Two’s company when it comes to debt funding. Surely, three makes things a little crowded? It doesn’t have to be that way.

After the SAM HAWK decision in September 2016 restored the status quo in the recognition of foreign maritime liens in Australia (see our briefing http://www.hfw.com/Arrest-of-the-SAM-HAWK-October-2016) two Federal Court decisions in November 2016 bring the year towards a close with the Federal Court’s jurisdiction and application of the Admiralty Act being confirmed on established and predictable grounds.

Insolvency proceedings can often be a very chaotic and drawn out process. Amidst the flurry of activity undertaken by creditors, liquidators and directors, a question to consider is what happens when we throw an insurer’s rights of subrogation into the mix.

Subrogation

Subrogation is the act of one party (normally an insurer) having standing to prosecute a cause of action in the name of another, where the former has reimbursed the latter for losses.

‘Shipping steel, shipping steel . . .
Nobody knows, the way it feels
Caught between Heaven and the Highway
Shipping steel, shipping steel . . .’ ¹

On 7 April 2016, Administrators were appointed to South Australian-based steelmaker and iron ore miner Arrium, which reportedly owed approximately AUD4.3 billion to its lenders, suppliers and staff. The appointment covered 94 direct and indirect subsidiaries of Arrium Limited (the Arrium Companies), which at the time employed around 8,100 employees and contractors.

After a fraught period as an ASX listed company, including the near collapse of iron ore miner and major customer, Atlas Iron, the transport company McAleese Limited has entered voluntary administration.

SUMMARY

This week’s TGIF considers Wood v Astra Resources Ltd (UK Company No 07620218) [2016] FCA 1192, in which the Federal Court was asked to recognise a foreign proceeding under the Model Law on Cross Border Insolvency.

BACKGROUND

In August I presented on cross-border insolvency at the joint Federal Court of Australia and Law Council of Australia conference on corporations law. The audience consisted of over 30 Federal Court judges and a range of other experienced corporate and insolvency lawyers.

This week’s TGIF considers a recent decision in which the Court directed that liquidators would be justified in utilising trust funds to conduct further investigations to identify and pursue potential claims available to a trustee.

WHAT HAPPENED?

The plaintiffs were appointed as voluntary administrators of the trustee company (Trustee) and subsequently became its liquidators. The Trustee acted as responsible entity and trustee within a corporate group that funded property investment and development activities.

Unscrupulous advisors, unconscionably preying on desperate directors driven by the fear of losing everything, have created a boom in illegal phoenix activity. The below article, originally published on the McCullough Robertson white collar crime blog, Collared, sheds some light on the illegal phoenix, the gravity of the problem in Australia and considers what is being done to monitor and control the issue.

The High Court this afternoon unanimously dismissed Clive Palmer and Ian Ferguson's challenge to the constitutional validity of section 596A of the Corporations Act.

This means that a liquidator's power to publicly examine and compel the production of documents remains intact and removes any doubt about the powers of liquidators under section 596A of the Corporations Act.

Arguments made by Clive Palmer and Ian Ferguson