The United States Supreme Court recently denied certiorari to an Eleventh Circuit appeal which would have addressed the issue of whether section 506(d) of the Bankruptcy Code permits a chapter 7 debt to “strip off”¹ a wholly unsecured junior lien in Bank of America, N.A. v. Sinkfield.² As a result, wholly unsecured junior creditors will continue to suffer the harsh consequence of having its junior lien completely “stripped off” in Eleventh Circuit bankruptcy cases, despite other Circuits around the country holding to the contrary.

Stewart v Atco Controls Pty Ltd (in Liquidation) [2014] HCA 15

The High Court this week reinforced the significance and standing of a Liquidator's equitable lien for his or her costs and expenses incurred in realising assets of a company in liquidation, as first clearly espoused by Justice Dixon in the 1933 case of Universal Distributing. Gadens acted for the successful Liquidator/Appellant in the unanimous judgment of the five High Court Justices.

The Principle

Bankruptcy practitioners are anxiously awaiting a U.S. Supreme Court ruling that will determine whether a party can waive its right to trial before an Article III tribunal.

Until recently, the creditor of a chapter 7 debtor whose debts were not primarily consumer in naturewas unable to rely on Eleventh Circuit precedent to support its position that its debtor's chapter 7 bankruptcy case should be dismissed for bad faith.

Introduction

Does the ATO have priority over secured creditors in a liquidation? Is a receiver required to account to the ATO for any tax payable out of funds received on the sale of an asset before accounting to the secured creditor? Are receivers and liquidators personally liable for the tax payable from funds received by them? Can receivers and liquidators avoid such personal liability by distributing funds received to creditors before a tax assessment arises? These issues were at the centre of a Federal Court judgment handed down on 21 February 2014.

Two days before Christmas, the Supreme Court of New South Wales delivered a bonus for the general unsecured creditors of the collapsed discount giant Retail Adventures, and confirmed the requirements for deeds of company arrangement.

Deeds of Company Arrangement

Today the High Court of Australia handed down a decision which confirms a liquidator has the green light to disclaim leasehold interests in land (Willmott Growers Group Inc v Willmott Forests Limited (receivers and managers appointed)(in liquidation)).

Due to the way in which the case came before the Courts, the High Court did not consider the application of s568B of the Corporations Act 2001 (Cth) (Act). 

This section allows tenants to challenge in Court the liquidator’s disclaimer.

ASIC suspended the Australian Financial Services Licence of LM Investment Management Limited for two years this week for being an externally managed vehicle (voluntary administrators were appointed in March 2013). The practical effect of the suspension will mean that LM Investment Management won’t continue managing its nine funds. ASIC is also investigating the complex structure of the business and their related party transactions with the principal, Peter Drake.