Freezing orders and the Foreign Judgments Act

Freezing orders (also known as Mareva orders or Mareva injunctions) are oft-used tools available to a plaintiff to preserve the assets of a defendant, where there is a danger of the defendant absconding or of the assets being removed from the jurisdiction or otherwise diminished. Such dangers put in peril the ability of a plaintiff to recover any favourable judgment against that defendant.

Since the Global Financial Crisis it has been increasingly common for parties involved in property settlement disputes to be fighting over property with a net negative value or, in extreme cases, for one party to be declared bankrupt.

Despite common perception, a spouse being declared bankrupt in the middle of court proceedings for property settlement does not automatically end the proceedings or mean that the bankrupt’s assets are put out of reach of the other spouse in a property settlement.

The unanimous decision by the Full Court of the Federal Court in Templeton v Australian and Securities Investments Commission [2015] FCAFC 137 confirms that the concept of proportionality is a well-recognised factor in considering the question of reasonable remuneration for an insolvency practitioner, and that, in assessing a remuneration claim, the Court can take into account the quality and complexity of the work as well as the value and nature of any property dealt with and the time reasonably spent.

With continuing market volatility a number of companies remain under financial pressure. Businesses or individuals receiving payments from companies that might be financially distressed should be aware of the ability of a liquidator to apply to a court under the Corporations Act 2001 (Cth) (Corporations Act) to recover payments made to creditors in the six months prior to the appointment of a liquidator/administrator on the grounds the payment constituted an “unfair preference”.

Quick Recap on the Relevant Provisions

Baker & McKenzie Alert Client Alert 28 SEPTEMBER 2015 Download Forward Contact Us Visit Our Website Providing the Commissioner of Taxation with access to records - even liquidators cannot escape Need to know The Federal Court has recently determined that when the Commissioner of Taxation is a creditor of a company in liquidation, he or she is not required to obtain a court order under section 486 of the Corporations Act 2001 (Cth) (Corporations Act), unlike all other creditors, before requiring the Liquidator to make available the company's records for inspection.

A recent case[1] is a reminder to creditors in a voluntary winding up that the Court has the power to appoint an additional or special purpose liquidator (SPL) to carry out a set function in the orderly liquidation of a company where it is 'just and beneficial' to do so.

What is a special purpose liquidator?

In March 2015, the High Court delivered its judgment in Grant Samuel & Ors v Fletcher & Ors[2015] HCA 8, and unanimously overturned the decision of the New South Wales Court of Appeal, in holding that liquidators cannot rely on the procedural court rules of a State or Territory, to extend the time within which to commence voidable transaction proceedings, under section 588FF(3)(a) of the Corporations Act 2001 (“the Act”).

HOW THE GAME UNFOLDED

The Federal Court’s decision in Commissioner of Taxation v Warner [2015] FCA 659 has clarified that the Australian Taxation Office’s (ATO) coercive powers requiring a taxpayer to produce documents and information to the ATO prevail over section 486 of the Corporations Act 2001 (Cth) (CA) (section 486 provides that a Court order must first be obtained before a creditor is authorised to inspect the books of a company).

This week’s TGIF considers a decision in which the court appointed an additional liquidator to conduct further investigations alongside the incumbent liquidators in a creditors’ voluntary winding up.

WHAT HAPPENED?

On 18 July 2014, liquidators were appointed to Ambient Advertising Pty Ltd (Ambient) pursuant to the resolution of creditors under section 439C(c) of the Corporations Act 2001 (Cth).

In Austcorp Project Number 20 Pty Ltd v The Trust Co (PTAL) Limited, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (in liq) [2015] FCA 850, the Federal Court of Australia had to determine whether to dismiss the proceedings for failure to comply with previous orders for security for costs, or vary those orders for security. The basis upon which the Court made the orders for security in the first place is set out in Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd [2014] FCA 1371, and was canvassed in an ear