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

On December 19, 2013, the Ontario Court of Appeal held that the Registrar of Motor Vehicles (the “RMV”) cannot deny vehicle permits to individuals on account of pre- bankruptcy debts owing to the ETR Concession Company Limited (the  “ETR”). Based  on the  intent and  purpose of federal bankruptcy law to permit debtors to obtain a “fresh start,” it was concluded that the provincial act establishing the ETR conflicts with bankruptcy law and was, as a result, unconstitutional in part.

Background

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

In a November 20,2013 decision in the Companies Creditors’ Arrangement Act (the “CCAA”) proceedings of Aveos Fleet Performance Inc. and Aero Technical US, Inc.

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.

In the 2012 decision of SWP Industries Inc., Re, Justice McLellan of the Court of Queen’s Bench of New Brunswick (the “Court”) declined to lift the stay of proceedings one week in advance of its expiry, despite the assertion of material prejudice advanced by Bank of Nova Scotia (“BNS”).

It has long been standard practice for Court-appointed receivers, monitors and trustees in bankruptcy to include comprehensive disclaimer language in the reports they submit to Court in connection with insolvency proceedings. The reason is simple – these reports are relied on by the Court and other parties to the proceedings, and are often prepared using unaudited and unverified information obtained from management of the debtor company.

On April 2, 2013, Justice Mesbur of the Ontario Superior Court of Justice (Commercial List) granted an application brought by Business Development Bank of Canada (“BDC”) for the appointment of a receiver over the assets, undertakings and properties of Pine Tree Resort Inc. and 1212360 Ontario Limited, operating as the Delawana Inn in Honey Harbour, Ontario (together, “Delawana”).