BH Apartments v Sutherland Nominees [2015] VSC 381

The costs of ‘convening’. Whether the person requesting a meeting of creditors, pursuant to 5.6.15(1)(b) of the Corporations Regulations 2001 (Cth) be called is only liable for the costs of calling the meeting.

Sutherland Nominees Pty Ltd (Sutherland) was being administered pursuant to a deed of company arrangement under part 5.3A of the Corporations Act 2001 (Cth).

It is not uncommon for companies served with wind up proceedings to appoint external administrators for the purposes of investigating the affairs of the company and so that recommendations can be made to creditors to either have the company wound up, execute a deed of company arrangement or hand the company back into the control of directors.

In circumstances where the administrators conclude that the company should be wound up, it is common for the administrators to seek to be appointed as the official liquidators of the company.

A recent decision of the NSW Court of Appeal demonstrates the importance for security trustees tocarefully consider and understand their obligations in an enforcement scenario.

Need to know

There's been a drop-off, but Peter Bowden says things might be about to change.

Click here to watch video.

This week’s TGIF considers the circumstances in which a resolution passed at a creditor’s meeting will be set aside on the basis that it is contrary to the interests of creditors as a whole.

Background

The insolvency of one of the principals, contractors or subcontractors can seriously impact a construction project at all levels of the supply chain. Infrastructure and Projects partner, Ted Williams look at the issue and some practical thoughts on drafting contracts to help mitigate these risks.

“How did you go bankrupt?" Two ways. Gradually, then suddenly.” ? Ernest Hemingway

Key Points:

A DOCA can extinguish claims under a guarantee, even where those claims arise following the DOCA's termination.

If the underlying debt has already been extinguished by a DOCA, can a secured creditor still enforce the charge? A recent case explored the role of section 444D(2) of the Corporations Act in this situation, with implications for parties seeking to rely on guarantees from companies that have been through a DOCA (Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95).

Key Points:

Section 562A of the Corporations Act does not apply where liquidator realises a sum of money by assigning the proceeds of the reinsurance claim to a third party.

Liquidators of insurance companies face a major quandary when assessing reinsurance recoveries.

A new Court decision may undercut the legislative policy that reinsurance proceeds should be quarantined from the normal rules for paying out creditors of insolvent companies.

If a director can exercise a right of set-off against a company in liquidation for a debt owed to the director or for a liability of the company to the director (which may be unascertained in amount or contingent), it may help to cancel out or significantly reduce the director’s liability to the company for insolvent trading.

BACKGROUND

A bank loaned over $8,000,000 to Areaworks Pty Ltd for a property development in Victoria. Adrian Liddell (Liddell) provided a guarantee of the debt. Subsequent to default under the facility, the bank sold the secured property and commenced debt recovery proceedings against Liddell for the shortfall of over $700,000 owing to it.

A sequestration order was subsequently made against Liddell upon the presentation by Liddell of a debtor’s petition, with admitted debts in his bankruptcy totalling $3,303,078.