In the recent case of Dwyer & Ors and Davies & Ors v Chicago Boot Co Pty Ltd [2011] SASC 27, Chicago Boot claimed that certain payments made to it by two insolvent companies were not unfair preference payments, because of, amongst other defences, the purported application of a retention of title clause in relation to the supply of goods by Chicago Boot.
The Australian unit trust industry recently experienced financial difficulties. The formal legal process of handling those difficulties has revealed gaps in the Australian regulatory map.
This article highlights some of those problems and the Government’s response to them.
Background
Few now remember that Chapter 5C of the Corporations Act can trace its origins to the afternoon of 23 July 1991. For the past year, the unlisted property trust industry had been in meltdown. The value of the assets held by the industry had fallen over 20%. Investors were scrambling to get out, and collapses seemed imminent.
During the administration of a company, liquidators may identify creditors who have received payments in preference to other creditors, and apply to the court pursuant to section 588FF of the Corporations Act 2001 (Act) to recover those payments in order to achieve a more equitable distribution amongst all creditors.
What constitutes a preferential payment?
Over the past few months there have been a number of insurance portfolio transfers and a winding up of a general insurer. Various judges of the Federal Court have considered aspects of the Insurance Act (Cth) 1973.
Portfolio transfers
There have been two scheme transfers of insurance portfolios from Australian branches of overseas insurers to Australian subsidiaries. While objections to the transfers were raised, the Federal Court confirmed the schemes.
Amaca Pty Ltd v McGrath & Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90
With REDgroup administrators, Ferrier Hodgson, desperately searching for a buyer for REDgroup's Australian book business, the consequences for franchisees remains uncertain. Whilst the nine remaining Borders bookstores are set to close, no decision has yet been made on the future of Angus & Robertson (A&R).
Following the 2011/2012 Federal Budget announcement that directors will be made personally liable for any unpaid superannuation guarantee contributions, Treasury has released the Tax Laws Amendment (2011 Measures No. 7) Bill 2011 (Bill).
The legislation extends the current director penalty regime for unpaid PAYG. Whilst the announcement from Bill Shorten MP on 5 July 2011 highlights the need to prevent companies engaging in phoenix activities, the legislation will have a much broader impact.
Where a creditor of an insolvent company set conditions for its merger and advised its board of directors on its post-merger operations and finances, held that this was not sufficient to render it a shadow director of the company:
- Buzzle Operations Pty Ltd (in liq) v Apply Computer Australia Pty Ltd [2011] NSWCA 109 (Australia, New South Wales Court of Appeal, 9 May 2011)
Introduction
New Zealand liquidators have had their powers recognised in Australia in a series of recent ground-breaking judgments.
These decisions in respect of Northern Crest Investments Limited, a New Zealand registered company listed on the ASX, demonstrate the broad powers which the courts are willing to provide to foreign representatives under the Cross-Border Insolvency Act 2008 (Cth) (the CBIA).
Obtaining powers of Australian liquidators