In a recent case involving a default judgment to recover the sum of an outstanding loan, the Federal Court of Australia considered whether it had jurisdiction to set aside a bankruptcy notice issued against the guarantor of the loan and whether it had jurisdiction to extend the time for compliance with the bankruptcy notice.
Background
In Algeri, in the matter of WBHO Australia Pty Ltd (Administrators Appointed) [2022] FCA 169, the Federal Court heard the second application by the administrators who were seeking an extension to the convening period for the second meeting of creditors, which pursuant to section 439A(5) of the Corporations Act 2001 (Cth) (the Act) was set to expire on 24 March 2022.
In the recent case of In the matter of Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation) [2022] NSWSC 340, the NSW Supreme Court has provided clarity on the order of priority for employee debts and secured creditor claims, where the key asset is an entitlement to tax refunds for research and development.
This matter involved the liquidators of Spitfire Corporation seeking directions under s 90-15 of the Insolvency Practice Schedule (Corporations) that:
“Trillions of dollars”: That’s the amount of civil penalty claims a group of 40 States are asserting against Johnson & Johnson for consumer protection law violations. [Fn. 1]
Such civil penalty claims:
Johnson & Johnson (“J&J”) sold baby powder for decades.
Today, J&J is facing tens of thousands of lawsuits alleging that its baby powder causes cancer. And the number of new cancer claimants is increasing daily—with many thousands yet to be identified over decades to come.
So, J&J turns to bankruptcy to address this litigation threat, to protect future claimants, and to protect the going concern value of its global operations. [Fn. 1]
Johnson & Johnson and its affiliates (“J&J”) have been selling baby powder for decades.
Along the way, studies began showing that talc in J&J’s baby powder can cause ovarian cancer and mesothelioma. So, since 2016, over 38,000 lawsuits have been filed against J&J contending its baby powder talc causes cancer.
In July of 2018, the talc litigation against J&J built-up serious steam when a jury awarded 22 women a $4.69 billion (yes, with a “b”) verdict against J&J—an appellate court reduced the verdict to $2.25 billion.
“The trustee shall . . . appear and be heard at . . . any hearing that concerns . . . the value of property . . . confirmation of a plan . . . sale of property.” § 1183(b)(3) (emphasis added).
In every Subchapter V case, the trustee has a statutory duty to “appear and be heard” on certain issues. Often, a trustee can satisfy such duty, on many issues, by participating in a hearing and expressing a verbal opinion on the matter that’s before the Bankruptcy Court.
Business people value their reputations because they take pride in their good names, and “not for some nebulous financial gain.” They:
Here are a couple long-standing and foundational policies for the entire bankruptcy system:
- Bankruptcy laws protect the honest but unfortunate debtor; and
- Discharge exceptions are to be strictly construed against the objecting creditor and liberally construed in favor of debtor.
So, for all my decades of practice under the Bankruptcy Code, this idea has held sway: an honest debtor is entitled to a bankruptcy discharge.
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Hon. Gerald E. Rosen (Ret.) serves as mediator, arbitrator and neutral evaluator in high-level business cases for the JAMS office in Detroit.