In Australian Building Systems Pty Ltd v Commissioner of Taxation [2014] FCA 116, the Federal Court held that liquidators do not have an obligation to retain an amount for the payment of tax of a portion of the proceeds from the sale of property owned by the company before liquidation when no tax assessment has been issued. However, Justice Logan made clear that a prudent liquidator would be entitiled to retain the gain until an advice or assessment from the Commissioner, was issued.

Background

The recent case of Young, Jr, in the matter of Buccaneer Energy Limited v Buccaneer Energy Limited [2014] FCA 711 considered the concept of “the centre of main interests”, described in the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (United Nations General Assembly Resolution A/RES/52/158 (1997)). Senior Associate, Sarah Drinkwater and Associate, Tim Logan discuss.

Application

The recent decision of the Federal Court in Canadian Solar (Australia) Pty Ltd v ACN 138 535 832 Pty Ltd (subject to deed of company arrangement) [2014] FCA 783, is a useful reminder that a deed of company arrangement (DOCA) approved by a majority of creditors at the second creditors meeting can still be terminated by order of the Court if it is found to be unfairly prejudicial to one or more creditors or contrary to the interests of creditors as a whole. 

Key Points:

This case presented a difficult and unique set of circumstances for the court to navigate while the scheme clock was ticking.

The recent approval of the David Jones scheme of arrangement demonstrates how, in the absence of shareholder opposition, the inexorability of a scheme timetable can cause problems for a court when there is a major development after the first court hearing.

In Kisimul Holdings Pty Ltd v Clear Position Pty Ltd, a decision seemingly inconsistent with established law, the Supreme Court of NSW earlier this year held that an omission in the affidavit supporting a statutory demand did not amount to “some other reason why the demand should be set aside”. The NSW Court of Appeal has now reversed the decision, restoring a degree of certainty in this much-litigated area of law.

The Law

Di Cioccio v Official Trustee in Bankruptcy [2014] FCA 782

Examination of whether shares purchased from a bankrupt’s income below the threshold amount in respect of which he was required to make contributions to his trustee under Division 4B of Part 6 of the Bankruptcy Act 1966(Cth) is within the meaning of “after acquired property” in s 58(1).

In the decision Young, Jr (on behalf of debtor-in-possession of Buccaneer Energy Ltd) v Buccaneer Energy Ltd [2014] FCA 711, the Federal Court of Australia considered whether Chapter 11 proceedings under the United States Bankruptcy Code should be recognised as a foreign main proceeding under the Cross-Border Insolvency Act 2008 (Cth) (CBIA) and Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law).

In the last week, two cases have been handed down regarding funds held on trust in liquidations and liquidators’ fees.

Saker, in the matter of Great Southern Limited [2014] FCA 771 (Great Southern) considered whether funds from floating charge assets held separately for satisfaction of priority employee entitlements were held on trust, and the impact on the liquidators’ fees and secured creditors’ recoveries in the absence of such a trust.

The Hon Joe Hockey announced the final terms of reference for a new financial system inquiry on 20 December 2013.  The purpose is to examine how the financial system could be best positioned to meet Australia's evolving needs and support Australia's economic growth.

An interim report was released on 15 July 2014.  Section 3 discusses potential changes to the current external administration regime in Australia. 

Key Points:

Courts will remove liquidators where there's apparent bias even where it might cause significant inconvenience and expense to the liquidation.

The Full Court of the Federal Court has found that a conflict of interest arose in circumstances where liquidators were required to investigate transactions with an entity that also refers work to the liquidators (ASIC v Franklin; Re Walton Construction Pty Ltd [2014] FCAFC 85).