“Creative destruction” occurs when something new kills off whatever existed before it.

IPhone Example

Just think, for example, of all the creative destruction that the iPhone has wrought! It has destroyed businesses that provided telephones and phone books, cameras and film, audio recordings and players, newspapers and newsstands, and related services.

City of Chester is the oldest city in Pennsylvania, incorporated as a borough in 1701 and as a city in 1866, and is located on the Delaware River between Philadelphia and Wilmington.

Unfortunately, the City is also in Chapter 9—having filed bankruptcy on November 10, 2022.

The City’s bankruptcy filing causes a ruckus because:

This week’s TGIF concerns Kennedy Civil Contracting Pty Ltd (Admins Appt) v Richard Crookes Construction Pty Ltd [2023] NSWSC 99, in which the New South Wales Supreme Court determined that an insolvent company’s creditors could properly make a DOCA to maintain the right under security of payment legislation to recover amounts that would have been lost on entry into liquidation.

Key takeaways

In this week’s TGIF, we consider an appeal against the making of a pooling order in the Full Federal Court decision ofMcMillan Investment Holdings Pty Ltd v Morgan [2023] FCAFC 9 and examine the challenges liquidators face in convincing a court to grant such an order.

Key takeaways

The U.S. Supreme Court does not like bankruptcy benefits for individual debtors. It really doesn’t.

An example from a couple years ago is Fulton v. City of Chicago, where the U.S. Supreme Court finds a way to declare:

Can a corporate debtor be denied a Subchapter V discharge under § 523(a), despite this § 523(a) language (emphasis added):

• “A discharge under section . . . 1192 [Subchapter V] . . . does not discharge an individual debtor from . . . ”?

A recent Bankruptcy Court opinion (in Avion Funding) says, essentially, this: “No! You can’t paint over explicit statutory language.”[Fn. 1]

Such recent opinion:

The decisions in Metal Manufactures Pty Limited v Morton [2023] HCA 1 and Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 have been viewed as conflicting for liquidators. In this week’s TGIF, we examine these proceedings and why the decisions benefit both liquidators and creditors.

Key takeaways

The U.S. Supreme Court issues its first-ever opinion—of any type—on August 3, 1791. [Fn. 1] But it does not address a bankruptcy question for quite some time thereafter. In fact, the first U.S. law on the subject of bankruptcy did not exist until the Bankruptcy Act of 1800.

First Bankruptcy Opinion

Here’s a hard-knocks rule:

• When you can’t or won’t explain the true reason for taking a position in negotiations or litigation, distrust and suspicion of the worst-possible motives will follow.

An Exhibit A for this rule is an opinion issued February 9, 2023, in In re Heaven’s Landing, LLC, Case No. 20-21350, Northern Georgia Bankruptcy Court (Doc. 145).

Here are illustrative statements from that opinion:

“Consistently, the highest percentage of filings in the federal docket is bankruptcy cases, which can be up to 75% of filings.”

That’s a conclusion by the authors of a 2014 study.[Fn. 1]

Bankruptcy-Specific

Here are bankruptcy-specific details and explanations from that same study: