Introduction
By unanimous decision in Bruton Holdings Pty Limited (in liquidation) v Commissioner of Taxation1, five members of the High Court have reversed a controversial decision of the Full Federal Court to confirm that the Commissioner of Taxation (Commissioner) cannot ‘leap-frog’ other creditors in a liquidation.2
In a closely-watched case stemming from the demise of the Australian HIH insurance group, the UK House of Lords has ruled in McGrath & Anor & Others v Riddell and Others [2008] UKHL 21 that the English assets of four companies in that group, which are in liquidation in Australia and in ancillary insolvency proceedings in England, must be remitted to Australia for distribution under Australian insolvency law.
If an international airline that is a member of the International Air Transport Association (“IATA”) goes into insolvent external administration under the Australian Corporations Act 2001 (Cth) (the “Act”), will the IATA Clearing House Regulations (effective January 1, 2006) (the “CH Regulations”) continue to govern the relationship between IATA, the insolvent airline, and the other members of IATA? A recent judgment of Australia’s High Court clarifies these issues.
The House of Lords has ruled that English assets of the HIH group of companies are to be remitted to the Australian liquidators for distribution under Australian law. This briefing discusses the background to McGrath and another and others v Riddell and others [2008] UKHL 21 and the implications of the ruling.
Background
The House of Lords recently had to consider whether the English court should remit assets when faced with a request to do so by a foreign court.
MCGRATH AND ANOTHER v RIDDELL, House of Lords, 9 April 2008
The liquidators of the HIH group of Australian insurance companies appealed against the decisions of the High Court and the Court of Appeal that certain assets of the HIH group, mostly reinsurance claims on policies taken out in the London market, should not be remitted to Australia. The courts instead ordered that the assets should remain in England and be distributed to creditors in accordance with English insolvency laws.
In a July 12, 2007 post, we reported on issues relating to HIH Casualty and General Insurance Limited (“HIH”). The question before the court was whether it had jurisdiction to entertain a request under the Insolvency Act for directions to the liquidators in England to transfer assets collected by them to the liquidators in an Australian liquidation. The Court of Appeal held that it would not direct a transfer of the English assets by the English provisional liquidators to the Australian liquidators because to do so would prejudice the interests of many of the creditors.
Attorney-General Robert McClelland, has today introduced a bill in Federal Parliament to create a comprehensive national personal property securities law, to be known as the Personal Property Securities Act (PPSA). The bill is the culmination of more than three years of public consultation and is a significantly revised version of an exposure draft bill that was the subject of a report by the Senate Standing Committee on Legal and Constitutional Affairs in March of this year.
Exposure draft legislation has been released which proposes amendments to the GST legislation to make it clear that liquidators and other representatives of incapacitated entities are liable for GST on transactions within the scope of their appointment.
Date of effect
It is proposed that the main operative provisions of the legislation have effect retrospectively from the commencement of the GST Act on 1 July 2000.
Background
Effectively, the High Court held that aggrieved shareholders (shareholders whose debt arises as a result of misrepresentation or improper disclosure by the company causing the shareholder to acquire shares) would be ranked equally with the debts of other unsecured creditors.
If Departmental activity, debate in Parliament and media articles are an indication, the Federal Government’s much awaited response to the Ripoll Report is imminent.