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

Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FACFC 89 concerned the powers of liquidators in Australia.  In 2009, joint liquidators were appointed to Octaviar Limited (Octaviar) and Octaviar Administration (Funder).  Fortress claimed to be a secured creditor of Octaviar under a charge, and was owed approximately $71 million.  The liquidators arranged for Octaviar and the Funder to enter into funding agreements that provided for the Funder to fund an investigation into the actions of Fortress and to commence litigation against Fortress.

In Saker, in the matter of Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation), the plaintiffs were the liquidators of Great Southern Managers of Australia Limited (GSMAL).

The recent English decision in the Australian liquidation, New Cap Reinsurance Corpn Ltd (in liquidation) and another v Grant and others (available here), has further opened up the possibility for New Zealand insolvency proceedings to be recognised and enforced in the United Kingdom. 

In brief

A recent decision by the New South Wales Court of Appeal in Buzzle Operations Pty Ltd (in liq) –v- Apple Computer Australia Pty Ltd [2011] NSWCA 109 provides useful guidance on the key aspects of shadow directorships and to what extent advices can be given by an interested party such as a financial accountant or a lender to a debtor without that interested party falling within the definition of "shadow director".

Background

In insolvency circles, the word "success" is definitely a relative term. Often it only means that a complete meltdown of the company's business has been averted, or that employees have at least received their statutory entitlements on their way out the door.

The ABC Learning Centre story has, however, definitely been a success by any measure – including some measures which are not generally part of the metrics of insolvency.[1] In order to see why this insolvency administration deal was both unique and uniquely successful, it is necessary to understand some of the background.