Apr 262012

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 – Prior to Date of Bankruptcy

I like to see matters such as this where the Constitution is considered – Capital Finance Australia Ltd v Vellar [2012] FMCA 285 (4 April 2012) BANKRUPTCY – Creditors petition – opposition challenging authority of Federal Magistrate – High Court summons filed on eve of hearing – adjournment applications refused – sequestration order made.

CONSTITUTIONAL LAW – Creation of Federal Magistrates Court – appointment of Federal Magistrates – whether invalid under Chapter III of the Constitution by reason of exclusion from judges’ pensions http://www.austlii.edu.au/au/cases/cth/FMCA/2012/285.html

‘Stay Orders’ seem to go in & out of favour – a good summary of where the Court has gone in relation to the definition of insolvency in recent times – I’m not sure that I understand the basis for the change. Could it be that given that there is much more ready access to credit now, as opposed to a generation ago, the debtor is demonstrating reluctance to pay rather than insolvency?? – National Australia Bank Limited v Oberg [2012] FMCA 233 (27 March 2012) BANKRUPTCY – Creditor’s petition – whether debtor satisfied court that he is able to pay his debts within s.52(2)(a) of the Bankruptcy Act 1966. http://www.austlii.edu.au/au/cases/cth/FMCA/2012/233.html

It will be interesting to see if there is more Court action in this matter – Zekry v Nair [2012] FMCA 237 (19 March 2012) BANKRUPTCY – Application to set aside bankruptcy notice – controlling trustee appointed – applicant failed to appear


No surprises – Deputy Commissioner Of Taxation v Caporale [2012] FMCA 206 (16 March 2012) BANKRUPTCY – Contested creditor’s petition – unpaid tax – taxpayer objecting to assessments – second such objection – no reason to delay making a sequestration order http://www.austlii.edu.au/au/cases/cth/FMCA/2012/206.html


Bankruptcy Act – following Date of Bankruptcy

Romeo v The Trust Company (PTAL) Ltd [2012] NSWCA 62 (30 March 2012) APPEAL – application for leave to appeal – default judgment for possession of property set aside on condition that mortgagors pay part of claimed debt into court – whether condition should have been imposed – effect of bankruptcy of one mortgagor http://www.austlii.edu.au/au/cases/nsw/NSWCA/2012/62.html

A Bankruptcy & a Part X!! – The Trustee of the Property of Paul Jason Uhrhane, A Bankrupt & Anor v Gunn & Anor [2012] QCA 75 (30 March 2012) PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PLEADING – DEFENCE AND COUNTERCLAIM – where the appellants made an admission in their original defence that a registered mortgage was granted in favour of the respondents – where the appellants subsequently filed an amended defence that challenged the validity of that mortgage – where the primary judge struck-out the amended defence for inconsistency with the admission in the original defence – whether the appellants’ original defence contained an admission that was inconsistent with their amended defence – whether the primary judge was correct in striking-out the amended defence http://www.austlii.edu.au/au/cases/qld/QCA/2012/75.html

** follows Setting Aside of Sequestration Order ** –  Mbuzi v SV Partners & Anor [2012] QSC 84 (5 April 2012) PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – ORIGINATING PROCESS – where the applicant started proceeding by originating application – where the applicant claims compensatory damages for negligence, undue harassment and defamation and aggravated and vindicatory damages – where the applicant sought an order under r 14 of the Uniform Civil Procedure Rules 1999 (Qld) that the proceeding continue as if started by claim – where claims for damages could proceed only if properly pleaded and particularised – where purpose of return date of application was to address the applicant’s choice of originating process – where the amounts claimed for damages did not require the claim to be started in the Supreme Court – whether the choice of incorrect originating process was an abuse of the court’s processes


Should Trustees start reading the transcript of Sequestration Order hearings ? Mbuzi v Favell (No 2) [2012] FCA 311 (28 March 2012) BANKRUPTCY AND INSOLVENCY – appeal against sequestration order made by Federal Magistrate – service of bankruptcy notice – reg 16.01 Bankruptcy Regulations 1996 (Cth) – bankruptcy notice alleged to have been sent by post – evidence given of standard office practice for sending mail – claimed register of outgoing mail – claim that secretary/receptionist put bankruptcy notice in post – no evidence given by any person who may have put bankruptcy notice in post – system of postage – sequestration order of utmost seriousness – strict proof of service of bankruptcy notice required – onus of establishing proof of service of bankruptcy notice lies with creditor – appeal allowed COSTS – unrepresented litigant – self-represented litigant – appeal successful but no costs awarded http://www.austlii.edu.au/au/cases/cth/FCA/2012/311.html

Frost v Sheahan as Trustee of the Bankrupt Estate of Allen Gordon Frost [2012] FCAFC 46 (28 March 2012) BANKRUPTCY – whether property held on trust – findings of fact – impermissible attempt to re-canvass evidence on appeal – no appellable error – a mortgage – whether a transfer of property PRACTICE AND PROCEDURE – leave to amend Notice of Appeal – overturning factual conclusions on appeal – denial of procedural fairness


Part IV Compositions are so uncommon, but an application to have one set aside!! – Hingston v Westpac Banking Corporation [2012] FCAFC 41 (23 March 2012) BANKRUPTCY AND INSOLVENCY – consideration of an appeal by the bankrupt to set aside orders of the primary judge setting aside a composition made between the bankrupt and his creditors under Division 6 of Part IV of the Bankruptcy Act 1966 (Cth) – consideration of the grounds set out in s 222(1)(d) and s 222(5)(e)(i) of the Bankruptcy Act in setting aside the composition made by the bankrupt with his creditors under Division 6 of Part IV – consideration of the construction to be attributed to s 222(5)(e)(i) and s 76B in applying the grounds contained in that subsection to a composition under Division 6 of Part IV – consideration of the construction to be attributed to s 222(5)(e)(i) and s 76B in circumstances where the omission of a material matter from the debtor’s statement of affairs concerns a statement of affairs presented to the Official Receiver under s 55 of the Act rather than a debtor’s statement of affairs for the purposes of s 188(2C) or (2D) of the Bankruptcy Act – consideration of the factors informing the exercise of the discretion to set aside a composition made between the bankrupt and his creditors under Division 6 of Part IV in the context of s 222(1)(d) and s 222(5)(e)(i) as applied to a composition by s 76B of the Bankruptcy Act BANKRUPTCY AND INSOLVENCY – consideration of the scope of consequential orders to be made consequent upon setting aside a composition under s 222(1)(d) and s 222(5)(e)(i) and s 30(1) of the Bankruptcy Act 1966 (Cth) – consideration of the relationship between s 74(5) of the Bankruptcy Act and the power of the Court to make remedial orders that put the parties in their pre-composition position


Samootin v Official Trustee in Bankruptcy (No. 2) [2012] FCA 316 (28 March 2012) PRIVILEGE – Legal professional privilege – waiver – common interest – documents coming into existence after sequestration order made and challenged – litigation involving Official Trustee in Bankruptcy and bankrupt – interests of Official Trustee potentially in conflict with interests of bankrupt http://www.austlii.edu.au/au/cases/cth/FCA/2012/316.html

Ambrose v Poumako [2012] FCA 318 (22 March 2012)


Owners Corporation PS334337A v Hoiles [2012] FMCA 218 (19 March 2012) BANKRUPTCY – Application of trustees under s.146 of the Bankruptcy Act 1966 (Cth) for distribution of dividends – no statement of affairs received in relation to deceased’s estate – application acceded to – costs charges and expenses incurred by applicants including in period between initial bankruptcy and subsequent bankruptcy of a deceased estate be paid in priority by bankrupt deceased estate http://www.austlii.edu.au/au/cases/cth/FMCA/2012/218.html

Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea’s Concreting & Anor [2012] QSC 51 (14 March 2012) TAXES AND DUTIES – ADMINISTRATION OF FEDERAL TAX LEGISLATION – COLLECTION AND RECOVERY OF TAX – COLLECTION OF AMOUNT FROM THIRD PARTY – Taxation Administration Act 1953 (Cth), Schedule 1 s260-5 – notices – statutory charge created by – where moneys paid into court by recipient of notice – where debt owing be recipient to taxpayer discharged by that payment – whether Commissioner of Taxation entitled to a charge over money in court


Must have missed this one earlier, worth a good look – Burness v Taliauli [2011] FMCA 910 (10 November 2011) BANKRUPTCY – Application for vacant possession of property – failure to annul bankruptcy – application successful http://www.austlii.edu.au/au/cases/cth/FMCA/2011/910.html


Bankruptcy Act – Other Schemes under the Act

Moran v Robertson [2012] FCA 371 (13 April 2012) BANKRUPTCY – application to have personal insolvency agreements set aside – terms of agreement unreasonable – derisory dividend payable to creditors – some creditors electing not to participate in distribution GUARANTEES construed strictly in favour of guarantor PRACTICE AND PROCEDURE – filing of written submissions after hearing – submissions manifestly in excess of that contemplated TRUSTS – personal liability of trustee http://www.austlii.edu.au/au/cases/cth/FCA/2012/371.html


Corporations – pre-appointment

Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Limited [2012] FCA 363 (16 April 2012) CORPORATIONS – application to wind up company in insolvency by reason of tax debt – tax debt the subject of pending review proceedings in the Administrative Appeals Tribunal – application to adjourn winding up application until decision in review proceedings CORPORATIONS – extension of period within which application for company to be wound up in insolvency be determined – “special circumstances” under s 459R(2) of the Corporations Act 2001 (Cth) TAXATIONapplication to wind up company – tax debt the subject of pending review proceedings in the Administrative Appeals Tribunal – adjournment PRACTICE AND PROCEDURE – corporate respondent – leave to appear otherwise than by a lawyer – dispensing with r 4.01(2) of the Federal Court Rules 2011 EVIDENCE – “fullest and best” evidence principle – standard of proof – balance of probabilities http://www.austlii.edu.au/au/cases/cth/FCA/2012/363.html

Hillam v Ample Source International Ltd (includes Corrigendum dated 18 April 2012) [2012] FCA 374 (13 April 2012) PRACTICE AND PROCEDURE – winding up order on the ground of oppression previously stayed on conditions pending appeal – preservation of status quo – interlocutory application for the reconstitution of the board of the company and for the sale of a substantial asset of the company pending appeal


Lifese Pty Limited v Lee Crane Hire Pty Limited [2012] FCA 302 (28 March 2012) CORPORATIONS – statutory demand for payment of debt – application to set aside – whether “genuine dispute” – whether abuse of process Held: statutory demand be set aside



Corporations – post appointment

MG Corrosion Consultants Pty Ltd v Gilmour [2012] FCA 383 (16 April 2012) CORPORATIONS – freezing orders – appointment of an external administrator – s 440D of the Corporations Act 2001 (Cth) – proceeding – in relation to – any of its property – legal or equitable estate or interest – a thing in action – chose in action – bare right to litigate – third parties – Mareva type order – undertaking – discretionary considerations – dissipation or disposal of assets – Div 7.4 of the Federal Court Rules 2011 (Cth) – good arguable case – inference – danger or real risk http://www.austlii.edu.au/au/cases/cth/FCA/2012/383.html

An interesting matter – also related to a Bankruptcy – Healy, in the matter of Falaren Pty Ltd (deregistered), v Australian Securities and Investments Commission [2012] FCA 368 (12 April 2012) CORPORATIONS – whether a deregistered company should be reinstated – whether the deregistration of a company should be deferred – whether proposed liquidator is qualified to be appointed as a replacement liquidator http://www.austlii.edu.au/au/cases/cth/FCA/2012/368.html

Australian Property Custodian Holdings Ltd v Capital Finance Australia Ltd & Ors [2012] VSC 124 (4 April 2012) CORPORATIONS – Whether future chose in action secured under charges – Construction of charges – Whether bare right to sue – Genuine commercial interest – Right incidental or ancillary to transfer of interest in property – Whether liquidators may prosecute chose in action when charges enforced and receivers appointed – Whether trustee charged its right of indemnity including right of exoneration – Application by liquidators for approval of litigation funding agreement – Director of proposed funder defendant in other proceedings brought by the liquidators – Corporations Act 2001 (Cth) s 477(2B)http://www.austlii.edu.au/au/cases/vic/VSC/2012/124.html

It sounds like this will be an interesting matter to follow this matter –  AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118 (30 March 2012) CORPORATIONS – Application for interim injunction pursuant to Section 1324(4) of the Corporations Act 2001 (Cth).


Grapecorp Management Pty Ltd (in liq) v Grape Exchange Management Euston Pty Ltd [2012] VSC 112 (30 March 2012) CORPORATIONS LAW – Set-off provisions for insolvent companies under s 553C – Meaning “mutual credits, debts or other mutual dealings” – To be construed widely. CORPORATIONS LAW – Set-off provisions for insolvent companies under s 553C – Whether funds were trust funds thereby precluding mutuality and set-off. CORPORATIONS LAW – Set-off provisions for insolvent companies under s 553C – Whether post liquidation expenses can be set-off against post liquidation income – Relevance of antecedent agreement – Meaning of contingent or vested claims. CORPORATIONS LAW – Set-off provisions for insolvent companies under s 553C – Whether notice of insolvency precludes set-off under s 553C(2) – Relevant time that creditor must have such notice. CORPORATIONS LAW – Insolvent companies – Whether costs and expenses were properly incurred and are priority claims under s 556(1)(a) Corporations Act. AMENDMENT AND LEAVE TO RE-OPEN CASE – Whether late amendment should be permitted – No prejudice to plaintiff – Matter raised early in proceeding – Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 applied


Georges v Seaborn International Pty Ltd (Trustee) [2012] FCA 294 (26 March 2012) APPEAL – Application for leave to appeal – whether order for directions was final or interlocutory – application for leave to appeal by non party – refusal of application to be appointed as a representative in the proceedings http://www.austlii.edu.au/au/cases/cth/FCA/2012/294.html

Sheahan; In the matter of SK Foods Pty Ltd (In Liquidation) [2012] FCA 268 (23 March 2012) http://www.austlii.edu.au/au/cases/cth/FCA/2012/268.html

Gould Bros & Co Pty Limited (Administrators Appointed), in the matter of Gould Bros & Co Pty Limited (Administrators Appointed) [2012] FCA 285 (22 March 2012) CORPORATIONS – administration – application as to how Pt 5.3A of the Corporations Act 2001 (Cth) is to operate – administrators’ liability and indemnity for debts of administration – funding agreement http://www.austlii.edu.au/au/cases/cth/FCA/2012/285.html

STARRS -v- RETRAVISION (WA) LTD [2012] WASCA 67 (27 March 2012) Practice and procedure – Application to set aside default judgment – Merits of proposed defence – Turns on own facts http://www.austlii.edu.au/au/cases/wa/WASCA/2012/67.html

Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd (In Liquidation) (Receivers and Managers Appointed) & Ors [2012] NSWCA 49 (22 March 2012) APPEAL – interlocutory injunction pending appeal – balance of convenience – no question of principle


C Pty Limited and Ors & PGW as Liquidator of S Pty Limited (in Liq) (Costs) [2012] FamCAFC 38 (15 March 2012) FAMILY LAW – APPEAL – COSTS – where the appellants seek that each party bear their own costs or in the alternative that they be granted a certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) – where the respondent seeks costs on “the ordinary basis” – where costs certificates cannot be granted pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) given the appeals have been dismissed – where the appellants object to the Full Court receiving the respondent’s submissions in reply which they assert were filed out of time – where the submissions in reply were received – where both sets of proceedings before the Family Court were proceedings under the Family Law Act 1975 (Cth) (“the Act”) and thus the applications are governed by s 117 of the Act – where the appeals have been wholly unsuccessful – where there is no evidence as to the financial circumstances of the parties which either supports or prevents an order for costs being made – where there is no basis for making an order for costs based on the conduct of the respondent – where there is relevant conduct by the appellants to be taken into account in favour of an order for costs being made – where the offers of settlement made by the appellants are disregarded – where the applicants are to pay the respondent’s costs of and incidental to the appeals as agreed and in default of agreement as assessed on a party/party basis – costs order made http://www.austlii.edu.au/au/cases/cth/FamCAFC/2012/38.html



Income for Income Tax purposes – what about if a Bankrupt? – Sent apears to be an interesting fellow – Sent v Commissioner of Taxation [2012] FCA 382 (16 April 2012) INCOME TAX – Employee incentive share trust plan — Whether payment to trust had character of ordinary income – Whether payment in substitution for bonuses from employment is ordinary income – Whether when part of amount deemed to be ordinary income assessable to the respondent but the remaining part is not — Whether respondent obtained a benefit or gain — Whether amount of ordinary income “derived” – When amount is applied or dealt with by a taxpayer – Whether exemptions applied to treat amount as a fringe benefit – PENALTIES and OFFENCES — Recklessness – Failure by taxpayer to discharge onus regarding recklessness of tax agent – Failure to adopt a reasonably arguable position ADMINISTRATIVE LAW — Whether error of law by the Administrative Appeals Tribunal —– Statutory requirement to provide reasons – Whether inadequacy of reasons an error of law – Whether appropriate to set aside decision for failure to provide adequate reasons – Whether facts as found are capable of supporting the decision http://www.austlii.edu.au/au/cases/cth/FCA/2012/382.html

NORTHWEST CAPITAL MANAGEMENT -v- WESTATE CAPITAL LTD [2012] WASC 121 (5 April 2012) Corporations – General meeting – Validity of purported resolutions – Whether chairperson appointed – Requirement of chairperson for validity of general meeting – Whether meeting in such disarray that no valid resolutions passed – Whether proxy votes invalidly excluded – s 1322 Corporations Act – Whether irregularities substantive or procedural Corporations – Whether proxy appointment ineffective under s 250B of the Corporations Act if it is provided to a third party for delivery to the company – Whether proxies tabled prior to general meeting Trade practices – Conduct likely to mislead or deceive – Misleading or deceptive conduct in relation to voting process for purported resolutions and circulating resolution – Whether s 18 The Australian Consumer Law (sch 2 of the Competition and Consumer Act 2010 (Cth) applies – Whether s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) applies – Meaning of ‘engage in conduct’ – Relevance of lack of evidence that any person was misled or deceived – Nature of injunctive relief under s 232 of The Australian Consumer Law and s 12GD of the Australian Securities and Investments Commission Act Trusts and trustees – Written circulating resolution – Whether power in Trust Deed for the removal of trustee by a circulating resolution – Nature of requirement for notice of meetings – Whether the same principle extends to requiring circulating resolutions to be provided to all unit holders Trusts and trustees – Whether implied term arises from a clause providing for removal of trustee for a power to appoint a new trustee – Powers under the Trustees Act 1962 (WA) to appoint a new trustee – History of powers to remove trustees and appoint new trustees – Trusts and trustees – Trustees Act 1962 (WA) s 77(1) – Whether expedient to appoint a new trustee – Whether issue of units in Trust and stapled shares in company occurred for purpose of procuring voting support – Whether it is inexpedient, difficult or impracticable to appoint a new trustee in substitution for an existing trustee without the assistance of the Court – Considerations in exercise of discretion under s 77(1) – Rule against direction of trustee – Whether meeting of unit holders should be convened by Trustee – Powers of unit holders http://www.austlii.edu.au/au/cases/wa/WASC/2012/121.html

Barescape Pty Ltd & Anor v Bacchus Holdings Pty Ltd & Anor (No 6) [2012] NSWSC 257 (21 March 2012) EVIDENCE – Expert evidence – Expert’s reports – Rules of court as to admissibility of expert’s reports – Rule 31.28 of Uniform Civil Procedure Rules 2005 (NSW) – Whether “exceptional circumstances” exist supporting the admissibility of expert’s reports – Whether substantial prejudice exists preventing the admission of expert’s reports.EVIDENCE – Tender of MYOB records – Whether sufficient evidence exists to establish how MYOB records were prepared – Whether business records under s 69 of Evidence Act 1995 (NSW).


As the PPSA is about to take effect, I thought I’d have a look at what is happening in NZ  – surprise, surprise the 1st three decisions feature corporate insolvency practitioners!!  – Does anyone know of a Canadian equivalent to AUSLII?Commissioner of Inland Revenue v Stiassny [2012] NZCA 93 (15 March 2012) Were the receivers personally liable to pay the GST? Can any of the respondents recover the GST from the Commissioner on the basis it was paid under a mistake of law, namely that the receivers were personally liable to pay the GST?


Marac Finance Limited v Greer [2012] NZCA 45 (1 March 2012) A question of priorities – if the PPSA does not apply


Glenmorgan Farm Limited (in rec and in liq) v New Zealand Bloodstock Leasing Limited [2011] NZCA 672 (20 December 2011)


Stop looking!  I’ve found a Canadian source – note Price Waterhouse as Receiver and Receiver/Manager in this decision – AGT Financial Corporation v. Ellake Services Limited, 2011 BCSC 578 ‘The standard described in Re Searcy does not require an individual to have conscious knowledge. Rather, it requires that the relevant information be delivered to a corporation in a manner such that a reasonable person would take cognizance of it. The court’s concern in Re Searcy, leading to its discussion of “actual knowledge”, was that the basis for the knowledge did not require the corporation to draw inferences (however reasonable) in order to arrive at the requisite conclusion’


And now a Bankrupt Estate – Bankruptcies of Arseneau and Arseneau, 2005 NSSC 26 


An older Canadian case, but useful in terms of what you might need to consider in conducting a search of the PPSR (Aust) – of interest to me because of the eccentricities of the Bankruptcy database Harry Watson Farm Supply Ltd. v. Hi-Way Service Inc., 2000 ABQB 26 There can be little doubt that a farm tractor is equipment and serial numbered goods as defined by the Act and by Personal Property Security Regulation Alt. Reg. 234/90 (see Regulations l(j);1(1); 1(s);1(t); and Section 1 (1)0 of the Act)



Apr 202012

The Government is again proposing to extend the director penalty regime to cover employee superannuation entitlements.

The original Bill was introduced to Parliament on 13 October 2011. (I wrote about this in my blog post on 18/10/2011: see “Parliament sees new tax laws to protect superannuation and deter phoenix companies”.)

In its media release on 18 April 2012, the Government says it “held further consultation with industry after withdrawing an earlier  version of the legislation in November. Following this consultation, the  Government has made amendments to the draft Bill, including to ensure that new  directors have time to familiarise themselves with corporate accounts before  being held personally liable for corporate debts and requiring the ATO to serve  director penalty notices on directors in all cases before commencing  action.”

This is the full GOVERNMENT MEDIA RELEASE of 18 April 2012:

“Draft  legislation released today will help to protect workers’ superannuation  entitlements, said Assistant Treasurer, David Bradbury.

Under the director penalty regime,  which has been in operation since 1993, company directors are personally liable  for amounts withheld by their company that have not been remitted to the  Australian Taxation Office (ATO). The Tax  Laws Amendment (2012 Measures No. 2) Bill 2012: Companies’ non-compliance with  PAYG withholding and superannuation guarantee obligations will extend the  regime to cover Superannuation Guarantee amounts.

As well as  strengthening directors’ obligations to arrange for their companies to meet Pay  As You Go (PAYG) withholding and superannuation obligations, the measure will  also help counter phoenix behaviour.

“The Gillard  Government is committed to protecting workers’ entitlements,” said Mr Bradbury.

“This  legislation makes it clear that directors have an obligation to ensure that  provision is made for the ongoing payment of workers’ superannuation.

“It also  ensures that fraudulent directors who use phoenix companies to try and avoid  their debts will be held personally liable for their PAYG withholding and  superannuation obligations.”

The  Government held further consultation with industry after withdrawing an earlier  version of the legislation in November. Following this consultation, the  Government has made amendments to the draft Bill, including to ensure that new  directors have time to familiarise themselves with corporate accounts before  being held personally liable for corporate debts and requiring the ATO to serve  director penalty notices on directors in all cases before commencing  action.

The draft  legislation also includes a new defence for directors liable to penalties for  superannuation debts where, broadly, they reasonably thought the worker was a  contractor and not an employee,” he said.

“The  measure strikes the appropriate balance between protecting workers’ entitlements  while not discouraging people from becoming company directors.”

The  Government looks forward to receiving submissions from the public about this  important reform.  Submissions close on 2 May 2012 to allow for the  introduction and passage of the legislation in the Winter 2012 sittings of  Parliament.

The draft legislation, explanatory memorandum,  and a summary of the policy changes can be found on the Treasury website.

CANBERRA 18 April 2012″

Click on the following link to go to THE TREASURY WEBSITE LOCATION WHERE DETAILS WILL BE FOUND.  The closing date for submissions regarding the proposed legislation is 2 May 2012. 


Apr 202012

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 – Prior to Date of Bankruptcy

Bank of Western Australia Limited v   Srinivasan [2012] FMCA 177 (12 March 2012) BANKRUPTCY – Creditors   petition – ground of opposition challenging authority of Federal Magistrate –   interim applications for disqualification, transfer to Federal Court, or   adjournment – interim applications refused – ground of opposition rejected –   sequestration order made.
CONSTITUTIONAL LAW – Creation of Federal Magistrates Court   – appointment of Federal Magistrates – whether invalid under Chapter III of   the Constitution   by reason of exclusion from judges’ pensions http://www.austlii.edu.au/au/cases/cth/FMCA/2012/177.html

Warren Mckeon Dickson Pty Ltd v Maytom [2012] FMCA 160 (6 March 2012) BANKRUPTCY – Contested creditor’s petition – grounds of opposition – consideration of whether any reason existed for the Court to defer making or refrain from making a sequestration order  http://www.austlii.edu.au/au/cases/cth/FMCA/2012/160.html

Carlamax Properties Pty Ltd v Phontos [2012] FMCA 125 (28 February 2012) BANKRUPTCY – Creditor’s petition – whether grounds for an adjournment – whether the creditor was a secured creditor – whether for other sufficient cause a sequestration order ought not to be made http://www.austlii.edu.au/au/cases/cth/FMCA/2012/125.html

Thanks Bob – 4 time bankrupt, I understand – The Council Of The New South Wales Bar Association v Archer [2012] FMCA 81 (13 February 2012) BANKRUPTCY – Contested Creditor’s Petition – question of effectiveness of service of Bankruptcy Notice by email pursuant to regulation 16.01(1)(e). http://www.austlii.edu.au/au/cases/cth/FMCA/2012/81.html

An older decision, but interesting in the consideration given to amendment of creditors petition – Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No 3) [2011] FCA 1279 (8 November 2011) http://www.austlii.edu.au/au/cases/cth/FCA/2011/1279.html


Bankruptcy Act – following Date of Bankruptcy

Salfinger v Napiat Pty Ltd [2012] FCA 247 (19 March 2012) PRACTICE AND PROCEDURE – security for respondent’s costs of appeal – appeal against sequestration order pursuant to which appellant/bankrupt made bankrupt – where appellant resident out of the jurisdiction – where no statement of affairs filed by appellant – whether security for costs should be ordered http://www.austlii.edu.au/au/cases/cth/FCA/2012/247.html

Another instance where the value of the debt upon which a Sequestration Order was based will be costs of the administration – Charan v Gleeson [2012] FCA 236 (16 March 2012) BANKRUPTCY – appeal against Federal Magistrate’s decision that transfer of property from son to his parents was void against the Trustee – held that Federal Magistrate entitled to reasonably infer from circumstances that the son was or was about to become insolvent and that the main purpose of the transfer was to defeat creditors – insufficient evidence from parents to rebut presumption of advancement or rely on defence of an equity of exoneration PRACTICE AND PROCEDURE – whether it was appropriate for affidavit evidence of Trustee to be taken without his being available for cross-examination – reasonable explanation for why Trustee was unavailable – held that appellate courts must exercise caution in interfering with discretionary exercises of a primary judge’s discretionary rulings on matters of practice and procedure http://www.austlii.edu.au/au/cases/cth/FCA/2012/236.html

This Application & decision follows a number of hearings in a range of Court, largely brought by the bankrupt (Liprini) against the Trustee of his estate – the decision sets out the requirements for bringing vexatious proceedings – note that the Orders only apply in NSW (& only to NSW Courts?) & the Trustee’s costs are to be paid by the bankrupt (not payable from the Estate)  Pascoe v Liprini [2011] NSWSC 1484 (5 December 2011) PRACTICE AND PROCEDURE – vexatious proceedings – whether proceedings are vexatious – meaning of “vexatious” – whether proceedings were conducted frequently – meaning of “frequently” http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/1484.html

Commonwealth Bank of Australia v Tarrant & Hawkins [2012] NSWSC 165 (5 March 2012) PROCEDURE – possession proceedings – Defendant fails to comply with orders for filing of pleadings and evidence – Defendant subsequently made bankrupt – stay sought by Defendant until appeal against sequestration order determined – no utility in stay – Plaintiff seeks summary judgment – final hearing directed  http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/165.html

Hill and The Inspector-General in Bankruptcy [2012] AATA 69 (8 February 2012) BANKRUPTCY – power of trustee to object to bankrupt’s discharge before usual period – Trustee raised special and ordinary grounds of objection under s 149D – Decision under review affirmed http://www.austlii.edu.au/au/cases/cth/AATA/2012/69.html

Capital Finance Australia Limited v Brookfield [2012] FMCA 165 (7 March 2012) BANKRUPTCY – Application to set aside sequestration and other orders made in the absence of the debtor http://www.austlii.edu.au/au/cases/cth/FMCA/2012/165.html

Young, in the matter of Macryannis (No 2) [2012] FCA 175 (2 March 2012) COSTS – principles relevant to an award of costs – Court has unfettered discretion – Trustee to be treated as an ordinary litigant – consideration given to what would be just in the circumstances http://www.austlii.edu.au/au/cases/cth/FCA/2012/175.html

Thanks for this one Bob –  Young, In the matter of Macryannis [2011] FCA 1272 (8 November 2011) BANKRUPTCY – application under s 179 Bankruptcy Act 1966 (Cth) for enquiry into Trustee’s conduct in administering deceased estate – administration under Part XI Bankruptcy Act– Trustee appointed by Court order – delay in distributing assets – application for enquiry brought by creditor of estate – whether creditor has standing to bring application – whether issues identified by creditor warrant an enquiry being ordered – consideration of principles relevant to exercise of Court’s discretion under s 179 – consideration of principles governing the duties of trustees in bankruptcy – Court has high degree of supervision and control over trustees’ conduct – powers of Inspector-General in Bankruptcy – reasons referred to Inspector-General for consideration BANKRUPTCY – administration under Part XI Bankruptcy Act – whether Trustee entitled to deal with non-divisible assets as part of administration – reference to bankrupt’s assets or estate to be read as reference to whole of deceased person’s property – Trustee required to administer whole of estate which includes non-divisible assets BANKRUPTCY – application by Trustee to have remuneration fixed – whether Trustee entitled to be remunerated for dealing with exempt assets – consideration of mechanism by which remuneration to be calculated – consideration of s 162(4) Bankruptcy Act and reg 8.08 Bankruptcy Regulations and relevant authorities – whether Trustee entitled to costs, charges and expenses of administration – remuneration and any costs, charges and expenses to be drawn from divisible assets http://www.austlii.edu.au/au/cases/cth/FCA/2011/1272.html

Dyason v Pascoe [2012] FMCA 146 (27 February 2012) BANKRUPTCY – Removal of trustee – failure to provide particulars of complaints – application summarily dismissed for default http://www.austlii.edu.au/au/cases/cth/FMCA/2012/146.html

Sheikholeslami v Tolcher (No 2) [2012] FCA 199 (9 March 2012) COSTS – apportionment http://www.austlii.edu.au/au/cases/cth/FCA/2012/199.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

Sutherland as Trustee of the Bankrupt Estate of Leayr v Leayr [2012] FMCA 128 (20 February 2012) BANKRUPTCY – Application by trustee for an order that bankrupt vacate property – consent of bankrupt  http://www.austlii.edu.au/au/cases/cth/FMCA/2012/128.html

Samootin v Official Trustee in Bankruptcy [2012] FCA 64 (10 February 2012) PRACTICE AND PROCEDUREFederal Court Rules 2001 (Cth) – r 30.01 – Application for separate trials – Discretion to order separate hearing – Separate questions – Whether preliminary question of whether application made within time should be heard separately from other questions – Factors affecting discretion to order separate hearing http://www.austlii.edu.au/au/cases/cth/FCA/2012/64.html

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

                        Halsted (Bankrupt) v The Official Trustee in Bankruptcy, in the matter of Halsted (Bankrupt) [2011] FCA 1242 (17 October 2011) BANKRUPTCY AND INSOLVENCY – settlement proceeds – whether settlement proceeds from personal injury claim are property of the bankrupt – proceeds are not property of bankrupt EQUITY – equitable charges – whether intention to create equitable charge over settlement proceeds in favour of the third respondent – where third respondent had entered into two loans with bankrupt – where loans included inevocable instruction not to pay money to bankrupt until loan debt had been paid out of settlement proceeds – whether there was intention to keep settlement proceeds separate and loan would be paid out of those separate funds – equitable charge created over settlement proceeds in favour of third respondent  http://www.austlii.edu.au/au/cases/cth/FCA/2011/1242.html

Holden v Van Houten [2012] FCA 4 (13 January 2012) BANKRUPTCY AND INSOLVENCY – Bankruptcy annulled – Trustee’s entitlement to costs, expenses and remuneration http://www.austlii.edu.au/au/cases/cth/FCA/2012/4.html

This decision was in last month, but I include it again because of the very useful observation proffered by one the recipients – “In respect of the above case and on an associated tack, I have always “preached” that if you as the trustee can not find anything to decline acceding to the bankrupt’s application to leave Australia you notify creditors of your decision and inform them that if they are not happy with your decision to let the bankrupt go, they can seek a review of your decision by the Court.” –  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

Interesting series of decisions in relation to the one estate 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

Pearce (Trustee) v Mulhern (Bankrupt) (No 3) [2012] FCA 16 (16 January 2012) BANKRUPTCY – warrant for arrest – warrant executed – order for release from custody after public examination http://www.austlii.edu.au/au/cases/cth/FCA/2012/16.html

Pearce (Trustee) v Mulhern (Bankrupt) (No 2) [2012] FCA 7 (12 January 2012) BANKRUPTCY AND INSOLVENCY – arrest warrant – failure to attend public examination – use of an alias – flight risk http://www.austlii.edu.au/au/cases/cth/FCA/2012/7.html

Pearce (Trustee) v Mulhern (Bankrupt) [2011] FCA 930 (9 August 2011) BANKRUPTCY AND INSOLVENCY – arrest warrant – whether to issue – where respondent bankrupt had not appeared for public examination – where it appeared respondent had not complied with obligations of a bankrupt under the Bankruptcy Act 1966 (Cth) – arrest warrant issued http://www.austlii.edu.au/au/cases/cth/FCA/2011/930.html


Bankruptcy Act – Other Schemes under the Act                                        

Osborne v Gangemi (No 3) [2012] FCA 188 (6 March 2012) COSTS – application to set aside a Personal Insolvency Agreement – whether allegations were made against Trustees personally sufficient to justify a costs order in favour of Trustees where Trustees were unsuccessful in their opposition to the application http://www.austlii.edu.au/au/cases/cth/FCA/2012/188.htmlhttp://www.austlii.edu.au/au/cases/cth/FCA/2012/188.html

Osborne v Gangemi (No 2) [2011] FCA 1278 (4 November 2011) http://www.austlii.edu.au/au/cases/cth/FCA/2011/1278.html

Osborne v Gangemi [2011] FCA 1252 (4 November 2011) BANKRUPTCY AND INSOLVENCYSection 222(1) of the Bankruptcy Act 1966 (Cth) – whether the Court should set aside Personal Insolvency Agreement on grounds of unreasonableness or because it is not calculated to benefit the interests of creditors generally – amount available for distribution trivial or negligible when compared to the debtor’s total debts – debtor’s affairs call for further investigation – closeness of the vote of creditors a relevant factor – Personal Insolvency Agreement set aside and sequestration order made http://www.austlii.edu.au/au/cases/cth/FCA/2011/1252.html

It’s a long time since I can remember seeing a Part X decision, so two is just great – Gore v Prentice (Trustee), in the matter of the Personal Insolvency Agreement of Gore [2012] FCA 104 (3 January 2012) PRACTICE AND PROCEDURE – interlocutory injunctions – whether serious question to be tried – where applicant alleged second respondent was not or appeared not to be impartial – where second respondent was partner of liquidator of a company of which the applicant was a director – no serious question to be tried – where balance of convenience favoured the respondent – interlocutory application dismissed http://www.austlii.edu.au/au/cases/cth/FCA/2012/104.html


  Corporations – pre-appointment

Interesting matter, but did not find the result too surprising – Surdex Steel Pty Ltd v GB Manufacturing Pty Ltd [2012] VSC 90 (13 March 2012) CORPORATIONS – Winding up application filed before time for compliance with statutory demand had expired – Corporations Act 2001, s 459C(2)(a), s 459F(2)(a)(ii) – Application dismissed http://www.austlii.edu.au/au/cases/vic/VSC/2012/90.html

Dynamics Co Pty Limited v G and M Nicholas Pty Limited [2012] NSWSC 206 (9 March 2012) CORPORATIONS – Winding up – Statutory demand – Costs of application to set aside statutory demand where orders were made by consent -Whether service of statutory demand was reasonable http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/206.html

GEORGIOU BUILDING PTY LTD -v- PERRINEPOD PTY LTD [2012] WASC 72 (1 March 2012) Winding up application – Insolvency – Adjudication under Construction Contracts Act 2004 (WA) – Whether winding up application is an abuse of process – Enforcement of adjudication – Whether creditor is a judgment creditor under s 457P Corporations Act 2001 (Cth) http://www.austlii.edu.au/au/cases/wa/WASC/2012/72.html

Mintoo Property Developers Pty Ltd v Multiboard Australia Pty Ltd [2012] VSC 61 (29 February 2012) CORPORATIONS – Setting aside a statutory demand – Genuine dispute about the existence of debt – Offsetting claim – Corporations Act 2001 (Cth), s 459G http://www.austlii.edu.au/au/cases/vic/VSC/2012/61.html

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

In The Matter of HEZ Pty Limited (Receivers and Managers Appointed) ACN 084 052 595In The Matter of HEZ Nominees Pty Limited (Receivers and Managers Appointed) ACN 100 786 187 [2012] NSWSC 26 (31 January 2012) CORPORATIONS –Corporations Act 2001 (Cth) s 459A winding up in insolvency – no issue of principle http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/26.html

Deputy Commissioner of Taxation v National Skin Institute (Aust) Pty Ltd [2012] FCAFC 2 (2 February 2012) CORPORATIONS – winding up application – affidavit in support – verification that debt still due and payable – a formal affirmation – formal proof not required http://www.austlii.edu.au/au/cases/cth/FCAFC/2012/2.html

Norman, in the matter of Forest Enterprises Australia Limited (Subject to Deed of Company Arrangement) (Receivers & Managers Appointed) v FEA Plantations Limited (Subject to Deed of Company Arrangement) (Receivers Appointed) (No 2) [2011] FCAFC 169 (23 December 2011) http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/169.html

Northside Deli Pty Limited, in the matter of Deputy Commissioner of Taxation v Deputy Commissioner of Taxation [2011] FCA 1474 (12 December 2011) CORPORATIONS – application for stay of winding-up orders – where applicant asserted serious and fundamental error in taxation assessments forming basis of statutory demand – where applicant expressed intention to apply for review by Administrative Appeals Tribunal – where no evidence of error and no application for review brought – where company not otherwise trading http://www.austlii.edu.au/au/cases/cth/FCA/2011/1474.html

Lee, in the matter of Hyperbarics Australia Pty Ltd v Hyperbarics Australia Pty Ltd [2011] FCA 1429 (9 December 2011)  CORPORATIONS – application for appointment of provisional liquidator http://www.austlii.edu.au/au/cases/cth/FCA/2011/1429.html


Corporations – post appointment

McElligott v. Commonwealth Bank of Australia [2012] QCA 61 (20 March 2012) CONVEYANCING – MATTERS ARISING AFTER COMPLETION – OTHER MATTERS – CAVEATS AGAINST DEALINGS – where appellant lodged a registered owner’s caveat against land on behalf of a company in liquidation – where the caveat prevented registration of a transfer of the land and mortgage over the land – where the mortgagee applied for removal of the caveat pursuant to s 127 Land Title Act 1994 (Qld) – where the caveat was based upon alleged fraudulent conduct – where the alleged fraudulent conduct related to persons other than the transferee and mortgagee – whether the primary judge’s discretion under s 127 Land Title Act 1994 (Qld) miscarried in ordering that the caveat be removed PROCEDURE – COURTS AND JUDGES GENERALLY – COURTS – OTHER MATTERS – whether the primary judge erred in refusing to stay an order for removal of a caveat to permit the appellant to add a party to the proceeding APPEAL AND NEW TRIAL – APPEAL PRACTICE AND PROCEDURE – QUEENSLAND – POWERS OF COURT – COSTS – where the respondent contends that the appellant advanced the same hopeless position on appeal as at first instance – whether costs should be awarded on the indemnity basis Land Title Act 1994 (Qld), s 127 http://www.austlii.edu.au/au/cases/qld/QCA/2012/61.html

In the matter of Richard James Porter and David Ian Mansfield. [2012] NSWSC 220 (13 March 2012) CORPORATIONS – Winding up – Replacement of liquidator – Administration – Replacement of administrator http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/220.html

In the matter of Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) Phoenix Lacquers & Paints Pty Limited v Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) & Ors [2012] NSWSC 214 (13 March 2012) CORPORATIONS – Creditors’ meeting – Plaintiff seeks declaration as to validity of resolution to remove and replace joint and several administrators – Plaintiff submitted proof of debt to chairperson of creditors’ meeting- Chairperson admitted debt after recalculating interest at a lower simple interest rate – Debt treated as “a debt the value of which was not established” for the purposes of reg 5.6.23(2)(d) of Corporations Regulations 2001 (Cth) – Whether chairperson’s decision effected by bad faith, mistake as to facts, error of law or error of principle – Whether the declarations sought by the Plaintiff ought to be made http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/214.html

BOSI SECURITY SERVICES LTD -v- PAKWEST PTY LTD (RECEIVER AND MANAGER APPOINTED) [2012] WASC 52 (17 February 2012) Practice and procedure – Whether trial of preliminary issues should be ordered – Turns on its own facts http://www.austlii.edu.au/au/cases/wa/WASC/2012/52.html

& the saga continues –  THE BELL GROUP LTD (In Liquidation) -v- WESTPAC BANKING CORPORATION [2011] WASC 367 (16 January 2012) Practice and procedure – Case management principles – Application to vary order that two related applications be heard together – High likelihood of appeal of interlocutory proceedings – Proceedings potentially impacted by proceedings in United Kingdom – Turns on own facts http://www.austlii.edu.au/au/cases/wa/WASC/2011/367.html

This Decision has me interested for a number of reasons – now we see a Winding-up Order Set Aside!! – Is this very common??  I’ve only ever seen it in relation to a Sequestration Order – Worth a look at to see how a Taxing Officer might review a Bill of Costs – the legislative restrictions impinging on this process are also of interest – Is anyone aware of any instances where these Corporations decisions where referred to in applications to set aside Sequestration Orders? –  Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd [2012] VSC 71 (2 March 2012) http://www.austlii.edu.au/au/cases/vic/VSC/2012/71.html

Re AED Oil Limited (admns app’td) (No 2) [2012] VSC 54 (27 February 2012) CORPORATIONS – Administration under Part 5.3A of the Corporations Act 2001 – Application for further extension of time to convene second meeting of creditors pursuant to s 447A(1) of the Act http://www.austlii.edu.au/au/cases/vic/VSC/2012/54.html

Algeri; Re Colorado Group Limited (No 2) [2012] VSC 22 (17 February 2012) CORPORATIONS – Further extension of time to convene second meeting of creditors – ss 439A(6), 447A(1) of the Corporations Act 2001 (Cth) http://www.austlii.edu.au/au/cases/vic/VSC/2012/22.html

In the matter of Norman Nominees Pty Ltd (in liq) & Ors v Zervos Pty Ltd & Ors (No 2) [2012] QSC 18 (16 February 2012) Costs – discretionary factors – turns on own facts http://www.austlii.edu.au/au/cases/qld/QSC/2012/18.html

 Amaca Pty Limited (under NSW administered winding up) & Ors v Messrs A G McGrath & C J Honey (as liquidators of the HIH Group of Companies) & Anor [2012] NSWSC 176 (5 March 2012) CORPORATIONS – Winding up – Insolvency – Proceeds of contract of reinsurance – Application for orders under Corporations Act 2001 (Cth) s 562A(4) – Whether “just and equitable” to make orders sought by the Plaintiffs http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/176.html

Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2012] NSWSC 170 (5 March 2012) EQUITY – “fruits of the action” lien – prior to commencement of hearing in main proceedings solicitor acted for company defending a claim and prosecuting a cross-claim – judgment in favour of the company on the cross-claim – HELD – lien arose in favour of the solicitor over moneys recovered in the litigation by reference to the cross-claim – EQUITY – trust over litigation proceeds claimed – no question of principle – HELD – no trust was created – CORPORATIONS – deed of company arrangement – charges registrable under s 262(1) Corporations Act 2001 (Cth) – whether a “fruits of the action” lien is registrable – whether equitable charge created by deed over money to be recovered by company in litigation is registrable – HELD – “fruits of the action” not registrable under s 262(1) as it arises by operation of law and is exempt under s 262(2) – express charge over money claimed in litigation registrable as a book debt insofar as secured claim was for reimbursement of expenses incurred in ordinary course of business – CORPORATIONS – deed of company arrangement – competing priorities between a fixed charge and an administrator’s statutory and/or equitable lien – circumstances in which an equitable lien may arise in favour of the administrator and take priority over a fixed charge – AGENCY – claim that a grant of irrevocable authority to current solicitor to pay former solicitor created a secured interest in favour of former solicitor – HELD – no such secured interest – CONTRACT – whether personal obligation of directors of company to pay solicitors’ costs – created by either the retainer or the deed – HELD – no personal obligation created by deed, but personal obligation arose from joint retainer under which the directors were joint and severally liable with the company for costs of the proceedings http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/170.html

Sutherland v Ghougassian & Ors [2012] NSWSC 125 (29 February 2012) MORTGAGE – account of moneys secured by mortgage – no question of principle http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/125.html

Daniel Ivan Cvitanovic in his capacity as liquidator of Master Education Services Pty Ltd (in liquidation) [2012] NSWSC 205 (17 February 2012) CORPORATIONS – Insolvency – Liquidation – Application by liquidator to Court under s 511 of Corporations Act 2001 (Cth) http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/205.html

In the matter of Ursidae Pty Ltd formerly trading as Powerfab Engineering (in liquidation) -v- Commissioner of Taxation [2012] NSWSC 172 (13 February 2012) CORPORATIONS – application by company and its liquidator under s 588FF of the Corporations Act 2001 (Cth) to recover tax paid as voidable transactions – Commissioner admits liability and seeks indemnity against directors under s 588FGA(2) http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/172.html

Deputy Commissioner of Taxation v West Apartments Pty Ltd (in liq) [2012] FCA 222 (9 March 2012) CORPORATIONS – resignation of liquidator – appointment of liquidator by the Court http://www.austlii.edu.au/au/cases/cth/FCA/2012/222.html

Crisp, in the matter of ACN 069 895 585 Pty Ltd (in liq) v ACN 069 859 585 Pty Ltd (in liq) [2012] FCA 148 (5 March 2012) PRACTICE AND PROCEDURE – Discovery – Privilege – Whether claim of privilege waived by making of claims in proceeding – Whether maintenance of privilege inconsistent with those claims – Whether contents of documents necessarily laid open for scrutiny by those claims http://www.austlii.edu.au/au/cases/cth/FCA/2012/148.html

Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal (No 5) [2012] FCA 191 (6 March 2012) COSTS – security for costs – whether springing order for dismissal on non-compliance http://www.austlii.edu.au/au/cases/cth/FCA/2012/191.html

Duties of Provisional Liquidators set out by Court – is this usual? –  Griffin Energy Group Pty Ltd v Griffin Windfarm Holdings Pty Ltd, in the matter of Griffin Energy Group Pty Ltd (subject to Deed of Company Arrangement) [2012] FCA 197 (2 March 2012) CORPORATIONS – appointment of provisional liquidators – circumstances in which usual undertaking as to damages not required http://www.austlii.edu.au/au/cases/cth/FCA/2012/197.html

White v Norman; In the Matter of Forest Enterprises Australia Limited (Receivers and Managers Appointed) (in Administration) (No 2) [2012] FCA 163 (2 March 2012) CORPORATIONS ACT – where plaintiff successful on appeal from decision of receivers under s 1321 of the Corporations Act 2001 (Cth) – form of orders – whether order for payment of disputed amount appropriate in context of legislative scheme – whether the court has power to award interest under s 1321 – whether the court has power to award interest under s 51A of the Federal Court of Australia Act 1976 (Cth). Held: The proceeding be dismissed. The appropriate orders are declarations and an order modifying the receivers’ decision. No power to award interest under s 1321 of the Corporations Act 2001 (Cth) or s 51A of the Federal Court of Australia Act 1976 (Cth)
COSTS – where plaintiff claimed indemnity costs on basis that proceeding concerned proper administration of a fund – consideration of appropriate costs order in appeal under s 1321 – whether proceeding adversarial in nature. Held: The proceeding was of an adversarial nature and costs should be assessed on a party and party basis http://www.austlii.edu.au/au/cases/cth/FCA/2012/163.html

Deputy Commissioner of Taxation v 24 x 7 Direct Pty Ltd (No 2) [2012] FCA 157 (1 March 2012) http://www.austlii.edu.au/au/cases/cth/FCA/2012/157.html

From CPA Insolvency Group – highlighted for consideration of ‘creditor’ and earlier cases on point – good review of earlier decisions –  BE  Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton [2011] NSWCA 414 (20 December 2011) CORPORATIONS – voluntary administration – whether person having unadjudicated claim under s 106 Industrial Relations Act 1996 is a “creditor” bound by a Deed of Company Arrangement – whether Court has power under s 447A(1) Corporations Act 2001 (Cth) to vary operation of Pt 5.3A to allow admission of such claim
CORPORATIONS – voluntary administration – definition of “creditor” in Pt 5.3A – whether term has same meaning as defined in s 553 – Brash Holdings v Katile Pty Ltd [1996] 1 VR 24 – whether scheme, purpose and scope of Pt 5.3A require class of claims broader than that of claims under s 553
CORPORATIONS – voluntary administration – definition of “claim” in Pt 5.3A – contingent claim – Community Development Pty Ltd v Engwirda Construction Co [1969] HCA 47; (1969) 120 CLR 455 – requirement of existing obligation
INDUSTRIAL LAW – unfair contracts – status of unadjudicated claim under s 106 Industrial Relations Act – whether “claim” within meaning of s 553 – Majik Markets Pty Ltd v Brake & Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 – Fisher v Madden [2002] NSWCA 28 – Colley v Futurebrand FHA Pty Ltd [2005] NSWCA 223 – whether basis, founded on existing legal right, for asserting a right to participate in the division of the assets of the company – whether legally enforceable right to have Industrial Relations Commission determine application according to law is sufficient – analogy with claim for costs
CORPORATIONS – voluntary administration – power of Court – s 447A – whether Court has power under s 447A(1) Corporations Act 2001 (Cth) to vary operation of Pt 5.3A to deem to be a creditor someone who is not a creditor – Re Motor Group Australia Pty Ltd [2005] FCA 985
CORPORATIONS – voluntary administration – power of Court – s 447A – whether limitations imposed by the subject matter, scope and purpose of the statute – whether order falls within objectives within s 435A or other purpose within Pt 5.3A
CORPORATIONS – voluntary administration – power of Court – s 447A – where broad power conferred on court, requirement to exercise judicially – requirement to exercise power to achieve purposes for which it was conferred
CORPORATIONS – voluntary administration – power of Court – s 447A – whether nexus with how Pt 5.3A is to operate
CORPORATIONS – voluntary administration – power of Court – s 447A – Standing – person with unadjudicated claim under s 106 Industrial Relations Act seeking order deeming them to be creditor – whether “any other interested person” – Allatech Pty Ltd v Construction Management Group Pty Ltd [2002] NSWSC 293
APPEAL – right of appeal – jurisdiction of the Court of Appeal – s 101(2)(r)(ii) Supreme Court Act 1970 – whether leave to appeal required – whether appeal involves a matter at issue amounting to $100,000 or more
COSTS – general rule – costs follow the event – whether departure from general rule – where proceedings relate to fund being administered subject to control of court – whether costs should be treated as costs in administration – no reason to depart from general rule http://www.austlii.edu.au/au/cases/nsw/NSWCA/2011/414.html

Australian Securities and Investments Commission v Letten (No 17) [2011] FCA 1420 (12 December 2011) CORPORATIONS – unregistered managed investment scheme – receivership – whether claims of trust creditors and investor claimants are “trust creditor claims” for purposes of the Pooling Orders – trustee’s right of indemnity – clear accounts rule – trustee’s duties – duty to get in / secure surplus investor funds – duty to account for income generated and debt funding secured against scheme property – duty to account for distributions to investors – duty to comply with the law http://www.austlii.edu.au/au/cases/cth/FCA/2011/1420.html

Termicide Pest Control Pty Ltd, in the matter of Granitgard Pty Ltd (in liq) v Albarran [2011] FCA 1410 (9 December 2011) CORPORATIONS – application under s 503 of the Corporations Act 2001 (Cth) to remove a liquidator – liquidator voluntarily appointed by insolvent company – insolvent company involved in a transaction that is at least questionable – consideration of ‘cause’ to remove a liquidator – liquidator may be removed if the Court is satisfied that it is in the general interest of the creditors of the insolvent company to do so – liquidator need not have demonstrated unfitness, impropriety or breach of duty HELD – application granted http://www.austlii.edu.au/au/cases/cth/FCA/2011/1410.html

In the Matter of Sullivans Cove IXL Nominees Pty Ltd; Crawford v de Kantzow (No 2) [2011] TASSC 53 (27 September 2011) Corporations – Winding up – Conduct and incidents of winding up – Applications to court for directions or advice – Costs of applications – Application by liquidator for directions – Dispute between shareholders as to distribution of surplus on winding up – Outcome of dispute depended on the construction of a contract between shareholders – Company not a party to the contract – Whether losing shareholder should pay the costs of the winning shareholder and the liquidator – Whether the company should pay the costs of all parties http://www.austlii.edu.au/au/cases/tas/TASSC/2011/53.html

In the Matter of Sullivans Cove IXL Nominees Pty Ltd; Crawford v de Kantzow [2011] TASSC 9 (2 March 2011) Corporations Share capital – Shares – Classes of shares and shareholders – Generally – Whether the holders of the “B” class ordinary shares are to receive a distribution from a surplus on winding up – Whether an agreement between shareholders conferred any special privileges, rights or conditions on the “B” class ordinary shares http://www.austlii.edu.au/au/cases/tas/TASSC/2011/9.html


Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 (8 March 2012) REAL PROPERTY – conveyancing – voluntary alienation to defraud creditors – transfer of land by judgment debtor – whether intent to defraud creditors by making execution against land impossible – PROCEDURE – judgments and orders – enforcement of judgments and orders – whether writ of execution may be enforced in respect of judgment debt of trustee – EQUITY – trusts and trustees – money judgment against trustee – trustee’s right of indemnity and preferred beneficial interest in trust assets – subrogated position of trust creditors – protection of preferred beneficial interest from destruction by levy of execution http://www.austlii.edu.au/au/cases/nsw/NSWCA/2012/26.html

Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham’s Warehouse Sales Pty Ltd [2012] HCA 7 (8 March 2012) Restitution − Restitution of benefits derived from unenforceable or illegal contracts − Recovery of money paid as money had and received − Respondents invested in tax driven blueberry farming schemes − Respondents borrowed funds to pay farm management fees − Each investment a “prescribed interest” under Companies Code of each respondent’s home State (“Code”) − Contrary to s 170(1) of Code, no valid prospectus registered when prescribed interests offered − Farming schemes collapsed − Respondents did not repay loan funds − Loan agreements unenforceable against respondents due to illegality − Whether restitution of loan funds available − Whether failure of consideration − Whether respondents’ retention of loan funds unjust. Personal property − Alienation of personal property − Assignment of choses in action − Assignment of right to restitution − Deed of assignment included assignment of legal right to debts and “all legal and other remedies” − Whether right to restitution capable of assignment − Whether deed of assignment assigned right to restitution. Words and phrases – “bare right of action”, “chose in action”, “failure of consideration”, “legal and other remedies”, “money had and received”, “prescribed interest”, “unjust enrichment”.  http://ww w.austlii.edu.au/au/cases/cth/HCA/2012/7.html

Sounds interesting –  Australia and New Zealand Banking Group Limited v Konza [2012] FCA 196 (9 March 2012) TAXATION – notices to furnish information issued by Deputy Commissioner pursuant to s 264(1)(a) of Income Tax Assessment Act 1936 (Cth) – notices directed to Australian bank – information sought in notices provided to bank from subsidiary in Vanuatu – information stored electronically in Australia – whether notices invalid – whether notices require bank to breach common law and statutory confidentiality obligations under Vanuatu law – whether s 264 authorises Commissioner to issue notices that infringe foreign sovereignty – whether notices were issued for a proper purpose – whether notices are uncertain – whether bank “not capable of complying” with notices within meaning of s 8C(1B) of Taxation Administration Act 1953 (Cth) – application dismissed  http://www.austlii.edu.au/au/cases/cth/FCA/2012/196.html

Waller v Hargraves Secured Investments Ltd [2012] HCA 4 (29 February 2012) Mortgages – Mortgagee’s remedies – Farm Debt Mediation Act 1994 (NSW) (“Act”) – Creditor must provide notice of intention to take “enforcement action” under “farm mortgage” (“Notice”) – Notice must specify availability of mediation regarding farm debts – Creditor unable to take enforcement action until NSW Rural Assistance Authority (“Authority”) issues certificate that Act does not apply because satisfactory mediation has occurred – Borrower mortgaged land to secure all monies owed under loan agreement – Borrower defaulted and lender provided Notice – Borrower requested mediation under Act – Following mediation parties executed second and third loan agreements, discharged previous debts and created new farm debts – Authority satisfied of successful mediation and issued certificate certifying that Act did not apply to farm mortgage – Borrower defaulted in making interest payments due under third loan agreement – Whether successive farm debts created new “farm mortgage” requiring satisfactory mediation before creditor could pursue enforcement action – Whether separate Notice required for enforcement action under subsequent loan agreements – Whether certificate issued by Authority void – Whether lender’s entitlement to possession of secured land and outstanding monies barred. Words and phrases – “enforcement action”, “farm debt”, “farm mortgage”, “in respect of the farm debt involved”, “in respect of the farm mortgage concerned”.  http://www.austlii.edu.au/au/cases/cth/HCA/2012/4.html


Questions and (perhaps) Answers

(1)    Peter asked me for decisions where a bankrupt had claimed that they held property in ‘trust’ only, especially where it is held for minor children. I readily recalled two bankruptcies which expended generous amounts of Court time.

Marchesi v Apostolou [2007] FCA 986 (4 July 2007) BANKRUPTCY – Torrens system land registered in name of bankrupt – Whether bankrupt had made effective gift of land – Whether bankrupt held beneficial title to land.
EQUITY – Gift of Torrens system land – Registered title not transferred – Instrument of transfer held by solicitor acting for donor and donee – Whether instrument had been delivered to donee – Whether donor had done everything necessary to be done by him to transfer registered title – Whether gift perfect in equity.
EQUITY – Torrens system land – Agreement by registered proprietor to transfer equitable interest for value – Full price not paid by other party to agreement – Agreement not complied with in other respects – Whether agreement specifically enforceable – Whether agreement gave rise to option – Whether other party acquired equitable interest in land as a result of agreement.
BANKRUPTCY – Gift of Torrens system land to registered proprietor’s family trust – Whether purpose was to defeat creditors – Bankruptcy Act 1966 (Cth), s 121.
BANKRUPTCY – Torrens system land – Agreement by registered proprietor to transfer equitable interest for value – Whether purpose was to defeat creditors – Bankruptcy Act 1966 (Cth), s 121.
TRUSTEES – Land held on trust – Expenses and outgoings relating to land – Trustee incurring expenses incidental to proposed development of land but not in capacity of trustee – Whether trustee entitled to indemnity from trust estate- http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2007/986.html?stem=0&synonyms=0&query=”vasiliou%20

Owens v Lofthouse [2007] FCA 1968 (12 December 2007) BANKRUPTCY — appeal from orders of Federal Magistrates Court transferring beneficial title of properties to trustee in bankruptcy — whether appellant beneficial owner of properties
TRUSTS — whether document titled “Declaration of Trust” effective — whether document manifested intention to declare a trust — document ambiguous in its terms — whether parol evidence rule applicable — appellant’s subsequent conduct inconsistent with declaration of trust
PRACTICE AND PROCEDURE — application to adduce “further evidence” pursuant to Federal Court Act 1976 (Cth) s 27 — further evidence relevant to creation of purported “Declaration of Trust” — principles relevant to reception of further evidence — whether evidence could have been led below — whether evidence sufficiently cogent to warrant its reception — whether evidence likely to have produced different result  http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2007/1968.html?stem=0&synonyms=0&query=”sue%20owens%20

Lofthouse v Baxter & Anor (No2) [2007] FMCA 1481 (30 August 2007) BANKRUPTCY – Application by Trustee pursuant to ss.58 and 116 of the Bankruptcy Act 1966 – whether valid trust – equitable principles – relevance of evidence of Bankrupt in other proceeding claiming ownership of property and no reference to trust http://www.austlii.edu.au/au/cases/cth/FMCA/2007/1481.html

(2)    Matthew referred me to an article from one of the published Insolvency newsletters of February 2012 about the decision below.

I was aware of the decision and was surprised it was not more well known. The article included the following observation: “Readers can assess whether that is a decision on the facts or is worthy of legislative attention, or neither.”

I also will leave that to you to decide, though would be please to hear your views & / or other decisions on point.

My early enquiries elicited the following two observations:  “ … the decision was very much based on the failure of the trustee to include in the deeming of the income the bankrupt as the doctor was generating the income by his personal exertion and that the employer company was an alter ego of the bankrupt . Also there was no provision for the operating expenses of the “business” allowed by the trustee , if I recall correctly.”  and

“Appeal dismissed- this is going to cause a lot of problems where we deem income.

Law needs to be beefed up here asap.”

Inspector-General in Bankruptcy v McGushin [2009] FCA 662 (18 June 2009) BANKRUPTCY – appeal by Inspector-General in Bankruptcy from decision of Tribunal – surgeon employed by company – Tribunal found net income of company was distinct from income paid to respondent – held net income of company not income ‘derived by the bankrupt’ for the purposes of s 139W of the Bankruptcy Act 1966 (BA) – whether Tribunal correctly interpreted operation of s 139(L)(a)(vii) BA – whether income received by company was income ‘derived by’ the respondent – whether income derived by company could be deemed as being income derived by employee by virtue of s 139M BA  http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2009/662.html?stem=0&synonyms=0&query=”mcgushin%20

The AAT decision:

McGushin and Inspector-General in Bankruptcy [2008] AATA 769 (27 August 2008) Bankruptcy – Applicant was the sole income producing employee of a Company of which he held 10/11ths of the issued capital as at the date of his bankruptcy – net income of Company, as distinct from income paid to applicant, not held to be “income … derived by the bankrupt” for the purposes of s 139W of the Bankruptcy Act 1966 http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/AATA/2008/769.html?stem=0&synonyms=0&query=”mcgushin%20

A Contributions decision with a more pleasing outcome, to Trustees:

McPhee and Inspector-General in Bankruptcy [2011] AATA 322 (13 May 2011) “Everett” Assignment – applicant assigned 50% of income from legal practice carried on in partnership with others – effect of such arrangement following dissolution of partnership and applicant’s subsequent bankruptcy – held assignment not operative in relation to income derived by applicant as a sole practitioner – such income derived solely by applicant http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/AATA/2011/322.html?stem=0&synonyms=0&query=”mcgushin%20