This week’s TGIF considers a recent decision of the High Court of Australia, in which a 4:3 majority held that a former trustee is not owed any fiduciary obligation by a successor trustee.

Key takeaways

In Davis-Jacenko v Roxy’s Bootcamp Pty Limited [2024] NSWSC 702, McGrath J delivered an extempore decision, appointing provisional liquidators in respect of Roxy’s Bootcamp Pty Limited (theCompany). His Honour stated that it was “a paradigm case” for the court to intervene to preserve the status quo.

Key Takeaways

When do amounts owed to a company constitute ‘circulating assets’ and how should they be distributed? This crucial question has not always been answered predictably in recent cases. The Court of Appeal’s decision in Resilient Investment Group Pty Ltd v Barnet and Hodgkinson as liquidators of Spitfire Corporation Limited (in liq) [2023] NSWCA 118 has provided a framework for navigating the relevant principles in the context of a priority dispute over R&D tax refunds.

Key takeaways

Delaware Judge Brendan Shannon has joined calls for reforming Section 546(e) of the bankruptcy code, echoing concerns that the section’s safe harbor from fraudulent transfer liability has allowed investors to “loot privately held companies to the detriment of their non-insider creditors with effective impunity.”[1]

Following an August 11, 2022 opinion from the Court of Appeals for the Fifth Circuit, certain irrevocable surety bonds will not be considered executory contracts in bankruptcy, even when a court applies a functional multiparty approach to the traditional Countryman definition of an executory contract.

Following a July 6, 2022 memorandum opinion from the United States Bankruptcy Court for the District of Delaware, lenders and noteholders seeking to preserve the priority of their liens must make any desired subordination protections explicit in their security documents. Judge Craig T. Goldblatt’s decision in In re TPC Group Inc. upholds a prepetition “uptier” transaction and narrows the issues before the Bankruptcy Court regarding TPC Group Inc.’s desired entry into a debtor-in-possession loan with an ad hoc group of noteholders over the dissent of minority holders.

In the recent case of Stubbings v Jams 2 Pty Ltd [2022] HCA 6, the High Court has allowed an appeal relating to asset-based lending (ABL) and the enforceability of security associated with these loans. The High Court held that whilst asset-based lending itself is not unconscionable, certain conduct may render loans and security unenforceable. The decision is a reminder that lenders should ensure the circumstances of potential borrowers are fully scrutinised prior to lending.

For a company with robust data protection and recovery practices, a ransomware attack may cause a few extra headaches, but it won’t wipe the company out. Companies without those protections in place, however, risk allowing ransomware to bankrupt their entire enterprise.

A recent order from the United States Bankruptcy Court for the Southern District of Texas (the “Court”) allowed a debtor to reopen a completed auction based on a significantly more attractive, but untimely, bid. The late bid was approximately three times the cash consideration of the previously declared winning bid, and also provided for the additional containment of potential environmental risks. The decision is being appealed to the United States District Court for the Southern District of Texas (the “District Court”).

Judge Craig Whitley’s recent transfer of the LTL Management case will bring a high-profile "Texas Two-Step" chapter 11 bankruptcy to New Jersey, and it may open a new chapter in how courts approach the novel transaction designed to isolate and address certain mass-tort liabilities.