“Australian Insolvency Decisions” February 2012 edition

Case Reports, Corporate Insolvency, court decisions, Insolvency Law, law reports, Personal Bankruptcy Comments Off

Mar 052012

Complied by Michael Ennis. Michael developed an interest in insolvency case law, while a Deputy Registrar in Bankruptcy at the Federal Court of Australia and while undertaking various roles at the Insolvency Trustee Service Australia (ITSA). He has maintained this interest since retiring. If you would like to receive the Insolvency Decisions schedule direct, advise Michael of additional decisions, or share your observations, you may contact Michael direct on rmci53mje@spin.net.au.

Bankruptcy Act – following Date of Bankruptcy

Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) (No 2) [2012] FCA 66 (9 February 2012) COSTS – loan contract – valid equitable charge in favour of respondent – application of contra proferentum rule – order for costs – whether applicant should be ordered to pay costs on a party and party basis or indemnity basis – construction of contractual arrangement – clause insufficiently explicit to require costs be paid on indemnity basis COSTS – imprudent or unreasonable refusal of an offer of compromise by applicant – whether indemnity costs to be ordered – indemnity costs ordered to be paid from date of expiry of reasonable offer of compromise http://www.austlii.edu.au/au/cases/cth/FCA/2012/66.html

Good to see these decisions still go back to the Court to provide guidance to Trustees = Pearce (Trustee) v Mulhern (Bankrupt) (No 4) [2012] FCA 54 (2 February 2012) BANKRUPTCY – application for return of passport – whether just and equitable to do so – where respondent bankrupt had complied with obligations under the Bankruptcy Act 1966 (Cth) http://www.austlii.edu.au/au/cases/cth/FCA/2012/54.html

Sresbodan & Sresbodan and Ors (No. 2) [2011] FamCAFC 240 (16 December 2011)FAMILY LAW ─ APPEAL ─ Application for leave to appeal ─ Appeal against order of Family Court Judge joining the third and fourth respondents (“the solicitors”) as parties to the proceedings ─ Where the solicitors lodged a proof of debt with the husband’s bankruptcy trustees ─ Where the solicitors lodged an appeal in the Federal Court against the trustees decision regarding the quantum of their entitlement ─ Where beyond what is recorded in the trial Judge’s reasons for judgment, this Court is unable to know on what basis the solicitors sought leave to intervene in the proceedings, and on what basis the husband opposed such leave being granted ─ Where the basis upon which the solicitors sought to remain interveners in the Family Court proceedings was squarely submitted to relate to “the mechanics of getting paid if and when the quantum of our debt is determined” ─ Where the Court was not aware of any suggestion, nor did they suggest that it would be appropriate in any event,

for the dispute between the solicitors and the trustees with respect to the quantum of the husband’s indebtedness to the solicitors to be determined other than by the Federal Court, which has been seized of the dispute for months ─ Where it was concluded that, absent consideration of section 58(3) of the Bankruptcy Act 1966 (Cth), the discretion to grant leave for the solicitors to intervene miscarried, in that the trial Judge failed to have regard to a matter which was material to the exercise of his Honour’s discretion ─ Leave to Appeal granted ─ Appeal allowed FAMILY LAW ─ APPEAL ─ COSTS ─ Where it was common ground that, if the application was granted and the appeal allowed, an order for costs against the solicitors was appropriate ─ That the solicitors are to pay the husband’s costs of and incidental to the application for leave to appeal and appeal as agreed or assessed on a party/party basis http://www.austlii.edu.au/au/cases/cth/FamCAFC/2011/240.html

Sresbodan & Sresbodan and Ors [2011] FamCAFC 239 (16 December 2011) FAMILY LAW ─ APPEAL ─ Application in an appeal – Where to adjourn the husband’s application for leave to appeal would have only increased the costs of all parties, with no prospect of the application having greater utility on any later occasion – Adjournment of the application for leave to appeal refused FAMILY LAW ─ APPEAL ─ Application for leave to appeal against interlocutory order of Family Court Judge ─ Property settlement ─ Where the trial Judge made orders for the sale of a property and that on completion of the sale the proceeds be disbursed to various creditors ─ Not established that the trial Judge was seized of an application pursuant to section 116(2) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) or that his Honour erred in not applying “correctly or otherwise” the provisions of that section ─ The Court was not referred to any evidence or submissions before the trial Judge asserting that the husband’s creditors ought not to be paid out of the proceeds of the sale of a property ─ Not established that the trial Judge erroneously applied the provisions of section 58 of the Bankruptcy Act on the evidence before him in light of the competing applications which were before him ─ Application for leave to appeal dismissed FAMILY LAW ─ APPEAL ─ COURTS AND JUDGES ─ Disqualification ─ Court was not referred to any application before the trial Judge to disqualify himself ─ Not identified or demonstrated that the trial Judge denied the parties natural justice http://www.austlii.edu.au/au/cases/cth/FamCAFC/2011/239.html

Corporations – pre-appointment

Armadale Retail Investments Ptd Ltd & Ors v Owenlaw Mortgage Managers Ltd [2012] VSC 9 (25 January 2012) CORPORATIONS — Appeal against decision of an Associate Justice — Rehearing de novo on the merits — Statutory demand— When statutory demand served — Service by post — Whether the deemed service provisions in the Acts Interpretation Act 1901 (Cth) and Evidence Act 2008 (Vic) rebutted by evidence — Corporations Act 2001 (Cth) ss 109X, 459G, Acts Interpretation Act 1901 (Cth) s 29, Evidence Act 2008 (Vic) s 160 http://www.austlii.edu.au/au/cases/vic/VSC/2012/9.html

Corporations – post appointment

A small but growing number of Corporation / Family Law decisions = C Pty Ltd and Ors & PGW as Liquidator of S Pty Ltd (In Liq) [2011] FamCAFC 231 (9 December 2011) FAMILY LAW – APPLICATIONS FOR LEAVE TO APPEAL – where two applications for leave to appeal were filed – where leave to appeal is required as these are interim financial proceedings – where the basis upon which leave is sought in both applications is essentially the same – where the jurisdiction of the Family Court to hear an application by the Liquidator of S Pty Limited to recover from Mr and Mrs Rand monies that S Pty Limited as guarantor had paid to discharge a loan to National Australia Bank is challenged – where if the Court has the jurisdiction to hear that application it should exercise that jurisdiction – where the exercise of jurisdiction by the Family Court to hear an application by C Pty Limited to reverse the decision by the Liquidator to reject a proof of debt is challenged – where the applicants contend that both applications should be transferred to the Supreme Court of New South Wales – where the issues raised are of importance – leave granted. FAMILY LAW – APPEAL – THE APPEAL BY MR AND MRS RAND – where the appellants argue that the trial judge was in error in finding that the guarantee proceedings were a “matrimonial cause” within s 4(1)(f) of the Family Law Act 1975 (Cth) – where the trial judge found that both the s 79 proceedings and the winding up proceedings were matrimonial causes and the guarantee proceedings were related to them – where there is no doubt that the Family Court has jurisdiction to hear the winding up proceedings pursuant to the power vested in it under s 1337C of the Corporations Act 2001 (Cth) – where the “remoteness” of the guarantee proceedings from the s 79 proceedings is dependent upon the meaning of the phrase “in relation to” in s 4(1)(f) of the Family Law Act 1975 (Cth) – where the necessary connection is established and the trial judge was correct in finding that the guarantee proceedings are a “matrimonial cause” and that the Family Court has jurisdiction to hear the proceedings – where the trial judge erred in holding in the alternative that the guarantee proceedings were a civil matter arising under the Corporations Act 2001 (Cth) and within the jurisdiction of the Family Court – where the guarantee proceedings arise under general law and are not a civil matter arising under the Corporations Act 2001 (Cth) – where the trial judge was correct in holding in the further alternative that the guarantee proceedings were within the Family Court’s accrued jurisdiction – where the winding up proceedings have not been completed and they therefore satisfy the need for there to be a family law claim as part of the justiciable controversy – where the trial judge was correct in exercising his discretion to exercise the jurisdiction – where it is beyond doubt that the trial judge correctly applied the criteria for the exercise of jurisdiction – whether the trial judge erred in concluding that the conduct of the Rands was “wrongful” – where this is a challenge to the trial judge’s findings as to the facts – where there were no oral submissions made by either side in relation to this challenge – where this challenge fails given that it was a challenge to orders 4 and 5 of the trial judge which orders have been complied with – where the trial judge was correct in rejecting the application of Mr and Mrs Rand for security for costs against S Pty Ltd in respect of the guarantee proceedings – where the trial judge was correct in applying s 117 of the Family Law Act 1975 (Cth) instead of s 1335 of the Corporations Act 2001 (Cth) – where the guarantee proceedings are “proceedings” within the meaning of s 117 – where on the basis that s 117 applies the trial judge did not err in taking into account other considerations such as the financial circumstances and conduct of the parties – where no error by the trial judge was found – appeal dismissed. FAMILY LAW – APPEAL – THE APPEAL BY C PTY LIMITED – where the appellant complains that the trial judge erred in dismissing the application to transfer the proof of debt proceedings – where the appellant concedes that in the event that the guarantee proceedings are found to be a matrimonial cause and the Family Court has original jurisdiction to hear those proceedings it is not appropriate to transfer them – where it was found that the guarantee proceedings are within the original jurisdiction of the Family Court – where this appeal becomes “academic” – appeal dismissed. FAMILY LAW – COSTS – where the appellants seek that the respondent pay the costs of and incidental to the appeal and the proceedings before the trial judge – where the respondent sought an order for costs – where both the appellants sought that a regime be put in place for the filing of written submissions on costs and for further evidence to be presented – where the respondent did not oppose this – where a regime as requested was put in place http://www.austlii.edu.au/au/cases/cth/FamCAFC/2011/231.html

C Pty Ltd & PGW as Liquidator of S Pty Ltd (In Liq) [2011] FamCAFC 230 (9 December 2011) FAMILY LAW – APPEAL – Application to adduce further evidence – where the application was filed after the hearing was completed and judgment was reserved – where the Court determined to treat the application as an application to re-open the hearing in order to adduce further evidence pursuant to s 93A(2) of the Family Law Act 1975 (Cth) – where the further evidence sought to be adduced was that the wife in the original family law proceedings (not a party to the appeal) had declared herself bankrupt prior to the hearing of the appeal – where the fact of the wife becoming bankrupt was of no relevance to the issue of the exercise of jurisdiction which was the subject of the appeal – where there was no basis to admit the further evidence – application dismissed.

FAMILY LAW – COSTS – where in the event the application was dismissed the respondent sought an order for costs on an indemnity basis, or if not, on a party and party basis – where the dismissal of the application would justify an order for costs being made in favour of the respondent – where the Court was not persuaded that the applicant’s prior knowledge of the wife’s bankruptcy and failure to file an application to adduce further evidence prior to the hearing constituted the necessary exceptional circumstances to award indemnity costs – costs ordered on a party and party basis http://www.austlii.edu.au/au/cases/cth/FamCAFC/2011/230.html

Amaca Pty Ltd (under NSW Administered Winding Up) v King [2011] VSCA 447 (22 December 2011) NEGLIGENCE – Occupier’s liability – Asbestos cement sheet manufacturing plant – Duty of care – Known risk of asbestos dust causing mesothelioma – Whether magnitude of risk sufficient to require occupier to take reasonable care to protect occasional visitor from risk – Jury directions – Whether judge erred in directions as to existence and scope of relevant duty – Breach – Causation – Distinction between risk and causation – Motion for judgment non obstante veredicto – Whether judge erred in dismissing application – Whether sufficient evidence of causation to support verdict – Damages – Pain and suffering – Whether amount awarded by jury excessive – Awards previously made in like cases – Appeal dismissed http://www.austlii.edu.au/au/cases/vic/VSCA/2011/447.html

National Australia Bank Ltd & Anor v Horne & Anor (No 2) [2011] VSCA 414 (8 December 2011) COSTS – Substantial success by both sides – No order as to costs http://www.austlii.edu.au/au/cases/vic/VSCA/2011/414.html

Action Cycles Pty Ltd (recs & mgrs apptd) & Ors v Ross & Ors [2011] VSCA 411 (1 December 2011) PRACTICE AND PROCEDURE – Stay pending appeal – Interlocutory appeal – Application for stay of order dissolving interlocutory injunction to restrain receivers from selling mortgaged properties pending hearing and determination of action – Serious question to be tried – Interest – Dispute as to applicable interest rate – Dispute as to date interest payments due for payment – Balance of convenience – Whether material change in circumstances so exceptional as to warrant discharge of injunction – Delay – Whether delay coming to trial caused by respondent – Injunction granted http://www.austlii.edu.au/au/cases/vic/VSCA/2011/411.html

Baker & Ors v Ambridge Investments Pty Ltd (in liq) & Ors (No 2) [2011] VSCA 400 (1 December 2011 COSTS – Application for indemnity costs by successful defendant to appeal – No special circumstances that would justify a departure from the usual order as to costs – Application refused – Costs to be taxed on a party and party basis http://www.austlii.edu.au/au/cases/vic/VSCA/2011/400.html

In the matter of Norman Nominees Pty Ltd (in liq) & Ors v Zervos Pty Ltd & Ors [2011] QSC 320 (4 November 2011) Amendment out of time to add new cause of action – Commonwealth statutory cause of action – Commonwealth statutory limitation time – s 588FF(5) Corporations Act 2001 (Cth) – interaction of State procedural rules and Commonwealth statutory limitation time – construction of “a relevant period of limitation” in r 376 – whether s 81 Supreme Court Act 1991 (Qld) is a separate source of power to amend in respect of Commonwealth causes of action – discretion not to allow amendments which would be futile – substantially the same facts Acts Interpretation Act 1954 (Qld), s 32A, s 32AA http://www.austlii.edu.au/au/cases/qld/QSC/2011/320.html

ACN 078 272 867 Pty Limited (In liquidation) (Formerly Advance Finances Pty Limited) v Deputy Commissioner of Taxation; Binetter v Deputy Commissioner of Taxation [2011] HCA 46 (2 November 2011) Corporations – Reinstatement to register – Winding up – Companies deregistered under Corporations Act 2001 (Cth) (“Act”) – Federal Court made orders reinstating companies to register pursuant to s 601AH(2) of Act and thereupon winding them up – Companies and former director sought writs of certiorari, to quash winding-up orders made by Federal Court, mandamus and prohibition – Whether Federal Court had jurisdiction to wind up companies – Whether Federal Court wound up deregistered companies – Whether Federal Court ordered that winding up take effect from date when companies reinstated – Whether s 601AH(5) of Act requires that company, when reregistered, come back into existence in same form as on deregistration. Procedural fairness – Whether companies should have been given opportunity to be heard before winding-up orders made – Discretionary nature of relief sought – Whether there was unfairness as matter of substance – Whether opportunity to be heard could have made difference to outcome. Words and phrases – “company”, “jurisdictional error”. http://www.austlii.edu.au/au/cases/cth/HCA/2011/46.html

“Australian Insolvency Decisions” September 2011 edition

Industry People, Insolvency practices, Personal Bankruptcy Comments Off

Oct 032011

by Michael Ennis. Michael developed an interest in insolvency case law, while a Deputy Registrar in Bankruptcy at the Federal Court of Australia and while undertaking various roles at the Insolvency Trustee Service Australia (ITSA). He has maintained this interest since retiring. If you would like to receive the Insolvency Decisions schedule direct, advise Michael of additional decisions, or share your observations, you may contact Michael direct on rmci53mje@spin.net.au.

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Bankruptcy Act – Prior to Date of Bankruptcy

Four judgments attached to BN – Dowd v Garde [2011] FMCA 713 (14 September 2011) BANKRUPTCY – Opposed Creditor’s Petition on the basis of an error in the Bankruptcy Notice where the stated sum does not equate to the amount contained in the four judgments attached – whether defect or irregularity curable under s.306 of the Bankruptcy Act 1966 – Bankruptcy Notice invalid – Creditor’s Petition dismissed http://www.austlii.edu.au/au/cases/cth/FMCA/2011/713.html

Applications to Stay Sequestration Orders always seemed to come in clumps after reasonable intervals of not seeing any, so we will have to keep an eye out for some more – Trustees can take the normal precautionary actions, these are not the actions contemplated by the Stay Order – Favell v Mbuzi [2011] FMCA 710 (5 September 2011) BANKRUPTCY – Creditor’s Petition – service of Bankruptcy Notice – deemed service – delivery in ordinary course of post – no receipt because of no mailbox – cl. 24.1.3 of Australia Post Terms and Conditions – no proved non-delivery. BANKRUPTCY – Stay of Sequestration Order – refused http://www.austlii.edu.au/au/cases/cth/FMCA/2011/710.html

Parnell Corporate Services Pty Ltd v Lieurance [2011] FMCA 709 (31 August 2011) BANKRUPTCY – Creditor’s petition – no appearance by debtor – sequestration order made http://www.austlii.edu.au/au/cases/cth/FMCA/2011/709.html

Trkulja v Gibsons Solicitors Pty Ltd [2011] FMCA 655 (26 August 2011) BANKRUPTCY – Application to review – application to set aside bankruptcy notice out of time – leave opposed – extension of time for compliance – adjournment of proceedings http://www.austlii.edu.au/au/cases/cth/FMCA/2011/655.html

Thomas & Anor v Nash [2011] FMCA 661 (24 August 2011) BANKRUPTCY – Petition – sequestration order granted http://www.austlii.edu.au/au/cases/cth/FMCA/2011/661.html

Demandem Holdings Pty Ltd & Anor v Christou [2011] FMCA 489 (24 August 2011) BANKRUPTCY – Contested creditor’s petition – whether the debtor is solvent and whether the debtor has an off-setting claim that provides a reason for the Court to refrain from making a sequestration order considered. http://www.austlii.edu.au/au/cases/cth/FMCA/2011/489.html

A most curious matter – I’ve never heard of an application to rescind a Set Aside order, let alone such an application being successful – also, I had thought only a Judge could set aside a Seq Order, but Registrar Luxton is very experienced in the jurisdiction = a comment from a member of this email group: ‘yes, a very interesting case concerning the rescission of a setting aside of a sequestration order. I have not heard of that happening before.

I wonder when the bankruptcy starts from?

It appears that there was some “creative accounting “going on concerning the debtor’s financial status which just a bit too creative and bore little resemblance to his actual state of insolvency. I did note that in the setting aside proceedings, the RT was able to get an order that he be paid $12,000 for his remuneration which was well done when you look at how Mr Pattison failed to receive remuneration in a number of his matters where the SO s were set aside. – Barro Group Pty Ltd v Poljakovic & Jacaranda Cooperative Housing Society Ltd [2011] FMCA 706 (23 August 2011) BANKRUPTCY – Application to rescind setting aside of sequestration order – application successful http://www.austlii.edu.au/au/cases/cth/FMCA/2011/706.html

Novel matter in relation to a Bankruptcy Notoce – Lewis v Lamru Pty Ltd; In the Matter of Lewis (No 2) [2011] FCA 1025 (31 August 2011) http://www.austlii.edu.au/au/cases/cth/FCA/2011/1025.html

Bankruptcy Act – following Date of Bankruptcy

David Lombe as trustee of the bankrupt estate of Salah Eddine Dib v Mohamed Dib & Anor [2011] NSWSC 1062 (9 September 2011) CONTRACT – general contractual principles – offer and acceptance – first party alleges he provides advance to assist in funding purchase of property by others – whether agreement to repay the funds advanced to first party or whether first party agreed to receive other benefits for advance – HELD: no agreement to repay funds advanced – TRUSTS AND TRUSTEES – resulting trust – constructive trust – allegations of resulting trust and constructive trust arising from first party’s advance of funds to purchase property in the names of others – whether contrary agreement – HELD: no resulting or constructive trust http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/1062.html

Very interesting decision – thanks to Bob for alerting me to it – note use of s. 77c transcript – note ‘heavies’ appearing – Nelson v Mathai & Ors [2011] FMCA 686 (2 September 2011) BANKRUPTCY – Trustee Application pursuant to s.121 of the Bankruptcy Act 1966 – meaning of ‘creditor’ http://www.austlii.edu.au/au/cases/cth/FMCA/2011/686.html

A Section 139ZQ matter – Combis (Trustee) v Spottiswood [2011] FCA 1082 (16 September 2011) PRACTICE AND PROCEDURE – substituted and deemed service – whether service can be deemed after multiple unsuccessful attempts – where no evidence that documents came to the attention of respondent – where impracticable to personally serve respondent – substituted service ordered in lieu of deeming service http://www.austlii.edu.au/au/cases/cth/FCA/2011/1082.html

Singh v Official Trustee In Bankruptcy & Anor [2011] FMCA 677 (6 September 2011) BANKRUPTCY – Leave to commence, continue and take fresh steps in proceeding – whether leave to be granted – where failure to comply with undertaking – costs – payment by solicitor personally http://www.austlii.edu.au/au/cases/cth/FMCA/2011/677.html

Harrison v Ponting & Anor [2011] FMCA 680 (2 September 2011) BANKRUPTCY – Application by the Trustee for possession of the property http://www.austlii.edu.au/au/cases/cth/FMCA/2011/680.html

A Ferrari is a nice bankruptcy asset, if it can be located!! – BMW Australia Finance Limited v Cheihk [2011] FMCA 720 (26 August 2011) BANKRUPTCY – Application to declare for or against trustees title – claim for declarations against the bankrupt, her trustees and another in respect of the ownership and right to possession of a chattel – no dispute – no proper claim under the Bankruptcy Act 1966 – no proper claim under the Court’s associated jurisdiction http://www.austlii.edu.au/au/cases/cth/FMCA/2011/720.html

Sheikholeslami v Tolcher [2011] FCA 1050 (9 September 2011) BANKRUPTCY AND INSOLVENCY – whether certain real property part of bankrupt’s divisible property – whether bankrupt held property on trust for another at the commencement of her bankruptcy TRUSTS AND TRUSTEES – whether an express trust exists – informal family arrangement between siblings in respect of the ownership of real property EQUITY – defence of unclean hands – whether applicant should be denied equitable relief in circumstances where notice under s 26A of the Foreign Acquisitions and Takeovers Act required but not given http://www.austlii.edu.au/au/cases/cth/FCA/2011/1050.html

Jones Lang Lasalle (NSW) Pty Ltd v Simpson; In the Matter of Simpson (Bankrupt) [2011] FCA 1006 (26 August 2011) BANKRUPTCY – whether the applicant should have leave to proceed pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) against the first and second respondents in a proceeding in the Supreme Court of New South Wales in which the applicant (as plaintiff) alleges that the first and second respondents were knowing participants in a breach of trust by a corporation of which they were directors and executives http://www.austlii.edu.au/au/cases/cth/FCA/2011/1006.html

Bankruptcy Act – Other Schemes under the Act

Nil

Corporations – pre-appointment

Statewide Secured Investments Pty Ltd v Tarrant [2011] FCA 1067 (15 September 2011) CORPORATIONS – application to set aside statutory demand – interlocutory application for substituted service http://www.austlii.edu.au/au/cases/cth/FCA/2011/1067.html

Deputy Commissioner of Taxation v Marro (SA) Pty Ltd, in the matter of Deputy Commissioner of Taxation [2011] FCA 1024 (1 September 2011) CORPORATIONS – winding up – setting aside winding-up order made in the absence of a party – procedural irregularity – agreement to seek adjournment departed from without notice – irregularity cured by subsequent giving of notice before making of winding-up order http://www.austlii.edu.au/au/cases/cth/FCA/2011/1024.html

Corporations – post appointment

Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1047 (8 September 2011) PRACTICE AND PROCEDURE – order for interrogatories sought – interrogatories seeking identity of ASIC delegates who, on behalf of ASIC, made decisions to wind up relevant companies – relevant principles – claim of misfeasance in public office – order made http://www.austlii.edu.au/au/cases/cth/FCA/2011/1047.html

S & V Nominees Pty Ltd (in liquidation) v Rabobank Australia Limited (Formerly known as Primary Industry Bank of Australia Limited) (No 2) [2011] FCA 1039 (6 September 2011) PRACTICE AND PROCEDURE — Application by plaintiffs to amend their statement of claim in a manner which includes claim for declarations that defendant had breached s 427 and s 432 of the Corporations Act 2001 (Cth) (‘Corporations Act’) without any further claim with respect to alleged breaches — where defendant said claim for declarations was untenable — where plaintiffs had no real interest in determination of the question and where declaration served no practical purpose Held: Leave to file a statement of claim incorporating a claim for declarations of breaches of the Corporations Act refused http://www.austlii.edu.au/au/cases/cth/FCA/2011/1039.html

Singleton, in the matter of Lehman Brothers Australia Limited (in Liq) [2011] FCA 1068 (2 September 2011) http://www.austlii.edu.au/au/cases/cth/FCA/2011/1068.html

Vickers, in the matter of York Street Mezzanine Pty Ltd (in liq) [2011] FCA 1028 (1 September 2011) http://www.austlii.edu.au/au/cases/cth/FCA/2011/1028.html

Miscellaneous

A Bank & Coleiro and Anor [2011] FamCAFC 157 (2 August 2011) FAMILY LAW – APPEAL – where the Federal Magistrate made an order joining the bank to the property settlement proceedings between the husband and wife – where there was no application before the Federal Magistrate seeking that the bank be joined as a party to the proceedings – where the bank was not given notice of the proposed joinder order, or the opportunity to make submissions in relation to the proposed joinder order – appealable error found – appeal allowed – order set aside. FAMILY LAW – APPEAL – where the Federal Magistrate made an order which purported to relieve the husband and wife from compliance with the provisions of s 121 of the Family Law Act 1975 (Cth) – where there was no application before the Federal Magistrate seeking such an order – where the Federal Magistrate did not provide the opportunity for the bank to be heard prior to the making of the order – where the Federal Magistrate failed to give reasons for the making of the order – appealable error found – appeal allowed – order set aside. FAMILY LAW – APPEAL – where the Federal Magistrate made an order that the bank provide further material to the Court – where it was argued that the bank should not have to disclose further material to the Court until the determination of the bank’s application for summary dismissal of the wife’s amended application was determined – appeal allowed – order set aside. FAMILY LAW – CONTEMPT – in face of the Court – observations made concerning the Federal Magistrate’s use of the contempt procedure against the husband http://www.austlii.edu.au/au/cases/cth/FamCAFC/2011/157.html

“Australian Insolvency Decisions” August 2011 edition

Industry People, Insolvency practices, Personal Bankruptcy Comments Off

Sep 012011

Compiled by Michael Ennis. Michael developed an interest in insolvency case law, while a Deputy Registrar in Bankruptcy at the Federal Court of Australia and while undertaking various roles at the Insolvency Trustee Service Australia (ITSA). He has maintained this interest since retiring. If you would like to receive the Insolvency Decisions schedule direct, advise Michael of additional decisions, or share your observations, you may contact Michael direct on rmci53mje@spin.net.au.

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Bankruptcy Act – Prior to Date of Bankruptcy

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Goodman v Zhao [2011] FMCA 578 (26 July 2011) BANKRUPTCY – Creditors petition – debtor disputing the judgment debt – issues in relation to the judgment debt already litigated as far as the High Court – previous judgment of this Court dismissing a challenge to the bankruptcy notice subject to appeal in the Federal Court – no reason to defer a sequestration order http://www.austlii.edu.au/au/cases/cth/FMCA/2011/578.html

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Kwok v Bank of Western Australia Limited [2011] FMCA 559 (22 July 2011) BANKRUPTCY – Application to set aside a Bankruptcy Notice brought pursuant to s.41(7) – requirements of section not make out – application dismissed http://www.austlii.edu.au/au/cases/cth/FMCA/2011/559.html

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“A question resolved – I had thought that there was a decision on point the other way” – M Ennis – Autron Pty Ltd v Benk [2011] FCAFC 93 (28 July 2011) BANKRUPTCY AND INSOLVENCY – bankruptcy notice – validity – whether post-judgment interest included in a bankruptcy notice can be a component of the prescribed statutory minimum for which a bankruptcy notice can be issued – consideration of the meaning of “final judgment” and “final order” http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/93.html

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Bankruptcy Act – following Date of Bankruptcy

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Mango Boulevard Pty Ltd v Whitton; In the matter of Spencer (Bankrupt) (No 2) [2011] FCA 845 (28 July 2011) COSTS – bankruptcy – application for directions by trustee – whether trustee ought to have his costs paid out of funds held by him for the calling of a meeting of creditors – where trustee’s application to the court was reasonable – where need for directions arose from instruction of principal proceeding – order for costs reserved to the discretion of the trial judge COSTS – costs of interlocutory proceeding – application that costs be paid forthwith – circumstances in which order for costs to be paid forthwith may be made – where applicant had costs awarded against it in respect of transfer application – where bankruptcy jurisdiction is exercised in national court – order would cause injustice – order not made http://www.austlii.edu.au/au/cases/cth/FCA/2011/845.html

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“Note service of Bankruptcy Notice by email” – M Ennis – Topalides v Edey [2011] FMCA 556 (22 July 2011) BANKRUPTCY – Application for Review – suggestions of procedural faults and of misleading conduct – allegations of improper service or no service at all – consideration of statutory requirements – determination of no fault or error arising from service or otherwise http://www.austlii.edu.au/au/cases/cth/FMCA/2011/556.html

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“How rare is this, a S. 50; so it follows the subsequent decision is going to be of interest” – M Ennis – Tang & Anor v Bassili & Ors [2011] FMCA 544 (20 July 2011) BANKRUPTCY – ATO delivery of s.260-5 ITAA notices upon third party – questions of whether money “due” by third party to taxpayer debtor – third party purchaser due to pay money to taxpayer pursuant to contract for sale of land – land subject to registered mortgages securing debt due – money not due to taxpayer – money due to mortgagee – arrangements between parties to secure disputed fund pending trial – such arrangement did not disturb legal rights of parties – arrangement not render disputed fund due by party subject to s.260-5 notice http://www.austlii.edu.au/au/cases/cth/FMCA/2011/544.html

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CostaExchange Limited & Ors v Shephard (No.2) [2011] FMCA 545 (12 July 2011) BANKRUPTCY – Creditor’s petition – application to set aside sequestration order – operation of sequestration order stayed for 21 days on condition of payment by debtor to trustee – mistake affecting ability of debtor to comply – no grounds for setting aside sequestration order – no evidence of ‘fraud’ – sequestration order did reflect intentions of court – delay in applying for remedy – application refused http://www.austlii.edu.au/au/cases/cth/FMCA/2011/545.html

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CostaExchange Limited & Ors v Shephard [2010] FMCA 804 (12 October 2010) BANKRUPTCY – Creditor’s petition – costs in protracted litigation with debtor – debtor’s evidence did not show ability to pay debt – sequestration order made http://www.austlii.edu.au/au/cases/cth/FMCA/2010/804.html

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Bankruptcy Act – Other Schemes under the Act

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“As the year goes on the most complex of matters seem to be occurring – looking forward to decisions in these bankruptcies” – M Ennis – Robertson & Anor v Moran & Ors [2011] FMCA 496 (20 July 2011) BANKRUPTCY – Personal insolvency agreement – application to set aside – agreement not calculated to benefit creditors generally – large unsecured indebtedness – token contribution under agreement – dominant related creditors benefiting from continuing business activities of debtor – controlling trustee recommended against acceptance of agreement – further investigation of debtor’s business affairs warranted – application set aside – sequestration order made http://www.austlii.edu.au/au/cases/cth/FMCA/2011/496.html

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Corporations – pre-appointment

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Time Of My Life Pty Limited -v- Windsor Turf Supplies Pty Limited (In Liquidation) [2011] NSWSC 916 (16 August 2011) CORPORATIONS – Corporations Act 2001 (Cth) s 459G(1), 459H(1) – application to set aside a statutory demand – genuine dispute as to existence of debt – statutory demand set aside http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/916.html

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Forensic Document Examiners Pty Ltd v Cristavao [2011] FCA 843 (28 July 2011) http://www.austlii.edu.au/au/cases/cth/FCA/2011/843.html

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Refund Property Fees Pty Ltd v Prime Project Development (Cairns) Pty Ltd [2011] FCA 851 (21 July 2011) PRACTICE AND PROCEDURE – interim receiver – whether to appoint an interim receiver of a secured loan under s 57 of the Federal Court of Australia Act 1976 (Cth) – where first respondent had purportedly assigned the loan to the applicant – where substantive proceeding claimed relief under the Trade Practices Act 1974 (Cth) and the Property Law Act 1974 (Qld) – where receiver would have powers to release security – where receiver would receive monies under loan and pay unsecured creditors instead of secured creditors – where security was effectively held separately – misunderstanding as to the nature of a receiver – necessary party not joined – receiver not appointed – applicant to file and serve statement of claim http://www.austlii.edu.au/au/cases/cth/FCA/2011/851.html

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Corporations – post appointment

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S E Vineyard Finance Pty Ltd (recs & mgrs apptd) v Casey [2011] VSC 403 (26 August 2011) APPEAL – Magistrates’ Court – Whether numerous challenges to Magistrate’s findings raised a question of law. TRADE PRACTICES – Whether there were misleading and deceptive representations in prospectus for establishment of vineyard – Omission to mention round robin transaction involving monies borrowed from appellant to pay management fees for vineyard – Whether credit provider knowingly concerned – Whether linked credit provider liable for misrepresentation – Meaning of consumer – Whether claims outside limitation period – Unconscionable conduct – Trade Practices Act 1974 (Cth), ss 48, 51AC, 52, 73, 82. EQUITY – Whether fiduciary relationship existed – Whether there was a breach of fiduciary duty – Equitable damages – Constructive trust http://www.austlii.edu.au/au/cases/vic/VSC/2011/403.html

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Re Keldane Pty Ltd (in liq) [2011] VSC 385 (23 August 2011) CORPORATIONS – Termination of winding up – Sufficiency of material for the Court to order termination – Doubt about whether the creditors’ resolution would have been passed on the material before them – Validation of appointment of administrators – Whether approval by creditors is to be given before or at the time of administrator’s appointment – ss 436B(2) and 482(1) Corporations Act 2001 (Cth). http://www.austlii.edu.au/au/cases/vic/VSC/2011/385.html

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Re Timbercorp Limited (in liq) [2011] VSC 189 (23 August 2011) Corporations – Approval of compromise – Insurance claim – Allocation of proceeds – Confidentiality of terms of settlement and legal advice – Applications under ss 477(2A) and 511 of the Corporations Act 2001 (Cth) http://www.austlii.edu.au/au/cases/vic/VSC/2011/189.html

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CAREY -v- KORDA & WINTERBOTTOM [No 2] [2011] WASC 220 (26 August 2011) Catchwords:
Evidence – Privilege – Legal professional privilege – Receivers and managers – Whether solicitors engaged by receiver and manager are engaged to act for company – Whether sufficient basis to maintain claim for legal professional privilege over bills of costs and recharge schedules – Whether legal professional privilege waived – Whether privilege abrogated by statute http://www.austlii.edu.au/au/cases/wa/WASC/2011/220.html

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GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1 -v- THACKRAY [No 3] [2011] WASC 195 (12 August 2011) Catchwords: Corporations – Managed Investment Scheme – Rights Proceeding – Withdrawal of defences and counterclaims in Rights Proceeding – Allocation of net proceeds of fund – Rights of respective claimants – Turns on own facts http://www.austlii.edu.au/au/cases/wa/WASC/2011/195.html

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MICHAEL OSCAR BASEDOW AS ADMINISTRATOR OF FIRST GROWTH FUNDS LTD (ADMINISTRATOR APPOINTED) [2011] SASC 132 (16 August 2011) Application for directions by Administrator – consideration of assets of company – whether approval should be given to dispose of certain assets prior to the second creditors meeting – difficulty of attributing value to assets – some assets consisted irrecoverable debts – agreements entered into by Administrator subject to the Court’s direction http://www.austlii.edu.au/au/cases/sa/SASC/2011/132.html

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Constantinidis & Anor v Landcorp (NSW) Pty Ltd (in liq) & Ors [2011] NSWSC 872 (16 August 2011) Costs – costs ordered against plaintiffs where application to extend caveat could not have succeeded http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/872.html

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In the matter of Tumut River Orchard Management Limited (in liq) ABN 003 501 611 [2011] NSWSC 915 (15 August 2011) CORPORATIONS – application for appointment of liquidator – s 502 of the Corporations Act 2001 (Cth) – where company in liquidation without liquidator — r 7.2 of the Supreme Court (Corporations) Rules 1999 (NSW) – whether plaintiff can bring the application where it is neither a creditor nor a contributory of the company – held r 7.2(2)(a) does not create a closed class – held s 502 of the Corporations Act 2001 (Cth) does not restrict who may properly make the application – s 14 of the Civil Procedure Act 2005 (NSW) – if it were otherwise the present case is an appropriate one in which to dispense with rule – r 1.8 of the Supreme Court (Corporations) Rules 1999 (NSW) – liquidator appointed http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/915.html

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Chand v Azurra Pty Ltd (in liquidation) [2011] NSWCA 227 (5 August 2011) ADMINISTRATIVE LAW – judicial review – procedural fairness – whether Consumer, Trader and Tenancy Tribunal denied applicants procedural fairness in giving no weight to expert report on basis of non-compliance with Makita v Sprowles principles – whether Tribunal denied applicants procedural fairness in excluding one applicant from hearing room while her husband was being cross-examined – whether excluded applicant was denied a reasonable opportunity to be present and participate in the proceedings on second hearing day ADMINISTRATIVE LAW – judicial review – relief sought in the nature of certiorari – whether Consumer, Trader and Tenancy Tribunal made factual findings in the absence of any evidence to support those findings EVIDENCE – principle in Jones v Dunkel – whether failure to call available party eyewitness relevant to assessment of evidence of another party eyewitness who was called http://www.austlii.edu.au/au/cases/nsw/NSWCA/2011/227.html

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CHICAGO BOOT CO P/L v DAVIES & MCINTOSH AS JOINT & SEVERAL LIQUIDATORS OF HARRIS SCARFE LTD [2011] SASCFC 92 (23 August 2011) CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – EFFECT OF WINDING UP ON OTHER TRANSACTIONS – PREFERENCES http://www.austlii.edu.au/au/cases/sa/SASCFC/2011/92.html

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Bridgeport Pty Ltd v Yelyruss Pty Ltd (in liq) and Anor [2011] QSC 237 (2 August 2011) Procedure – Supreme Court procedure – Queensland – Procedure under Uniform Civil Procedure Rules and predecessors – Other matters – application for leave to add contributor to notice of claim – factors considered – significant delay – prejudice – contribution would not be significant – leave not granted http://www.austlii.edu.au/au/cases/qld/QSC/2011/237.html

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In the matter of Lawrence Waterhouse Pty Ltd (in liq) – Shaw v Minsden Pty Ltd [2011] NSWSC 964 (24 August 2011) CORPORATIONS – whether transfer of land and/or creation of charge over land is/are insolvent transaction(s) pursuant to s 588FC of the Corporations Act 2001 (Cth) or unreasonable director-related transaction(s) pursuant to s 588FDA (and, in either case, voidable pursuant to s 588FE) – in the alternative, whether transfer and/or creation of charge is/are alienation(s) of land with intent to defraud a creditor pursuant to s 37A of the Conveyancing Act 1919 (NSW) – CONTRACTS – whether rights and equitable interest arising under transfer have been abandoned – TRUSTS – whether transferee (Minsden) holds land and/or charge on constructive trust for transferor (Lawrence Waterhouse) – whether Lawrence Waterhouse held land as trustee for its director (Wayne Lawrence) and, if so, whether Lawrence Waterhouse is entitled to indemnification – whether, if transfer void or set aside, land is held on constructive trust for Wayne Lawrence and subject to an equitable charge in his favour – HELD – abandonment not established – Lawrence Waterhouse held land as trustee for Wayne Lawrence at time of transfer – Lawrence Waterhouse entitled to indemnification and to trace land into hands of Minsden for that purpose – charge set aside as unreasonable director-related transaction and alienation of property with intent to defraud creditor – CORPORATIONS – whether Lawrence Waterhouse has kept proper books and records for purposes of s 286 of the Corporations Act – if not, whether presumption of insolvency has been rebutted – whether Wayne Lawrence has breached any civil penalty provisions and exculpatory relief should be granted – HELD – failure to keep proper books and records – presumption of insolvency rebutted up to date of withdrawal of support by Wayne Lawrence – breach of statutory duty established – exculpatory relief not granted so as to absolve director from obligation to account for any loss sustained through breach of that duty http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/964.html

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“Receivers & Managers” – M Ennis – Olde & Ors v Primary Compass Limited ACN 129 159 812 [2011] NSWSC 845 (8 August 2011) PROCEDURE – civil – interlocutory issues – injunction to restrain call on bank guarantee – whether implied term of guarantee that would only be used to meet certain liabilities – no serious question to be tried – interrelationship between “serious question to be tried” and “balance of convenience” http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/845.html

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Horley v Sector 7G Architecture Pty Ltd (in liquidation) [2011] NSWSC 827 (4 August 2011) APPEAL – appeal under s 39 of the Local Court Act 2007 – leave sought to carry on proceedings pursuant to s 500(2) of the Corporations Act 2001 (Cth) – leave under s 40 of the Local Court Act 2007 – adequate reasons for decision not given – architectural services provided for the reconstruction of a guest house – whether claim decided in contract or quantum meruit – credit findings – terms of agreement reached – whether agreement reached as to fixed fee on implied term that reasonable sum would be paid – appeal upheld – decision below set aside http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/827.html

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Roufeil v Gliderol International Pty Limited [2011] FCA 847 (29 July 2011) CORPORATIONS – voidable transactions – whether certain payments were voidable transactions within the meaning of s 588FE(2) of the Corporations Act 2001 (Cth) – whether payments were “unfair preferences” given by company to creditor – whether payments were made while company was insolvent – whether company presumed to be insolvent by virtue of s 588E of the Corporations Act 2001 (Cth) http://www.austlii.edu.au/au/cases/cth/FCA/2011/847.html

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“Significant debts in this matter” – M Ennis – Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89 (25 July 2011) CORPORATIONS – powers of liquidator in winding up – whether company’s entry into agreement to fund litigation intended to be commenced by a creditor was expedient for the winding up of the company’s affairs and the distribution of its property – whether possible commercial return from sharing in proceeds of litigation adequate to attract s 477(2)(m) of the Corporations Act 2001 (Cth) PRACTICE AND PROCEDURE – application for leave to appeal by non-party – where prospective appellant held charge over the assets of the party to be funded in the litigation, which security would potentially be diminished according to the terms of the litigation funding agreement if that agreement were approved http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/89.html

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Miscellaneous

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COMMONWEALTH BANK OF AUSTRALIA -v- SHADDICK [2011] WASC 205 (22 August 2011) Catchwords: Property law – Service of default notice – Whether notice has to come to attention of mortgagor – Proper mode of service http://www.austlii.edu.au/au/cases/wa/WASC/2011/205.html

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YZERMAN -v- SCHOFIELD [2011] WASC 200 (15 August 2011) Catchwords: Conflict of laws – Leave to issue writ and serve out of jurisdiction – Application to revoke or set aside order granting leave to issue writ and serve out of jurisdiction – Related proceedings instituted in England – Dispute over beneficial ownership of land – Forum non conveniens – Relationship between remedies – Inappropriateness of local forum – Registered joint tenancy of land in Western Australia – Parties resident in England – Action for sale of land in Western Australia under s 126 of Property Law Act – Discretionary considerations http://www.austlii.edu.au/au/cases/wa/WASC/2011/200.html

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Break Fast Investments Pty Ltd v C & O Voukidis Pty Ltd [2011] NSWSC 871 (15 August 2011) Caveat – form of caveat – whether description of interest adequate – leave to lodge further caveat http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/871.html

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Gigi Entertainment Pty Limited v Basil John Macree (No. 2) [2011] NSWSC 869 (12 August 2011) SOLICITOR – COSTS – lien – delivery of former client’s papers to new solicitor – solicitor’s rules – whether solicitors undertaking satisfactorily secures payment of former solicitor’s costs and disbursements – Legal Profession Act 2004, s 728 – appropriate conditions http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/869.html

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Registered Trustee voluntarily resigns from bankruptcy appointments

Industry People, Personal Bankruptcy Comments Off

Aug 032011

The following media release from Insolvency Trustee Service Australia (ITSA) on 11 July 2011 concerning Mr Paul Pattison escaped my attention:

REGULATOR WELCOMES COURT ORDERS PROVIDING FOR VOLUNTARY RESIGNATION OF MELBOURNE-BASED BANKRUPTCY TRUSTEE PAUL PATTISON

Melbourne-based Registered Trustee, Paul Pattison, has voluntarily resigned from his bankruptcy appointments following concerns by the regulator, Insolvency and Trustee Service Australia (ITSA), about his capacity to adequately and properly carry out his duties.

On Friday 08 July 2011, the Federal Court of Australia accepted Mr Pattison’s voluntary resignation and orders were obtained appointing the Official Trustee (ITSA) to administer the 272 bankruptcy matters which were formerly administered by him. Arrangements are being made to ensure the smooth transfer and ongoing administration of these bankrupt estates.

Mr Pattison resigned as trustee of these matters and gave an undertaking that he would cease to carry out, consent to, or otherwise accept appointment as a trustee, until he produces evidence in a form acceptable to ITSA or to the Court demonstrating he has the practice and financial capacity to adequately and properly carry out his duties as a trustee.

Friday’s orders follow ongoing scrutiny into Mr Pattison’s financial capacity to undertake his duties. ITSA also liaised with the Australian Securities and Investments Commission in the lead up to the commencement of a formal process investigating this and related issues. No findings of impropriety as to the conduct of Mr Pattison as a trustee were made.

Adam Toma

National Manager Regulation and Enforcement

Insolvency and Trustee Service Australia

Ph: 1300 364 785

Options paper questions insolvency regulation and practises

ASIC, Insolvency Laws, Insolvency practices, Personal Bankruptcy, Regulation, Standards Comments Off

Jun 062011

Over 130 questions about insolvency regulation and practises have been raised for discussion by the Attorney-General’s Department and the Departments of Treasury in their “Options paper: a modernisation and harmonisation of the regulatory framework applying to insolvency practitioners in Australia”, released at the 2011 Gala Dinner of the Insolvency Practitioners Association of Australia on 2 June.

The questions, extracted from the 120 page paper, are shown below. The final date for submissions is 29 July 2011.

Standards for entry into the insolvency profession

Discussion questions

Are there any concerns with changing the academic requirements to remove the greater emphasis placed upon accounting skills over legal skills, while retaining a minimum level of study in each?
Should the gaining of a Masters in Business Administration meet the qualification requirements for registration, if it did not otherwise meet legal and accounting study requirements?
Should a minimum level of actual experience in insolvency administration remain a mandatory requirement for registration as a practitioner?
Should the experience requirements for registered liquidators be reduced to two years of full‑time experience in five years?
Should new market entrants be required to complete some form of insolvency specific education before practicing as registered liquidators or registered trustees?
Should ASIC be empowered to impose requirements on a registered liquidator as a condition of the registration? What types of conditions should a regulator be empowered to impose upon a new registered liquidator’s registration?
Should a registered trustee face more streamlined entry requirements than those that exist for a standard applicant for registration as a registered liquidator, and vice versa?
Is further formal training necessary to ensure that practitioners that wish to transition between the two professions are able to fulfil their statutory obligations?

Registration process for insolvency practitioners

Discussion questions

Should an applicant seeking registration as a registered liquidator or registered trustee be required to be interviewed as part of the registration process?
Should an applicant seeking registration as a registered liquidator or registered trustee be required to sit an exam as part of the registration process?
Should a general ‘fit and proper’ person requirement be imposed for the registration of both personal and corporate insolvency practitioners?
If the process for the registration of liquidators is aligned with the process for the registration of registered trustees, what differences should be maintained between the two registration processes?
Is it appropriate that the current fee for registration of liquidators be increased to reflect the amendments to registration processes?
Should the official liquidator role be maintained?
What other aspects of the current Bankruptcy Act committee system might be amended?
If registration of a registered liquidator is for a defined period, what conditions should be required to be met for renewal of the registration to occur?
Should the renewal process include a fee? Should the fee be commensurate merely with the administrative cost for completing the renewal or should the revenue raised by the fee be used to fund additional oversight of the insolvency market? Should the renewal fee be determined with reference to the numbers and nature of the administrations to which the practitioner is appointed?

Remuneration framework for insolvency practitioners

Discussion questions

Should the Corporations Act be amended to include a provision that aligns with the Bankruptcy Act prohibition upon practitioners making any arrangement whereby a benefit is received, either directly or indirectly, in addition to the remuneration to which he or she is entitled? Should such a prohibition be clarified to provide that this extends to charging disbursements with a profit component that may benefit, directly or indirectly, the practitioner?
Are the current requirements for the provision of information to creditors to assist them in assessing costs appropriate? Should this information be provided in a standard form? Should these requirements be aligned between corporate and personal insolvency?
What could be done to address concerns about cross subsidisation?
What could be done to address concerns about inappropriate use of disbursements?
Should all fee approval be required to be subject to a cap set by creditors in an external administration or bankruptcy? Is it unreasonable to expect that an insolvency practitioner go back to the creditors in order to seek an increase on the initial remuneration cap?
Should a group of creditors (or a single creditor) that successfully challenge an insolvency practitioners’ remuneration, receive an increased priority in relation to the savings that may result?
Should a registered liquidator, under any circumstances, be able to exercise a casting vote on a motion regarding his or her remuneration or removal?

Communication and monitoring

Discussion questions

What amendments should be made to provide creditors with more information or power to monitor the progress of a winding up, administration or bankruptcy?
Should creditors have largely the same rights to information and tools to monitor a liquidation, administration, bankruptcy or controlling trusteeship?
Are there any impediments to insolvency practitioners communicating with creditors electronically?
If the statutory frameworks are aligned, are there any modifications necessary to account for the practical differences between the bankruptcy and corporate insolvency frameworks?
Would support from at least 25 per cent of creditors be an appropriate threshold in corporate insolvency for requiring a creditors meeting to be held? Given the larger numbers and quantum of claims, would a lower threshold (for example, 10 per cent) be more appropriate? What rules should apply in relation to who bears the costs of holding a meeting of creditors?
If liquidators are required to provide all information reasonably requested by a creditor regarding a liquidation or administration and creditors have improved powers to require the calling of meetings, is there any need for default annual meetings, written updates or creditors’ meetings at the completion of a winding‑up? Could these requirements be amended to a requirement for the practitioner to raise the option of having such updates and meetings with creditors (for consideration and voting) as a default reporting arrangement?
Should the role of the COI be given greater prominence in the corporate and personal insolvency systems? If so, how might this occur?
Should the rules governing COIs be aligned between corporate and personal insolvency? Are there any specific aspects of COI law that should be otherwise reformed?
Should creditors be able to make a binding resolution on a liquidator? If yes, should there be any role for the Court to overrule that resolution (for example, where the Court believes that the resolution is not in the best interests of the creditors as a whole)? Should there be any limit on the type of areas that creditors are able to pass a binding resolution?

Funds handling and record keeping

Discussion questions

Should the rules governing record keeping, accounting, audits and funds handling in corporate and personal insolvency be aligned? If so, how should this occur?
If aligned rules on accounts reporting are introduced, what should be the content, form and frequency of the accounts required?
Are there other record keeping, accounting, audits and funds handling rules that should be mandated for personal and corporate insolvency, in addition to those that currently exist?
If amendments are made to the personal and corporate law to align the powers of the regulators (in certain circumstances) to freeze the accounts of insolvency practitioners, in what circumstances should the regulators be able to issue an account freezing notice to a bank?
Should the issuing of an account freezing notice require an application to the Courts? For how long should a freezing notice have effect?
At what level should the penalties that apply to breaches of the funds handling, record keeping, retention of books, and audit provisions in the Corporations Act and the Bankruptcy Act be set to provide a greater deterrent to potential offenders?
Will increasing the penalties make practitioners more likely to pay greater attention to these requirements?
Are there additional civil obligations and criminal offences that should be provided for in respect of these areas?
If civil or criminal penalties are applied for the lodgement of inaccurate annual reports, under what circumstances should those penalties apply?
Should late lodgement, non‑lodgement or false lodgement of accounts be a statutory basis for removal? If so, by what process might removal take place?

Insurance requirements for insolvency practitioners

Discussion questions

Is there a benefit for insolvency practitioners, creditors or other stakeholders in aligning the insurance requirements for liquidators and registered trustees?
If the criminal penalty for not complying with insurance requirements is increased, at what level should the penalty be set to provide a sufficient deterrence against breach?
Should a fidelity fund be established? If so, how should such a fund be operated and funded?
What other reforms might be put in place regarding insurance requirements?

Discipline and deregistration of insolvency practitioners

Discussion questions

Are there any reforms that should be made to either the Committee’s or the CALDB’s systems of disciplining practitioners to improve their operation?
Do you think that aligning the disciplinary frameworks will provide for more consistent and improved outcomes for practitioners and other stakeholders between personal and corporate insolvency?
If a Committee structure is adopted for registered liquidators:
- Should there be any amendments to the framework that underpins the current personal insolvency committee system?
- Should the statutory framework for the committee system currently in the Bankruptcy Act be replicated in the Corporations legislation?
- Should ASIC be statutorily required to provide a show‑cause notice to the practitioner before establishing a committee?
- Should the committee consist of a member of ASIC, a member of the IPA, and an appointee of the Minister?
- Should there be a time limit for decisions by the committee? Should it be aligned with the current time limit for bankruptcy?
If a Committee structure is not adopted for registered liquidators, what specific reform options should be adopted under either the CALDB or Committee regimes? In particular:
Should a statutory timeframe be introduced for decisions by the CALDB?
Are there any powers that the CALDB currently has that should equally be conferred upon a Committee under the Bankruptcy Act or vice versa?
What, if any, other reforms should be made in respect of the transparency of Board and Committee hearings and decisions?
Should a committee constituted under the Bankruptcy Act be empowered to summon a third party to appear at a hearing to give evidence and be cross examined?
Should mechanisms be put in place to impose sanctions on practitioners or witnesses who fail to attend or provide books to a Committee or Board?
Should the Bankruptcy Act be amended to provide ITSA with the express power to seek to deregister a registered trustee where the trustee is no longer ‘fit and proper’?
If the regulatory frameworks are amended to expand the powers of ASIC and ITSA to discipline insolvency practitioners directly, what minor breaches should those powers extend to?
Would the suggested amendments to enhance the powers of the court breach considerations of natural justice?
Should the nature of the role of registered liquidators and registered trustees as officers of the court, as well as their inherent fiduciary duties, mean that it is reasonable to empower the Court to direct them to stand aside where there are serious allegations that have yet to be resolved?

Removal and replacement of insolvency practitioners

Discussion questions

Should an initial creditors’ meeting in a compulsory winding up at which creditors would have the right to replace or appoint a new liquidator be mandated?
If an initial creditors’ meeting were mandated for court‑ordered windings up:
Should there be an exception for assetless administrations?
Should approval of the appointed registered liquidator be able to be obtained through a mail out? If confirmation/replacement of registered liquidations occurred by postal vote in court ordered liquidations, should this mechanism also replace the opportunity to replace a practitioner provided via initial meetings in other kinds of corporate insolvency?
Should creditors in corporate insolvencies be generally empowered to remove a registered liquidator by resolution in the same way as under personal insolvency law?
What effect, if any, would the potential for removal be expected to have on remuneration arrangements?
Does the current scheme for the removal of a registered trustee provided sufficient and clear protections against abuses of process?
If creditors are empowered to remove a liquidator in a creditors’ voluntary winding up (subsequent to the first meeting), should members have any corresponding right in a members’ voluntary winding up?
Is there a need to facilitate the transfer of the books of the administration from an outgoing insolvency practitioner to his or her replacement? What barriers, if any, are there to the implementation of such a reform?
Are any other amendments necessary to assist creditors to use any new power to remove a registered liquidator? What other administrative arrangements would be required to ensure a smooth transition from one registered liquidator to another?

Regulator powers

Discussion questions

Are there unjustified divergences between the powers and roles of the insolvency regulators?
Should a creditor in a corporate insolvency have any right to request that ASIC undertake a review of specified kinds of decision by a liquidator?
If ASIC was to be empowered, what types of decisions should ASIC be able to review?
The expansion of ASIC’s current functions to include such a review power would have some cost. Given the Government’s cost recovery policy how should any expansion of powers be funded?
Should ASIC and ITSA be given more flexibility to communicate to a complainant (or creditors generally) information obtained by it in relation to the conduct of an external administration?
Should regulators be able to require a practitioner to sit an examination to test ongoing compliance with the knowledge or skills requirements for registration? Should such a power be extended to enabling regulators to require persons acting under delegation from practitioners to sit an examination?
What powers might be appropriate to provide to regulators to facilitate (if necessary) the rights of creditors to call meetings and to ensure such meetings are held in a transparent manner — in particular in relation to the assessment of votes for and against the retention of the current insolvency practitioner?
Does section 536 of the Corporations Act, as currently applied by the Court, provide for the appropriate supervision of registered liquidators by ASIC?
Should ASIC be able to share information with the IPA for disciplinary purposes?
Should ITSA and ASIC be empowered to impose conditions across the market? If so, what types of conditions should the regulator be empowered to impose?
If a new Ombudsman or external dispute resolution scheme were established:
Should the new body be a statutory body (for example, the Superannuation Complaints Tribunal) or a private body (for example, the Financial Ombudsman Service)?
Should any new body have the ability to hear disputes in both corporate and personal insolvency? Should the new entity be independent of the two regulators?
If the body is a statutory entity, what functions of ITSA or ASIC should be given to the new body? Should the body have power to obtain information or to inspect the records of an organisation relevant to the complaint? If the new body is privately run, what protections would need to be put in place to achieve this?
How should the new body be funded? Should there be any charge to the complainant to investigate a complaint or should it be funded through an industry levy?
Should the body have an explicit educative role?
Should the body have the right to deal with systemic issues or commence its own investigation? If the body is a private entity, what powers should it be given to achieve those objectives?
What types of disputes should the body be able to hear and deal with? Should the body be able to review remuneration? Should this be done through independent cost assessors?

Specific issues for small business

Discussion questions

Are any statutory reforms required to assist regulators to provide improved regulation in relation to interconnected personal and corporate insolvencies? Are improvements needed in relation to their capacity to share information and cooperate?
If the scope of the AA Fund is broadened to allow for the funding of registered trustees to investigate and report on corporate law breaches, which Corporations Act breaches in particular should be provided for?
Should the scope of the AA Fund be broadened to allow for loans to registered liquidators to properly carry out their fiduciary and statutory duties?
Should section 305 of the Bankruptcy Act also be expanded to provide for the funding of investigations into corporate law breaches?
What steps might be taken to improve efficiency in relation to related personal and corporate insolvencies while appropriately addressing conflicts of interest?
What other amendments can be made to assist creditors and directors of small corporates to better engage with the corporate insolvency system?
Is there a case for automatic disqualification of directors after a company failure? If so, how many repeated failures should trigger disqualification? Should there be a threshold for failures to trigger disqualification (for example, where less than 50 cents in a dollar are returned to creditors)? Over what period must the failures occur?
Should a registered liquidator be able to assign actions which vest personally in the liquidator? If so, should a registered trustee be likewise able to assign rights of action?
Should ASIC be able to automatically disqualify a director of an insolvent company who has not taken reasonable steps to ensure that the company has maintained its financial records?

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Big rise in bankruptcy penalty

Insolvency practices, Offences, Personal Bankruptcy, White collar crime Comments Off

May 192011

A crucial instrument of insolvency administration is a properly prepared and sworn statement of affairs made out by the proprietors of the insolvent business enterprise.

This fact was recently granted further recognition in Australia’s bankruptcy (personal insolvency) laws when the Federal Government ramped up the penalty for bankrupts who fail to make out a statement of affairs. [S.54(1) of the Bankruptcy Act 1966]

The penalty was increased fivefold or 500%.

In recommending the Bankruptcy Legislation Amendment Bill 2010 – which was supported by the Government and the Opposition – the Attorney-General, Mr McClelland, said:

“Importantly, the bill also provides trustees with stronger powers to obtain a statement of affairs from a bankrupt who fails to file this as required. The statement of affairs is the most important information required by a trustee to commence administering the bankrupt’s estate. Failure to comply with the requirement to file a statement of affairs significantly frustrates the trustee’s ability to administer the estate in a timely way. Failure to provide a statement of affairs often results in a trustee expending additional time and expenses to identify a debtor’s assets, income and liability. This in turn can diminish a bankrupt’s estate and returns to creditors.” [Second reading speech]

Simultaneously the government introduced a new power for the Official Receiver in Bankruptcy to compel a bankrupt to provide a statement of affairs [Section 77CA]. If the bankrupt fails again to comply after having had the obligation under Section 54 (1) brought to his or her attention by the Official Receiver, the bankrupt will have committed a further and more serious offence, the penalty for which is imprisonment for 12 months [Section 267B].

These laws became effective on 1 December 2010. To see the Official Receiver’s Practice Statement 10 titled “Filing of a Statement and issue of 77CA notices by the Official Receiver” CLICK HERE.

$154 million used under GEERS to pay employee entitlements.

Employee Entitlements, GEERS, Priority Debts Comments Off

Nov 092010

An annual report recently tabled in Parliament reveals that under the Australian Government’s “safety net” scheme over $154 million had to be paid out in 2009/10 to compensate 15,565 Australian workers who lost their jobs as a result of their employers’ insolvency.

This $154 million takes the total paid since the scheme began in 2001 to about $1,083 million.

The Department of Education, Employment and Workplace Relations (DEEWR) runs a scheme called the General Employee Entitlements and Redundancy Scheme (GEERS). The scheme is officially described as follows:

“GEERS is a safety net scheme which protects the entitlements of employees who have lost their jobs as a result of the bankruptcy or liquidation of their employers. Eligible entitlements under GEERS consist of up to three months unpaid or underpaid wages for the period prior to the appointment of the insolvency practitioner (including amounts deducted from wages, such as for superannuation, but not passed on to the superannuation fund), all unpaid annual leave, all unpaid long service leave, up to a maximum of five weeks unpaid payment in lieu of notice and up to a maximum of 16 weeks unpaid redundancy entitlement. Payments made under GEERS are subject to an annually indexed income cap, which was $108,300 for 2009–10.”

In its 2009/10 Annual Report the department lists the “notable achievements” of GEERS as:

“A total of $154,058,670 was advanced under GEERS to 15,565 eligible claimants. Of claimants who received assistance under GEERS, 87.3 per cent were paid 100 per cent of their verified employee entitlements by GEERS. More than 45,632 enquiries were received by the GEERS Hotline. Over $18 million advanced under GEERS was recovered during 2009–10.”

Note: After a payment is made from GEERS, the Government seeks to recover the payment through the liquidation or bankruptcy process (as a priority debt). As stated, the amount recovered in this way was $18 million, which apparently means that the net outlay of taxpayers’ money was $136 million.

GEERS was introduced in 2001. The following chart – prepared for this article using figures extracted from past DEEWR annual reports, and an article in the Australian Journal of Management (June 2009, pages 51-72, authors Jeannette Anderson and Kevin Davis) – shows amounts paid out over past years:

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