Introduction – why does this matter?

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.

There have been a number of smoke signals in the last few months around the increase of consumer debt in the UK and a focus on those firms providing consumer credit across the credit spectrum but particularly in the "sub-prime" or "near-prime" space.

Since the credit crunch, a number of consumer credit businesses have stepped in to fill a gap in the lending market. They give sub-prime or near-prime borrowers, who may find it difficult to obtain credit from traditional sources, with high-cost, short-term credit - instant access to funds.

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:

The Supreme Court's decision in Lehman Waterfall I was handed down this morning. DLA Piper represents one of the successful appellants, Lehman Brothers Limited (in administration) (LBL).

The court was asked to consider certain issues relating to distributions in the estate of Lehman Brothers International (Europe) (LBIE), an unlimited company in administration. Such issues arose due to a substantial anticipated surplus in LBIE and sought to resolve particular lacunas in UK insolvency legislation.

The insolvent trading "safe harbour" and "ipso facto" clause reform

The key points

Last week, the federal government circulated an exposure draft of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill (the Bill). The Bill is intended to promote entrepreneurship and innovation among directors of companies facing insolvency - this is to be achieved through two fundamental changes to existing insolvency laws.