"Once in a generation" review

Shortly before the Christmas break, the much anticipated review of the United States "Chapter 11 bankruptcy" regime was published by the American Bankruptcy Institute (ABI). This is one of very few such major "root and branch" reviews of Chapter 11 since its enactment in 1978, and the first since the 1990s.

On 25 July 2014 and 17 September 2014 respectively, Justice Brereton of the Supreme Court of NSW delivered two related judgments in Re AAA Financial Intelligence Ltd (in liquidation) andRe AAA Financial Intelligence Ltd (in liquidation) (No 2). The decisions deal with the evergreen topic of Liquidator remuneration and expenses.

Importantly, in fixing the Liquidators' remuneration, Justice Brereton adopted a "value" focussed approach, and discussed the relevance of considering matters beyond simply time spent multiplied by fixed hourly rates. 

Since BP Australia Pty Ltd v Brown, there has been a practice of Courts across Australia granting "shelf orders", whereby time for voidable transaction recovery actions by a Liquidator under section 588FF is extended "at large".  The Court's power to grant these "shelf orders", however, is to be scrutinised by the High Court in December 2014, in the course of the Octaviar group liquidation.

Dispute is one of priority, not ownership.

The first judgment regarding a major Personal Property Securities Act ("PPSA") priority dispute between a bank with a perfected "General Security Agreement" and an equipment owner with an unperfected "PPS Lease" has been handed down.

The decision in Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors  highlights three key issues for the insolvency industry:

The importance of notifications to potential defendants and directors of the insolvent company

The decision in Re Octaviar Administration Pty Ltd (in liq) [2013] NSWSC 786 highlights two key issues for insolvency practitioners:

Nearly three years after the High Court decision on the case of BNY Corporate Trustee Services Ltd v Eurosail UK 2007 – 3BL PLC and others was handed down, the case has run its course in the Supreme Court. The case, which considers the correct interpretation of the balance-sheet insolvency test in section 123(2) of the Insolvency Act 1986, is of importance to insolvency practitioners, financial institutions, legal advisers, company directors and companies.  

Court of Appeal decision  

BNY Corporate Trustee Services Limited v Eurosail-UK 2007-3BL Plc & others [2011] EWCA Civ 227

The Court of Appeal has allowed companies around the country to breathe a solvent sigh of relief, as it has held that the so-called “balance sheet” test of insolvency in s123(2) Insolvency Act 1996 is intended to apply where a company has reached a “point of no return” rather than being used as a “mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company”.  

Release provisions

The scope of the powers afforded to the security agent by the so called “release provisions” found in many intercreditor agreements employed in LBO deals has come under scrutiny recently. A number of restructurings have relied upon using the security agent’s powers to implement a restructuring and many others will have at least considered using them.

Summary

The joint administrators of Lehman Brothers International (Europe) (“LBIE”) have released their second statutory six month progress report for the period 15 March 2008 to 14 September 2009 (the “Report”).

A full copy of the Report is attached, which includes detail about the positions realised and expenses to date. Key points of interest are as follows: