On 14 July 2015, the South Australian District Court in Matthews v The Tap Inn Pty Ltd [2015] SADC 108 handed down a decision whose underlying reasoning could, if applied by superior courts around Australia, broaden the scope for liquidators to pursue unfair preference claims against secured creditors.
The decision
On October 13, 2015, the Court of Appeal for Ontario (the “Court”) dismissed the so-called “interest stops rule” appeal in the Nortel matter,[1] thereby confirming that the rule applies in proceedings under the Companies’ Creditors Arrangement Act (the “CCAA”). The Court’s decision also appears to eliminate any suggestion that the rule only applies to so-called “liquidating” CCAA proceedings.
Based on the current state of judicial consideration of s 548 (1) of the Corporations Act 2001 (Cth) (the Act), liquidators cannot be certain that a committee of inspection (COI) established at a general meeting of creditors alone is valid with the consequence that liquidators may be concerned about their reliance on past and future COI approvals to draw remuneration and take other steps in the winding up.
Re: the Bell Group Ltd (In Liquidation)
On May 1, 2015, the Alberta Court of Appeal rendered its decision in 1773907 Alberta Ltd. v. Davidson, 2015 ABCA 150, and allowed an appeal permitting an action, brought in the name of an insolvent company, to proceed, notwithstanding that the company had assigned this claim to a third party. As will be discussed, the assignment of an action to a third party is often found to be caught by the doctrines of champerty and maintenance, and the decision by the Court serves to identify where such an assignment will be permitted.
The important role of standard terms of sale
The standard terms of sale of a supplier can form part of a credit application by its customer, appear on sales invoices or order forms or on the supplier’s website and there are many other combinations of documentation and procedures that can be used to establish written evidence of the terms of the contract between the supplier and its customer. Just as important, there are many reasons why these combinations may come unstuck.
On June 6, 2014, Justice Brown of the Ontario Superior Court of Justice (Commercial List) released additional reasons1 to his decision in Romspen Investment Corp. v. 6711162 Canada Inc., 2014 ONSC 2781, centred on the cost submissions made by counsel to Romspen Investment Corp. (“Romspen”). Despite a contractual provision in a mortgage agreement that gave the applicant, Romspen, a right to full indemnity costs from the respondents, Justice Brown found that the legal fees incurred by counsel to Romspen were unreasonable.
On 11 March 2015, the High Court delivered the following significant decisions (Grant Samuel Corporate Finance v Fletcher [2015] HCA 8 and Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10) in relation to s588FF(3) of theCorporations Act 2001 (Cth).
In the matter of One.Tel Limited (in liquidation) [2014] NSWSC 1892
Factoring is a common way for businesses to monetize current assets. Typically, in a factoring transaction, an enterprise sells its accounts receivable to a third party (commonly a bank, but not always), which, in exchange for a discount on the value of the receivables, takes on the effort and time commitment related to collecting the accounts.
The recent decision by the Court of Appeal for Ontario (the “Court”) in 306440 Ontario Ltd. v. 782127 Ontario Ltd.1 serves as a cautionary reminder to secured creditors that their position may not always be at the top of the insolvency food chain, even when they have taken all the proper steps to perfect their security interests.