Jan 142015

UPDATED 16/1/2015

Despite directors receiving official admonishments, detailed instructions and threats about the practice of allowing a company to trade whilst insolvent (see, for example, ASIC Regulatory Guide 217), the curse of insolvent trading seems to be growing.

So, in an attempt to reel it in – or perhaps (for the cynical) to reduce the number of reported cases – the Australian Securities and Investments Commission (ASIC) is putting the onus on liquidators to provide “better” information in their statutory reports.


Where liquidators of insolvent companies become aware that a past or present director or other officer of a company may have committed an offence, they are required to make a formal report to ASIC. Several years ago ASIC came up with a form and guidelines spelling out the information it wanted from liquidators before it would take their allegations of offences any further. This change came with the introduction of an electronic means of lodging reports, but also occurred after ASIC had become fed-up with receiving offence reports considered by its investigators to be almost worthless.

The latest version of this offence report form was released on 18 December 2014. The changes that have been drawn to the attention of liquidators by ASIC concern allegations of insolvent trading. The previous version of the form (July 2008) asked little of liquidators regarding this subject: about all it wanted was a “Yes” or “No” on the availability of documentary evidence. But the new version requires far more.

In the insolvency profession the ASIC form is known as EX01. More technically it is Schedule B of Regulatory Guide 16: Report to ASIC under s422, s438D or s533 of the Corporations Act 2001 or for statistical purposes. (Note: This reporting requirement applies not only to liquidators but also to receivers or managing controllers and voluntary administrators. However for simplicity all these classes of external administrators are referred to collectively in this article as liquidators.)


Possible Misconduct – EX01

In EX01 reporting of “insolvent trading” is carried out in the section headed Possible Misconduct.

Here, ASIC asks the liquidator “Are you reporting possible misconduct?”

If the answer is “Yes”, the liquidator is invited to examine Schedule D of ASIC Regulatory Guide 16 to learn “what is likely to constitute a breach of the relevant section, and the evidence needed to prove such a breach”. Schedule D contains over 6,500 words.

There is also a warning “that ASIC may ask you to provide a supplementary report addressing in detail the possible misconduct reported and we may later require further evidence or statements from you for Court purposes”. A description of what is required in the ASIC supplementary report is set out in Schedule C: Supplementary report by receiver or managing controller under s422(2), by voluntary administrator under s438D(2), or by liquidator under s533(2). Schedule C contains about 3,000 words. Liquidators of “assetless companies” are eligible under Regulatory Guide 109 to apply for funding from ASIC for reasonable remuneration and costs in preparing a supplementary report (ASIC form EX03).

If, after considering what is involved in answering “Yes”, the liquidator still thinks the misconduct is worth reporting, or filing a complaint, he or she is directed to the section headed “Criminal Offences”.

Possible Misconduct – Criminal Offences – Insolvent Trading – EX01

Preliminary details of an allegation of insolvent trading – an offence under section 588G(3) of the Corporations Act 2001 – are sought by ASIC in the usual tick-the-box manner.

First the liquidator reports the alleged offence by ticking “Yes” to the following statement:

“In your opinion, one or more directors failed to prevent the company incurring a debt or debts at a time when the director suspected that the company was insolvent or would become insolvent as a result, and the failure to prevent the company incurring the debt(s) was dishonest.”

Having ticked that box, the liquidator is asked “Do you have documentary evidence or other to support your opinion?” and “Are you aware of documentary evidence in the possession of another person that supports this allegation?”

Up to this section the revised form is practically the same as the previous version.

But in the new version, if the liquidator reports a case of insolvent trading and has, or knows of, documentary evidence supporting this conclusion, the liquidator must provide more information by answering several extra questions.

These extra questions concern the period of insolvency, the methods and records used to determine the date of insolvency, the amount of debts incurred, and the reasonable grounds for the director had to suspect insolvency. (The actual questions are set out verbatim below, but the heading are mine.) They are the type of questions that a liquidator, especially one with sufficient funds, ought to consider as a matter of course before reaching an opinion regarding the existence (or non-existence) of insolvent trading.

Effects of changes to insolvent trading sections of EX01

Prior to the recent changes, if ASIC saw a completed EX01 form in which the liquidator had alleged a breach of the insolvent trading laws, and had also answered “yes” to questions about the possession or existence of documentary evidence “or other” to support that opinion, ASIC would have then needed to consider whether to investigate. Its task would likely have entailed obtaining, or trying to obtain, from the liquidator the extra information that is now set out in the latest version of EX01. So, as far as the extra demands in the form are concerned, ASIC would probably argue that liquidators are no greater imposed upon now than they were before.

But regardless of the information ASIC has or could readily obtain, it often decides not to investigate complaints of alleged offences. For many years this inaction has deeply frustrated a lot of liquidators. Many feel that completing an EX01 form is a waste of their time and also, where there are still funds in the insolvent company, a waste of creditors’ money. Unless the revised EX01 results in greater tangible action by ASIC (increased investigations and prosecutions and not just more detailed statistics), making the form more demanding will aggravate these feelings.

It might even see an increase in the non-reporting of insolvent trading offences (see the new question “Reasons for not reporting insolvent trading”), or in “no” being the liquidator’s response when it really should be “yes”.

Extra questions about insolvent trading – new EX01

Period insolvency commenced

Indicate the period, which, in your opinion, the company became unable to pay all its debts as and when they became due and payable:

◻ At appointment ◻ 1 – 3 months prior to appointment ◻ 4 – 9 months prior to appointment ◻ 10 – 15 months prior to appointment ◻ 16 – 24 months prior to appointment ◻ Over 2 years prior to appointment

Method/s of determining date of insolvency

How did you determine the date on which, in your opinion, the company became unable to pay all its debts as and when they became due and payable? (tick one or more):

◻ Cash flow analysis ◻ Trading history analysis ◻ Balance sheet analysis ◻ Informed by director(s) ◻Other, please specify __________________

Records used to determine date of insolvency

Which of the following records, in your possession, did you use to determine the date on which, in your opinion, the company became unable to pay all its debts? (tick one or more):

◻ Cash flow (actual / forecasts / budgets) ◻ Banking records ◻ Aged debtors’ list ◻ Aged creditors’ list ◻ Profit & loss statements ◻ Balance sheets ◻ Other, please specify _______________

Grounds for director to suspect insolvency

If you believe the director had reasonable grounds to suspect the company was insolvent or would become insolvent by incurring the debt (or a reasonable person in a like position would have reason to suspect), please identify on which of the following indicators of insolvency you have based your belief (tick one or more):

◻ Financial statements that disclose a history of serious shortage of working capital, unprofitable trading ◻ Poor or deteriorating cash flow or evidence of dishonoured payments ◻ Difficulties paying debts when they fell due (e.g. evidenced by letters of demand, recovery proceedings, increasing age of accounts payable) ◻ Non-payment of statutory debts (e.g. PAYGW, SGC, GST) ◻ Poor or deteriorating working capital ◻ Increasing difficulties collecting debts ◻ Overdraft and/or other finance facilities at their limit ◻ Evidence of creditors attempting to obtain payment of outstanding debts ◻ Other, please specify ________________

Approximate debt after insolvency

Estimate the approximate amount of debts incurred after the date (in your opinion) of insolvency:

◻ $0 – $250,000 ◻ $250,001 – less than $1 million ◻ $1 million to $5 million ◻ Over $5 million ◻ Unable to determine

Aged list of creditors

Do you have an aged creditors’ list as at (tick one or more):

◻ Date of insolvency ◻ Date of appointment

Dishonesty by director

If the director/directors was dishonest in failing to prevent the company from incurring the debt, indicate what evidence you have available to support this (tick one or more):

◻ Evidence showing that the director/directors had an opportunity to prevent the company from incurring the debt and did not. Such evidence could include: • documents evidencing discussions with the directors, employees and creditors concerning the circumstances surrounding the incurring of particular debts; • correspondence or other documents relating to the circumstances surrounding the incurring of the debt. ◻ Evidence showing that the failure was dishonest (i.e., the director/directors incurred the debt with the knowledge that it would produce adverse consequences, the failure was intentional, wilful or deliberate, and it included an element of deceit or fraud). Such evidence could include: • documents evidencing discussions with the directors, employees and creditors concerning the circumstances surrounding the incurring of particular debts; • correspondence or other documents relating to the circumstances surrounding the incurring of the debt.

Reasons for not reporting insolvent trading

If you did not report insolvent trading (s588(1)-(2) or s588(3)), was it because, in your opinion:

◻ The books and records are insufficient to establish insolvent trading ◻ The company did not incur debts at a time when it was unable to pay its debts (e.g., it ceased to trade) ◻ The directors had reasons to expect the company could pay its debts as they fell due and payable (eg. they obtained independent advice) ◻ Other, please specify ________________

Whether creditor/s are seeking compensation for insolvent trading

Has a creditor commenced, or indicated that they intend to commence, action to recover compensation for loss resulting from insolvent trading?

◻ Yes ◻ No

Possible Misconduct – Breaches of civil obligations – Insolvent Trading – EX01

Insolvent trading may also be a breach of civil penalty sections 588G(1)-(2) of the Act. The revised form EX01 also seeks details of allegations of this nature, by asking about the period of insolvency, the methods and records used to determine the date of insolvency, the amount of debts incurred, and the reasonable grounds for the director had to suspect insolvency. The questions are practically the same as those asked when a criminal offence is alleged (see above). In the previous version of EX01 only three brief questions were posed, which concerned the availability of evidence and the perceived legitimacy of a director’s defence.

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Dec 062014

When the Insolvency Law Reform Bill 2014 is passed, creditors in an external administration of a company (except under receivership or provisional liquidation) will be granted the power to have the external administrator’s fees reviewed by another external administrator. In the draft legislation, the person appointed by creditors is called a reviewer, a reviewing liquidator and, occasionally, a cost assessor.
The following table sets out the proposed legislation by using extracts from the Bill and related official material.





5-20 Meaning of external administrator of a company

A person is an external administrator of a company if the person is:
(a) the administrator of the company; or
(b) the administrator under a deed of company arrangement that has been entered into in relation to the company; or
(c) the liquidator of the company; or
(d) the provisional liquidator of the company.Note: A person is not an external administrator of a company for the purposes of this Schedule merely because the person has been appointed as a receiver, receiver and manager, or controller in relation to property of the company.

Insolvency Law Reform Bill 2014 Exposure Draft, Insolvency Practice Schedule (Corporations), section 5-20,
page 157
90-22 Application of this Subdivision

This Subdivision applies in relation to a company that is under external administration, other than a company in relation to which a provisional liquidator has been appointed.

Insolvency Law Reform Bill 2014 Exposure Draft, Insolvency Practice Schedule (Corporations), Subdivision C
section 90-22, page 263
Appointment to carry out review
(1) A registered liquidator may be appointed to carry out a review into either or both of the following matters:
(a) remuneration of the external administrator of the company;
(b) a cost or expense incurred by the external administrator of the company.
Appointment by resolution
(2) The appointment may be made by resolution of:
(a) the creditors; or
(b) if the company is being wound up under a members’ voluntary winding up—the company;
(3) If the appointment is made by resolution, the resolution must specify:
(a) the remuneration, costs or expenses which the liquidator is appointed to review; and
(b) the way in which the cost of carrying out the review is to be determined.

Appointment by one or more creditors or members
(4) The appointment may be made by:
(a) one or more of the creditors; or
(b) if the company is being wound up under a members’ voluntary winding up—one or more of the members.
(5) However, an appointment may only be made under subsection (4) if the external administrator of the company agrees to the appointment.
(6) The agreement must:
(a) be in accordance with the Insolvency Practice Rules; and
(b) specify:
(i) the remuneration, costs or expenses which the liquidator is appointed to review; and
(ii) the way in which the cost of carrying out the review is to be determined.
Appointments by creditors etc.—limit
(7) Despite subsection (1), a registered liquidator appointed under this section has no power to review the remuneration to which the external administrator of a company is entitled under subsection 60-5(2) (remuneration if no remuneration determinations made).

Insolvency Law Reform Bill 2014 Exposure Draft, Insolvency Practice Schedule (Corporations),
Subdivision C, section 90-24, pages 264 and 265
…. Creditors, ASIC and the Court will also have the power to appoint a cost assessor to assess and report on the reasonableness of the remuneration and costs incurred during a portion or all of an administration. Explanatory Material, page 163, para 7.22
Review of the external administration of a company

The creditors may resolve by majority of creditors in both value and number, or the external administrator may agree, to appoint a reviewer to review and report on the reasonableness of the remuneration and costs incurred in an external administration ….
The purpose of the report is to provide information for interested parties to exercise their rights in relation to the administration, such as to remove the liquidator or challenge the liquidator’s remuneration.
The review is not determinative of the issues considered.
The costs of the review will form part of the expenses of the administration, unless so agreed with the liquidator.
The Court may make any orders it deems fit in relation to the review.
The reviewer must be a registered liquidator.
The Insolvency Practice Rules may prescribe, amongst other things, the duties of a reviewer.

Explanatory Material, Comparison of key features of new law and current law, page 168
90-29 Rules about reviews

(1) The Insolvency Practice Rules may provide for and in relation to reviews under this Subdivision.
(2) Without limiting subsection (1), the Insolvency Practice Rules may provide for and in relation to any or all of the following matters:
(a) the giving of notice to the external administrator of a company before appointing, or making an application for the appointment of, a reviewing liquidator under this Subdivision;
(b) the meaning, for the purposes of section 90-26, of properly incurred in relation to costs or expenses incurred by an external administrator of a company;
(c) the appointment of reviewing liquidators, including requirements as to who may be appointed and the provision of declarations of relevant relationships;
(d) the powers and duties of reviewing liquidators in carrying out a review;
(e) the form and content of reports by reviewing liquidators;
(f) the preparation and provision of reports by reviewing liquidators.

Insolvency Law Reform Bill 2014 Exposure Draft, Insolvency Practice Schedule (Corporations), section 90-29,
page 268
Subdivision D of Division 90 provides ….for the creditors to resolve to appoint, or otherwise agree with the liquidator, to appoint a reviewer to report on external administrator remuneration or costs only. Section 90-27 provides for the Insolvency Practice Rules to contain rules about such reviews. Insolvency Practice Rules Proposal Paper, page 25, para 143
Only a registered external administrator would be able to be appointed as a reviewer. Insolvency Practice Rules Proposal Paper, page 26, para 147
In conducting a review of remuneration and/or costs, the reviewer will be empowered to do any of following:
• conduct the review;
• direct the external administrator to provide an itemised invoice in a form, and within the time, specified in the direction for work undertaken by the liquidator;
• direct a third party to give an itemised bill of costs in a form, and within the time, specified in the direction in relation to work undertaken by the third party;
• interview any party to the review and allow that party to be questioned by any other party to the review;
• direct a person to give a written statement, in a specified form and signed by the person, about a matter relevant to the review;
• direct the external administrator to produce all or part of the liquidator’s files or documents in relation to the administration of the estate.
Insolvency Practice Rules Proposal Paper, page 26, para 150
It is proposed that the new rules would also stipulate that:
• if the reviewer gives a person a direction, and the person does not comply with the direction, the reviewer may conduct the assessment on the basis of the information available to the reviewer; and
• the reviewer will have a duty to act independently, in the interests of creditors and to avoid actual and apparent conflicts of interest.
Insolvency Practice Rules Proposal Paper, page 26, para 151
The report to be prepared by the reviewing practitioner would be required to be provided in the form, and with the content, as agreed between the reviewer and the appointing body. Insolvency Practice Rules Proposal Paper, page 27, para 152
Once the report is completed, it would be required to be provided to the external administrator responsible for the administration, the committee of inspection (if applicable) and ASIC. Insolvency Practice Rules Proposal Paper, page 27, para 153
ASIC may give a registered liquidator notice in writing asking the liquidator to give ASIC a written explanation why the liquidator should continue to be registered, if ASIC believes that …. (g) the liquidator has been appointed to act as a reviewing liquidator … and has failed to properly exercise the powers or perform the duties of a reviewing liquidator Insolvency Law Reform Bill 2014 Exposure Draft,
Insolvency Practice Schedule (Corporations), section 40-40,
page 180
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Sep 032013

Melbourne liquidator Andrew Leonard Dunner is likely to be prohibited from being registered as a liquidator for 5 years, following a decision by the Federal Court in an action brought against him by the Australian Securities and Investments Commission (ASIC).

In a media release on 30 August 2013 ASIC said that:

“In handing down his reasons for judgment today, Justice Middleton found that Mr Dunner had failed to adequately investigate the circumstances and affairs of companies to which he was appointed and had inaccurately reported to ASIC and creditors.

“The Court also found that he had drawn remuneration in excess of $600,000 without appropriate approval or adequate supporting documentation. The Court considered it appropriate that he should repay that remuneration and have leave to apply to the Court for justification of an entitlement to recoup remuneration where appropriate. Justice Middleton found that Mr Dunner’s conduct indicated ‘…a systemic failure of administration and internal protocols, as well as (in a number of instances) extremely poor professional judgment. In this way, Mr Dunner has failed to satisfy the high standards of conduct required of his offices’.

“In finding that a banning period of 5 years was appropriate, Justice Middleton said:

‘Withdrawing a liquidator’s registration operates directly to protect the public from the work of the person. It also operates generally by deterring other liquidators from acting in a similar fashion. ASIC submitted – and I accept – that there is a compelling public interest in the maintenance of a system which recognises that registration as a liquidator is a privilege, the continuance of which is conditional upon diligent performance of its attendant duties.’

To see the ASIC media release, CLICK HERE.

To see Justice Middleton’s important 67 page report and judgment, CLICK HERE .

Case citation:

Australian Securities and Investments Commission v Dunner [2013] FCA 872.

Case catchwords:

CORPORATIONS – Corporations Act 2001 (Cth), ss 423, 499, 536 – Duties of liquidator – Duties of receiver – Court inquiry into defendant’s conduct as liquidator and receiver – Failure by defendant to investigate circumstances of companies to which he was appointed – Drawing remuneration without approval or adequate supporting documentation – Inaccurate reporting to ASIC and creditors regarding external administrations – Repayment of remuneration drawn without approval – Unfitness to remain registered as liquidator – Duration of prohibition order.


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Too many liquidators failing to provide adequate disclosure to creditors on relationships

 ASIC, Corporate Insolvency, Insolvency Laws, Insolvency practices, Offences, Regulation, Standards  Comments Off on Too many liquidators failing to provide adequate disclosure to creditors on relationships
Jul 242013

When the Australian Securities and Investments Commission (ASIC) released its report on supervision of registered liquidators it bemoaned the fact that its compliance checks had found a 10% increase in inadequate declarations, up from 46.9% in 2011 to 56.3% in 2012.

In the accompanying Media Release ASIC Commissioner John Price was fairly blunt:

“The increase in inadequate declarations concerns ASIC. Liquidators must make full disclosure to creditors when it comes to their independence. Given our guidance, and education programs through the Insolvency Practitioners Association of Australia (IPA), there is no good reason for such a failure rate.”

Under the Corporations Act 2001 liquidators and administrators (other than those appointed by the Court) are required to make written declarations to creditors concerning indemnities they have received and relationships they have, or have had, with certain defined “persons” within the preceding 24 months. Both declarations are to be made and sent to creditors before the first meeting of creditors is held. The Declaration of Relevant Relationships and Declaration of Indemnities are referred to collectively in the insolvency profession as a DIRRI.

Fawlty Dirri


An “inadequate” DIRRI is described in ASIC’s report (para 56) as one which:

(a) fails to disclose a relevant relationship in pre-appointment dealings and/or, where such a relevant relationship has been identified, adequately explain why it does not create a conflict of interest;

(b) fails to disclose all companies involved in appointments to a group of companies, and whether or not circumstances existed between the group entities that may give rise to a conflict and, if so, how the appointees would manage those issues; and/or

(c) is not signed by all appointees.

More detailed guidance on how to make sure a DIRRI is adequate was given to registered liquidators in an email sent to them on 28 June 2013 by Adrian Brown, leader of ASIC’s Insolvency Practitioners Team.

The email extract below is Mr Brown’s description of “seven key areas for improving the likelihood that your DIRRIs do comply with the law, relevant professional standards and the IPA’s Code of Professional Practice.”

“1. Disclose pre appointment dealings/advice

Provide meaningful information about the nature and extent of pre-appointment meetings (regardless of the nature of the meeting or dealing, be it face to face meetings, telephone discussions or email/ other electronic communications) with the company’s directors and any of their advisors.

2. Disclose relationships

Disclose all relevant relationships in accordance with the Act, professional standards and the IPA Code to ensure full disclosure and transparency. We suggest you consider:

· how the relevant relationship might impact your ability to act in the best interests of creditors; and

· whether there is a reasonable chance that creditors might consider that independence is, or appears to be, compromised by that relationship if it were to subsequently come to light.

3. Provide a reason why a relationship does not result in a conflict

Give a reason why you believe each relevant relationship does not result in a conflict of interest or duty. The reasons provided must be specific to the appointment and should not simply be a restatement of example reasons provided in the IPA Code.

Merely stating that a relationship will not affect your independence, or that you received no payment for pre-appointment advice or meetings, is NOT a “reason”.

4. Disclose when appointed to a group of companies

Where the appointment is to a number of companies in a group, the DIRRI should specifically refer to each company and cite a reason why you believe that multiple appointments will not result in a conflict of interest or duty.

You should also consider what steps you must take should you become aware of an actual or potential conflict after the appointment.

5. Disclose external administrations with common directors

Documented conflict checks undertaken pre-appointment should show if you or your firm acted, or continue to act, as external administrator of another company with the same or a common director where the appointment occurred within two years before the new appointment.

Where this occurs, the relationship should be disclosed together with the reason why you believe the new appointment will not result in a conflict of interest or duty.

6. Disclose indemnities and other up-front payments

Disclose full details of the nature and extent of all non-statutory indemnities and up-front payments. This should include stating whether there are any conditions governing the indemnity, including what the indemnity can be used for.

7. Review and sign the DIRRI

It is vital that you carefully review every DIRRI before signing it. All appointees must sign the DIRRI.”

ASIC’s message is taking a long time to get across to some liquidators …

Three years ago (May 2010) Mr Stefan Dopking, then ASIC’s leader of the Insolvency Practitioners & Liquidators Stakeholder Team, wrote to registered liquidators to reveal the findings of its compliance review of DIRRIs in 2009. What ASIC found then was strikingly similar to its findings in 2012, as this extract from Mr Dopking’s letter shows:

“The review identified a number of areas where we believe the adequacy of disclosure needs improvement.  In particular, our general observations are that:

  • a large number of Declarations did  not adequately disclose the nature of the relationships or provide adequate reasons to explain why the disclosed relationships did not result in a conflict of interest or duty;
  • Declarations  did  not  clearly  articulate  whether  the registered  liquidator’s  firm  (i.e. partners or related bodies corporate) was included in the Declaration;
  • the majority of Declarations did not disclose the nature and extent of pre appointment meetings and advice;
  • prior or contemporaneous appointments as external administrators of other companies with common directors were not adequately disclosed in over 20 instances;
  • many Declarations did not provide sufficient information to adequately identify the party providing an indemnity or sufficiently disclose the nature and extent of the indemnity provided;
  • many Declarations were not signed by both joint and several appointees (ASIC is of the  view that each appointee must consider whether any relevant relationships exist that require disclosure and the Corporations Act 2001 (‘the Act’) requires each appointee to sign the relevant Declarations); and
  • it was not evident from the minutes of the meeting of creditors in many cases that Declarations were tabled at the meeting of creditors as required by the Act3. Minutes  of  the  meeting  of  creditors  should  evidence  compliance  with  this statutory requirement.”

The law requiring liquidators to prepare DIRRIs for creditors came into effect in January 2008.

(End of post)

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Value of a penalty unit increased for first time in 15 years

 ASIC, Corporate Insolvency, Insolvency Laws, Offences, Regulation, White collar crime  Comments Off on Value of a penalty unit increased for first time in 15 years
Dec 202012

If you believe that the notional monetary value of fines should keep pace with inflation, then you’ll be pleased by recent amendments to the Crimes Act 1914.

The amendments, which take effect from 28 December 2012, will see the monetary value of a penalty unit increased for the first time in 15 years.

Also, the amendments require that in future the value of a penalty unit must be reviewed every three years to ensure that it is “amended to accommodate changes in the Consumer Price Index”.

The monetary value of a penalty unit will increase from $110 to $170.  This is the first increase since 1997.  On my calculations the $60 increase is the equivalent of a 2.2% increase each year over the past 15 years.

The change affects the value of a penalty unit in most Commonwealth laws, including the Corporations Act 2001. and, therefore, the sections dealing with liquidations and other forms of external administration.

I have written previously about penalties imposed under sections 475 and 530A of the Corporations Act.  A section 475 penalty may be imposed if a director fails to submit a Report as to Affairs to the liquidator.  A section 530A penalty may be imposed if a director fails to deliver books and records or fails to assist the liquidator.  The old and new maximum fines for these summary offences are shown in the chart below.



Maximum   Penalty Units

Old Maximum Fine to 27/12/2012

New Maximum Fine from 28/12/2012

Section 475




Section 530A(6)




Of course, it remains to be seen whether the increased maximums will result in greater penalties being imposed by the Courts.



Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Bill 2012 received royal assent on 28 November 2012.  See HERE

Crimes Act 1914, subsection 4AA

Section 1311 of the Corporations Act 2001

Schedule 3 of the Corporations Act 2001


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Jul 182012

How should the public interest test be applied?

The Australian Securities and Investments Commission (ASIC) has released a consultation paper outlining how it intends to implement its new power to wind up companies.

Recent amendments to the Corporations Act have given ASIC the power to order the wind up a company in specific circumstances and appoint a liquidator.  The Corporations Amendment (Phoenixing and Other Measures) Act 2012 amends the Corporations Act to add a new part to Chapter 5 – External Administrations.  The new part (Part 5.4C) – which comprises new sections 489EA, 489EB and 489EC – gives ASIC the power to wind up companies in FOUR scenarios:


ASIC may order a winding up if:

 (a)  the response to a return of particulars given to the company is at least 6 months late; and
 (b)  the company has not lodged any other documents under this Act in the last 18   months; and
 (c)  ASIC has reason to believe that the company is not carrying on business; and
 (d)  ASIC has reason to believe that making the order is in the public interest.


ASIC may order a winding up if the company’s review fee in respect of a review date has not been paid in full at least 12 months after the due date for payment.


ASIC may order a winding up if

(a)  ASIC has reinstated the registration of the company under subsection 601AH(1) in  the last 6 months; and
(b)  ASIC has reason to believe that making the order is in the public interest.


ASIC may order a winding up if

(a)  ASIC has reason to believe that the company is not carrying on business; and
(b)  at least 20 business days before making the order, ASIC gives to:
(i)  the company; and
(ii)  each director of the company;
a notice:
(iii)  stating ASIC’s intention to make the order; and
(iv)  informing the company or the director, as the case may be, that the company or the  director may, within 10 business days after the receipt of the notice, give ASIC a written objection to the making of the order; and
(c)  neither the company, nor any of its directors, has given ASIC such an objection within the time limit specified in the notice.


Comments on Consultation Paper 180 are due by Friday 10 August, 2012.

Click here to download  Consultation Paper 180. (PDF format.)

The following is ASIC’s media release of 12 July 2012:

ASIC today released a consultation paper outlining how it intends to implement its new power to wind up abandoned companies under the Corporations Act 2001 (Corporations Act) to facilitate greater access to the General Employee Entitlements Redundancy Scheme (GEERS).

Consultation Paper 180 ASIC’s power to wind up abandoned companies outlines how ASIC intends to exercise this new power, and how it will prioritise matters for winding up

‘When using this power, our first consideration will be if an order to wind up the company would facilitate employee access to GEERS’, Commissioner John Price said.

GEERS is a scheme funded by the Australian Government to assist employees of companies that have gone into liquidation and who are owed certain employee entitlements. However, companies are sometimes abandoned by their directors without being put into liquidation. This has previously resulted in employees of the company who are owed employee entitlements being unable to access GEERS.

Consistent with the new law, ASIC is proposing to apply a public interest test when deciding whether to wind up a company. This public interest test will consider factors like the cost of winding up, the amount of outstanding employee entitlements and how many employees are affected.

‘ASIC needs to consider the broader public interest when deciding which abandoned companies with outstanding employee entitlements will be wound up’, Mr Price said.

ASIC is proposing not to reinstate companies that have already been deregistered in order to wind them up later. Among other reasons, there are already court processes in place to facilitate the reinstatement of a company where that is needed.

ASIC intends to commence using this new power to wind up abandoned companies in the final quarter of 2012.

Comments on Consultation Paper 180 ASIC’s power to wind up abandoned companies are due by Friday 10 August, 2012.


One of the measures of the Australian Government’s Protecting Workers’ Entitlements Package (announced July 2010) is to assist employees of abandoned companies to access the General Employee Entitlements and Redundancy Scheme when they are owed certain employee entitlements.

When the employer is a corporation, it must be in liquidation before GEERS can assist an employee.

Amendments to the Corporations Act have given ASIC the power to wind up an abandoned company in specific circumstances.

ASIC may appoint a registered liquidator over a company when exercising its power to wind up an abandoned company.

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Jun 292012

A NSW Supreme Court judge has replaced the special purpose liquidator of the collapsed telecommunications company One.Tel.

Registered Liquidator, Paul Weston, who has served as special purpose liquidator since December 2003, was removed from his role after judge Patricia Bergin found creditors, led by Optus, had lost confidence in Mr Weston’s capacity “to bring a dispassionate mind to bear in exercising his powers in the liquidation”.  Mr Weston contended that the creditors’ loss of confidence in him was not enough to justify his removal. He contended that there must be some serious misconduct, conflict of interest or lack of independence.

Justice Bergin appointed another registered liquidator, Stephen Parbery, in Mr Weston’s place.

The application for removal of was Mr Weston was brought under section 503 of the Corporations Act 2001: “The Court may, on cause shown, remove a liquidator and appoint another liquidator.”

Issues considered in the case included:

  • The special liquidator’s relationship with the creditors’ Committee of Inspection.
  • The liquidator’s remuneration and expenses.


Extracts from the court judgment, and a link to the full judgement of 19 June 2012, are given below.

“In a court appointed liquidation (or a liquidation by the Court), a liquidator, as an officer of the Court, is a representative of the Court, entrusted with the reputation of the Court. It is expected that the liquidator will discharge the relevant functions and powers with impartiality and proper dispatch: Commissioner for Corporate Affairs v Peter William Harvey [1980] VR 669. Albeit that it may be inappropriate to refer to the defendant as “an officer of the Court” in this particular liquidation, it is expected that he would discharge his relevant functions and powers with impartiality and proper dispatch.”  (para 151)

“It is expected that the defendant will maintain an “even and impartial hand” in his dealings with those interested in the liquidation … It is expected that he will be independent in the sense that he will deal impartially and objectively in the interests of the creditors …”. (para 152)

“In City & Suburban Pty Ltd v Smith, Merkel J observed at 336 (excluding citations): Section 503 of the Law provides that the court may “on cause shown” remove a liquidator and appoint another liquidator. It has long been accepted that the section and its predecessors were not confined to situations where it is established that there is personal unfitness, impropriety or breach of duty on the part of the liquidator. Cause is shown for removal whenever the court is satisfied that it is for the better conduct of the liquidation or, put another way, it is for the general advantage of those interested in the assets of the company that a liquidator be removed.” (para 160)

“In the present case the acrimony which has arisen between the liquidator and the committee of inspection has not come about as a result of any unreasonable conduct on the part of the committee. Rather, it has come about because the liquidator has carried out his tasks in respect of the liquidation with some insensitivity to the angst of the members of the committee of inspection.” (para 162)

“In AMP Music Box Enterprises Ltd v Hoffman [2002] BCC 996, Neuberger J (as his Lordship then was) considered the power under s 180(2) of the Insolvency Act 1986 (UK) to remove a liquidator “on cause shown” and said at 1001-1002:

On the other hand, if a liquidator has been generally effective and honest, the court must think carefully before deciding to remove him and replace him. It should not be seen to be easy to remove a liquidator merely because it can be shown that in one, or possibly more than one, respect his conduct has fallen short of ideal. So to hold would encourage applications under s 108(2) by creditors who have not had their preferred liquidator appointed, or who are for some other reason disgruntled. Once a liquidation has been conducted for a time, no doubt there can almost always be criticism of the conduct, in the sense that one can identify things that could have been done better, or things that could have been done earlier. It is all too easy for an insolvency practitioner, who has not been involved in a particular liquidation, to say, with the benefit of the wisdom of hindsight, how he could have done better. It would plainly be undesirable to encourage an application to remove a liquidator on such grounds. It would mean that any liquidator who was appointed, in circumstances where there was support for another possible liquidator, would spend much of his time looking over his shoulder, and there would be a risk of the court being flooded with applications of this sort. Further, the court has to bear in mind that in almost any case where it orders a liquidator to stand down, and replaces him with another liquidator, there will be undesirable consequences in terms of costs and in terms of delay.” (para 164)


  1. I am satisfied that it is in the best interests of this liquidation for the defendant to be removed as special purpose liquidator and for Mr Parbery to be appointed in his place. The defendant is to meet with Mr Parbery and provide him with any advice, documents or other assistance sought by Mr Parbery so that he may be in a position to pursue the remaining purposes of the special purpose liquidation in the most cost efficient manner.
  2. I am conscious that ASIC’s review of the defendant’s remuneration and fees has effectively been put on hold pending the outcome of these proceedings. I am satisfied that it is appropriate to defer any ruling in relation to conducting an inquiry under s 536 of the Act until ASIC’s review has concluded. It may be that, having regard to the defendant’s removal and/or the outcome of ASIC’s review, the plaintiffs may no longer wish to press for such an inquiry.”


SingTel Optus Pty Limited & Ors v Weston [2012] NSWSC 674 (19 June 2012)

Click here to read and/or copy judgment.



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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. 


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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

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Parliament debates the proposed new liquidation and “phoenixing” laws

 ASIC, Insolvency Laws, Insolvency practices, Regulation  Comments Off on Parliament debates the proposed new liquidation and “phoenixing” laws
Mar 092012

Although it started out with a dream run, the Bill to allow ASIC to order the winding up of companies has been the subject of considerable debate in the House of Representatives.

The government had hoped to get the Corporations Amendment (Phoenixing and Other Measures) Bill 2012 through quickly.  It was introduced in the House on 15 February 2012.  A day later it was referred to the House Standing Committee on Economics.  The Committee met via a telephone conference – which lasted less than a minute – on 21 February 2012 and resolved to discharge the reference.  The Committee issued a statement of explanation on 27 February 2012, saying:

 “….the committee considers that the Bill comprises uncontroversial measures that will assist in curbing the amoral practice of phoenixing.”

The Committee quoted from a briefing issued by the law firm Minter Ellison, which expressed the view that the Bill “contains some reasonable measures for facilitating the protection of workers’ entitlements.  These measures are unlikely to affect the position of the majority of directors.”

But back in the House of Reps heated debate ensued.  A total of seventeen speeches for and against the Bill were made by MPs.  Naturally MPs took the view of their party, but nevertheless the debate did explore many of the issues involved.  Those who spoke were:

 Joe Hockey (LP) (Opposition); Julie Owens (ALP) (Government); Scott Buchholz (LP); Bernie Ripoll (ALP); Paul Fletcher (LP); Gai Brodtmann (ALP); Deb O’Neill (ALP); Steven Ciobo (LP); Sharon Grierson (ALP); Steve Irons (LP); Kelvin Thompson (ALP); Bruce Billson (LP); Mike Symon (ALP); Bert Van Manen (LP); Tony Zappia (ALP); Stuart Robert (LP); David Bradbury (ALP).

All the speeches may be seen at the following  link:


The main protagonists were David Bradbury (for) and Joe Hockey (against).   The speech on 1 March 2012 by David Bradbury will be found by following this link:


The speech on 1 March 2012 by Joe Hockey will be found by following this link:




None of the debate touches on the technical issues that I pondered in my post entitled Questions concerning new power for winding up by ASIC.

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