC 998 ------------------ This 'phoenix' judgment of the NSW Supreme Court - ASIC v Somerville & Ors [2009] NSWSC 934 - ... Read More »
Casting vote - application of the IPA Code by the Federal Court: This decision - Brisconnections Management Company Limited, In the matter of Thames Blund Holdings Pty Ltd (In Liq) [2009] FCA 626, 10 June 2009 - concerns a liquidator’s decision not to exercise a casting vote in favour of a resolution put to a meeting of creditors to remove him and a co-appointee as liquidators of the company... Read More »
Calculation of days for advertising meetings - beware of public holidays: An administrator miscalculated the days for advertising a meeting of creditors. As the Judge explained: “... when calculating the time period for when notices were required to be published, one of the Administrators inadvertently counted Monday, 4 May 2009 as one of the five business days required. He overlooked the fact that Monday, 4 May... Read More »
Hur v Samsun Logix Corporation - cross-border application: This appears to be the first decided application under the Cross-Border Insolvency Act 2008. It was an application to the Federal Court in Sydney under articles 15, 17 and 21 of the Model Law for a Korean insolvency proceeding to be recognised in Australia and for final orders to preserve the company’s property in Australia. ... Read More »
Directors are held to the details lodged with ASIC - service of a tax notice at an old address: The NSW Court of Appeal has held that a directors tax penalty notice was validly served by the Commissioner because it was sent by prepaid post to the taxpayer’s address recorded on ASIC’s national database, even though that address was wrong. The main question was whether the notice had been validly served under s 28A of the... Read More »
Vince v Hurley Transport - s 449E Corporations Act: This appears to be the first court decision, after the December 2007 changes, concerning the determination of an administrator’s remuneration under section 449E of the Corporations Act. It was given on 18 December 2008. Interestingly, it was marked as not to be sent for law reporting. The administrator – Vince - was appointed on 26 May... Read More »
s 440A(2) - adjournment granted - VAs were continuing to trade: The Court adjourned the Tax Commissioner’s winding up application to allow a voluntary administration to proceed. The question in such cases comes s 440A(2) of the Corporations Act, namely, whether the court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up. If the... Read More »
McGrath - re HIH Insurance Ltd & Ors [2010] NSWSC 404: This HIH decision is important in relation to litigation funding in insolvency. The Court has found that where one company in liquidation - A - has a legal claim to pursue but insufficient funds to litigate it, surplus assets from a related company - B, also in liquidation - may be used to fund the litigation of A's... Read More »
Commercial involvement with an insolvent company and de facto directors: The NSW Supreme Court has dismissed an insolvent trading claim against Apple, and its finance director James Likidis, which was brought by the liquidator of Buzzle on the basis that they were 'shadow directors' of Buzzle: Buzzle Operations Pty Ltd (In Liq) v Apple Computer Australia Pty Ltd [2010] NSWSC 233. The liquidator had argued... Read More »
Trustee succeeds in Family Court appeal - waiting on further hearing date: Since the report below of February 2009, over 12 months ago, the Full Family Court: directed that submissions be filed and served in relation to the future course which the proceedings, costs, and the re-exercise of the trial Judge’s discretion; then decided, in November 2009 - Trustee of the property of G Lemnos, a bankrupt... Read More »
Aust court appoints local receiver for UK bankruptcy trustee: The Federal Court has responded to a letter of request in bankruptcy from the English High Court on behalf of the English trustee (Levy) of the bankrupt estate of Reddy, under s 29 of the Bankruptcy Act 1966 (BA)Reddy owned property in the UK and Queensland. It was an ex parte ... Read More »
Remuneration reduced - appeal filed - work pending an annulment application: An appeal has been filed by the trustee, Max Donnelly, against the decision of Justice Nicholas in the matter discussed below - file NSD630/2010, filed 3 June 2010. The notice of appeal says that the Judge "erred in making a finding that the appellant as trustee of the former bankrupt estates was not entitled to recover his costs,... Read More »
The Stake Man case - director has to pay the liquidator's costs: In a subsequent decision, the Court ordered the director to pay the liquidator's costs , even though the director succeeded in his s 1317S claim. The liquidator in fact succeeded in showing there was insolvent trading and that there was no s 588H defence. Although the director succeeded in being excused under s 1317S but ...... Read More »
Investigating accountants as liquidators - WA decision: In Flynn v Theobald [2008] WASC 263, 14 November 2008, the WA Supreme Court refused to remove a liquidator who had previously acted for the secured creditor as investigating accountant – the C ourt said there was no lack of independence; but the C ourt required the liquidator to engage new solicitors different from... Read More »
Cross-border insolvency - letters of request: The Cross-Border Insolvency Act 2008 (CBIA) commenced operation on 1 July 2008. An interesting aspect of the CBIA arose in a recent court decision which highlighted and compared the existing avenues for overseas investigations of using a ‘letter of request’ to a foreign court, with the new processes available under the CBIA. The decision is... Read More »
Insolvent trading as a provable debt in bankruptcy: While the current insolvent trading provision – in s 588G – has been in the Corporations Act since 1993, there has not been a clear decision from the courts as to whether breach of the insolvent trading provisions of the Act constitutes a provable claim in the bankruptcy of the director. In a recent decision of... Read More »
Family law and bankruptcy - Family Court and Federal Magistrates Court decisions: Family law and bankruptcy - the first court decisions under the 2005 amendments The first court decisions under the 2005 amendments dealing with the interaction of bankruptcy and family law has been given by the Family Court in Lemnos v Lemnos on 30 August 2007, and by the Federal Magistrates Court... Read More »
Gould v CALDB - [2009] FCA 475: The Federal Court has given a decision in Gould v CALDB - http://www.austlii.edu.au/au/cases/cth/FCA/2009/475.html - an appeal by Mr Gould from the AAT which itself had reviewed a Companies Auditors and Liquidators Disciplinary Board (CALDB) decision of August 2004. The CALDB had found he had failed to carry out “adequately and properly” duties as liquidator... Read More »
Litigation funders v secured creditors - 'Meadow Springs' overturned: Remuneration of a liquidator and expenses reasonably incurred in the care, preservation and realization of property subject to a security can take priority over the interest of the secured creditor: re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171. In the context of litigation funding, the Full Federal Court in... Read More »
Winding up of a United States company that operated in Australia: A "foreign company" registered in Australia can be wound up here under s 583 of the Corporations Act as a “Part 5.7 body”. This is so even though it is dissolved in its place of incorporation: see s 582(3) CA. This case - Titchfield Management Ltd v Vaccinoma Inc [2008] NSWSC 1196... Read More »
Boensch v Pascoe - court inquiries, remuneration, independence ...: Boensch v Pascoe [2007] FCA 1977 is a Federal Court decision that raises issues concerning: court inquiries into insolvency practitioners’ conduct; pursuing recoveries for remuneration; and independence and conflicts of interest, arising out of tensions in the trustee-bankrupt relationship, and conflicts involving the retainer of lawyers. The decision is relevant to... Read More »
Tax debts and winding up demands: For the lawyers, the High Court has given a decision that confirms the ability of the ATO to rely upon a winding up demand even if the debtor company is validly appealing to the AAT or the Federal Court about the tax assessment upon which the demand is based: see DCT v Broadbeach Properties Pty Ltd [2008]... Read More »
Sons of Gwalia: Relevant Documents High Court decision Gwalia_Media | Gwalia_media_2 | High_Court_release_Sons _of_Gwalia_v_Margaretic IPA Press Release Sons of Gwalia’s Hidden Cost for Creditors The outcome of the SOG case is a potentially significant cost burden. Creditor proof... Read More »
Section 444DA - employee priorities and DOCAs: The first court judgment on s 444DA Corporations Act has been given: Fitzgerald, in the matter of Advance Healthcare Group Ltd (Administrators Appointed) [2008] FCA 1604. Section 444DA makes it mandatory for a DOCA to preserve the priority that is available to employee creditors in a winding up unless the employees agree to... Read More »
Diploma Construction v Windslow Corporation - remuneration decision - WA Supreme Court: Diploma Construction v Windslow Corporation [2007] WASC 168. This is a remuneration decision from the WA Supreme Court (Newnes J) in relation to a challenge to the remuneration of a liquidator. One creditor objected to two items: i. $22,000 in connection with the preparation for,... Read More »
Independence of liquidators, directors' appointees and geography: The NSW Supreme Court’s decision in Workers Compensation Nominal Insurer v Denny Earthmoving & Bulk Haulage Pty Ltd [2008] NSWSC 1167 raises issues about independence, choice of liquidators based on geographic location, and whether a liquidator should be chosen by the directors. See also the IPA Code at Ch 6 - Independence. It... Read More »
Exercise of special proxies: Practitioners should be aware of a recent NSW Supreme Court decision which explains that a person exercising a special proxy at a meeting of creditors of a company is entitled to vote generally on matters outside the resolution for which the special proxy was given. In that case, the chair ruled that any representative at the meeting... Read More »
Monarch Gold - IPA Code: Orders have been made by the Supreme Court of Western Australia in relation to the validity of a Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) under the IPA Code of Professional Practice: Monarch Gold Mining [2008] WASC 201. Completion of a DIRRI seeks to ensure compliance by an insolvency practitioner with various statutory obligations of... Read More »
HIH liquidators succeed in the UK: The UK House of Lords has found in favour of the Australian liquidators of HIH Insurance in allowing them to claim HIH assets in the UK: see McGrath v Riddell [2008] UKHL 21, 9 April 2008. In the HIH proceedings in NSW, the NSW Supreme Court ordered in July 2005 that a letter... Read More »
Foots v Southern Cross Mine - costs as provable debts in bankruptcy: In Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56, the High Court has confirmed the law that a costs order in favour of a successful applicant in court proceedings must be ordered before the bankruptcy in order for it to be a provable debt under s 82(1) of the Bankruptcy Act ,... Read More »

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