Since the landmark decision in Re Solfire Pty Ltd (In Liq) (No. 2) [1999] 2 Qd R 182, the Queensland Supreme Court has often marched to its own tune when reviewing applications for insolvency practitioner remuneration and disbursements. In two related decisions arising from the insolvency of LM Investment Management and managed investment schemes of which it is responsible entity, the Court has now turned its attention to the controversies in this area over proportionality and access to trust assets with which its counterparts in New South Wales have grappled over the last 18 months.

In a series of recent decisions1, the Federal Court of Australia has held that section 588FL of the Corporations Act 2001 (Cth) (Corporations Act) operates such that any new security granted by a company in external administration2. that could only be perfected by registration on the Personal Property Securities Register (PPSR), and which is not the subject of an effective registration made before the appointment of the external administrator, will be ineffective3.

Key point

• In certain circumstances the court will look to parallel statutory provisions where existing applicable statute does not accommodate the situation, as long as the latter is not offended, expanded or altered by doing so.

The facts

This application for directions was brought by the administrators of Lehman Brothers Europe Ltd (the “Company”) on:

Key Points

• Statutory powers are to be exercised in accordance with a company’s articles of association
• The Duomatic principle cannot simply be used as a bandage to cure a company’s procedural errors

The Facts

This appeal considered whether the sole director of a company, whose articles required two directors for its board meeting to be quorate, could validly appoint administrators under paragraph 22 Schedule B1 of the Insolvency Act 1986.

Yesterday in Canberra, a significant step forward for Australian insolvency law reform was taken: Parliament passed the much anticipated "safe harbor" for directors in relation to insolvent trading liability and moratorium on reliance by solvent counterparties on “ipso facto” clauses in voluntary administration and creditors schemes of arrangement.

Key Points

On the key points:

In a wide-reaching judgment concerning an appeal by Mighty River International in the administration of Mesa Minerals, the Western Australian Court of Appeal, has recognised that “holding” Deed of Company Arrangement (DOCA) is permissible under Part 5.3A of the Corporations Act.

The key points – Holding DOCAs as a flexible framework

The key points for insolvency and turnaround professionals to take from Mighty River International v Hughes are:

In a decision of importance for liquidators and litigation funders, the Western Australian Court of Appeal in Perrine v Carrello has further explained the important issue of how to determine the amount of compensation recoverable by liquidators where insolvent trading has occurred.

In a wide-reaching judgment concerning an appeal by Mighty River International in the administration of Mesa Minerals, the Western Australian Court of Appeal has recognised that a "holding" Deed of Company Arrangement (DOCA) is permissible under Part 5.3A of the Corporations Act.

The key points - Holding DOCAs as a flexible framework

The key points for insolvency and turnaround professionals to take from Mighty River International v. Hughes are:

Key points

• The dismissal of the appellant’s previous application for an annulment of a bankruptcy order was a serious procedural irregularity
• A court may annul a bankruptcy order under s 282 IA 1986 if it is satisfied that the order ought not to have been made based on grounds existing at the time the order was made
• In relation to appeals made pursuant to s 375 IA 1986 to review or rescind the decision of a lower court, the court may consider fresh material.

The facts

Key points

• A practical approach was adopted by the court in respect of deadlines for submitting administration expense claims that were otherwise holding up the making of distributions to unsecured creditors.
• In the absence of a suitable statutory mechanism, the court allowed for a cut-off date by which expense claims must be submitted.

The administrators of 18 of the Nortel companies applied to court for directions on how to deal with potential claims for administration expenses.