On 21 December 2011, the New South Wales Court of Appeal (Court) delivered its decision in Moss v Eaglestone (2011) 257 FLR 96.  This decision clarifies the circumstances in which legal causes of action will be considered property divisible amongst a bankrupt’s creditors.

Background

In 2007, Moss supplied information regarding Schapelle Corby to Nationwide News Pty Ltd (News).  News published this information in a newspaper article, which also referred to Moss’s criminal background.

In our March 2012 Insurance Update we considered the potential widening of the scope for creditors to claim damages against a director personally for contravention of the Corporations Act 2001 (Act). The Supreme Court of Queensland awarded Phoenix Constructions over $1.2 million in damages against Mr McCracken for contravention of s 182 of the Act. This decision, a first of its kind, was appealed by Mr McCracken.

The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (Cth) was introduced into Federal parliament on 15 February 2012.

The Bill proposes to amend theCorporations Act 2001 (Cth) and contains 2 key sets of measures:

One could almost be forgiven for thinking that nowadays delayed second creditors' meetings are just par for the course.

Applications to extend the time for the second meeting - often for months - have become quite routine, and are rarely (if ever) refused.

Some observers might thus wonder if we are losing sight of one of the objectives of the VA procedure - that it "should be expeditious".^[1]

Although the Australian voluntary administration regime served as the model for the UK administration system, one notable difference has emerged between the two systems: pre-packs.

Pre-packs – the use of a statutory insolvency regime to implement a pre-agreed debt / corporate restructuring – have not really taken off in Australia. In the UK, of course, they form a significant proportion of all administrations.

On 15 February 2012 the Commonwealth Government introduced the Corporations Amendment (Similar Names) Bill 2012.

Purpose

The purpose of this Bill is to amend the Corporations Act such that directors of failed companies can be jointly and individually liable for the debts of a company that has a similar name to a pre-liquidation name of a failed company.

The Bill itself is purportedly part of the Government’s election commitment from the Government’s Protecting Workers Entitlements Package announced in July 2010.

The Federal Government has introduced the Corporations Amendments (Similar Names) Bill 2012 which will be directed at companies that engage in ‘phoenix’-related activities through imposing personal liability on directors.  

The Bill seeks to impose liability for payments on the director behind the failed company to ensure they do not exploit the concept of limited liability. These measures rely on the notion that many phoenix companies use similar trading names as the company that was liquidated.  

On 5 October 2011 Justice Barrett of the Supreme Court of NSW handed down a decision in Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of the Centro Retail Trust [2011] NSWSC 1175 (“Centro”) where he found that the responsible entity of Centro Retail Trust would be justified in modifying the constitution of the trust without unitholder approval to a insert a provision permitting the issue of units at a price different to that provided for by the pre-existing provisions.

Introduction  

Another failed property developer has just been made bankrupt in Australia, this time with a difference – he was already bankrupt in New Zealand. Bank of Western Australia (Bank) v David Stewart Henderson (No. 3) [2011] FMCA 840 is another Australian cross-border insolvency case in which we have successfully tested the boundaries of the Cross-Border Insolvency Act 2008 (Cth) (the CBIA), this time with the Bankruptcy Act 1966 (Cth).

Facts

The Bridgecorp Group collapsed and receivers were appointed on 2 July 2007. The companies comprising the group were subsequently also placed in liquidation. The First and Second Defendants in the case were two of the Bridgecorp Group (Receivers and Managers appointed) (in Liquidation).

The directors faced numerous civil and criminal charges for alleged Wrongful Acts including alleged false statements in prospectuses, extension certificates and investment statements issued to prospective investors.