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 U.S. Court of Appeals for the Sixth Circuit recently affirmed a bankruptcy court’s order granting the debtors’ motion to compel the trustee to abandon their home as property of the estate because it had little equity and thus little value for unsecured creditors.

A copy of the opinion is available at: Link to Opinion.

The U.S. Court of Appeals for the Fifth Circuit recently held that debts arising from a scheme to deprive mortgagees of surplus foreclosure sale proceeds were non-dischargeable, affirming the bankruptcy court’s judgment against the debtor in consolidated adversary proceedings filed by various lenders that held first mortgage liens.

A copy of the opinion is available at:  Link to Opinion.

The District Court of Appeal of the State of Florida, Second District, recently held that where loan documents provided that Florida law applied to foreclosure claims, the trial court erred in applying Texas law because the deficiency claim in the case was part of the Florida foreclosure process.

A copy of the opinion is available at:  Link to Opinion.

The U.S. Court of Appeals for the Eleventh Circuit recently held that section 707(b) of the Bankruptcy Code, which allows a bankruptcy court to dismiss a chapter 7 petition if it finds that relief would be an “abuse” as defined in that section, applies to a petition initially filed under chapter 13 and converted to chapter 7.

A copy of the opinion is available at:  Link to Opinion.

The Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Sixth Circuit recently held that a mortgage foreclosure deficiency judgment lien may be avoided under 11 U.S.C. § 522(f)(2), reversing the bankruptcy court’s ruling to the contrary.

A copy of the opinion is available at: Link to Opinion. 

The Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of an adversary proceeding without leave to amend, holding that:

(a) the debtors failed to state a claim for wrongful foreclosure under California law;

(b) the debtors failed to state a claim for breach of contract or breach of the implied covenant of good faith and fair dealing because they were not third-party beneficiaries of the pooling and servicing agreement;