04 December 2013
[2013] HCA 51
High Court of Australia (French CJ, Hayne J, Kiefel J and Gageler J; Keane J dissenting)
The High Court of Australia held that liquidators of an insolvent lessor could disclaim a lease, and that this would terminate the lessee’s proprietary interest.
The High Court has recently affirmed the existence and scope of a liquidator’s equitable lien in Stewart v Atco Controls Pty Limited (in liquidation) [2014] HCA 15.
A liquidator is entitled to an equitable lien for the costs, charges and expenses (including the liquidator’s remuneration) incurred by the liquidator in realising assets brought into the estate, which lien takes priority over a creditor’s security: Re Universal Distributing Co Ltd (in liquidation) [1933] HCA 2.
Akers as a joint representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57
The Full Federal Court has confirmed a “modified universalism” approach to cross-border insolvencies, and provided guidance on what is required for the “adequate protection” of rights of local creditors under the Model Law on Cross-Border Insolvency (‘Model Law’), as enacted in Australia by the Cross-Border Insolvency Act 2008 (Cth).
A bankrupt trustee has been unsuccessful in trying to recover property of a former bankrupt more than 20 years after the date of bankruptcy. The decision of the Federal Court reinforces the limitation period in which a trustee can make a claim on any property of the bankrupt as outlined in Section 127(1) of the Bankruptcy Act 1966 (Cth) (Act)
Approximately 11 years ago, largely as a result of public resentment of bonuses being paid to directors of insolvent companies, the Corporations Act was amended by the Corporations Amendment (Re-Payment of Director’s Bonuses) Act 2003. The amendment made it possible for liquidators to not only seek to recover director bonuses but to also recover any “unreasonable director-related transactions” pursuant to the newly added section 588FDA of the Corporations Act.
Legislation
In a decision of interest to both secured creditors and liquidators, the High Court has now overturned a decision of the Court of Appeal of the Supreme Court of Victoria that found a liquidator was not entitled to an equitable lien to secure his reasonable costs in obtaining a settlement sum.
On 7 May 2014, the High Court handed down its eagerly anticipated decision on the scope of the liquidator’s equitable lien in Stewart v Atco Controls Pty Ltd (In Liquidation) [2014] HCA 15.
I INTRODUCTION
The ultimate aim of the Bankruptcy Act 1996 (Cth) is to provide a fair and orderly process for the administration of the affairs of a debtor. In many circumstances the debtor may attempt to avoid his obligations to some or all of his creditors. The Bankruptcy Act recognises this and has long had provisions which empower trustees in bankruptcy to recover certain assets of a bankrupt. The two types of powers given to the trustee are where:
The Court refused to declare an appointment of administrators invalid under section 447C of the Corporations Act 2001 (Cth) on the basis of a previous purportedly invalid removal of a director and alleged insufficient grounds to establish that the company was, or was likely to become insolvent. This case illustrates the Court’s willingness to overlook technical anomalies in exercising its discretion under section 447C where the end result for the company would be the same, and a broad approach in assessing whether there are reasonable grounds to form a view that a company