In the decision of In the matter of AWA Limited (Administrators Appointed) (Receivers and Managers Appointed) ACN 111 674 661 [2014] NSWSC 249, the New South Wales Supreme Court considered the scope of s 477D of the Corporations Act 2001 (Cth) and whether it was appropriate to make a direction regarding the administrators’ entry into a loan agreement to pay out a secured creditor.

Background

In the recent matter of JP Morgan Chase Bank, National Association v Fletcher; Grant Samuel Corporate Finance Pty Ltd v Fletcher [2014] NSWCA 31, the NSW Court of Appeal handed down a decision with important consequences for liquidators and the time they have to commence proceedings for voidable transactions. The decision also illustrates the frequently inconsistent operation of the Corporations Act 2001 (Cth) and Court procedure rules. Senior Associate, Elisabeth Pickthall and Associate, Stefano Calabretta discuss the decision.

A recent decision in the High Court of Australia gave liquidators of landlords extra powers to disclaim leases that are registered on title. For example, if a landlord leases a site to a tenant, and the landlord subsequently goes into liquidation, the liquidator does not have to abide by the terms of the lease, and may refuse to recognise the lease and ask the tenant to vacate the site.

Facts

The Farm Debt Mediation Act 2011 (Vic) (the Act) has been in operation for some two years and is in large part modelled on New South Wales legislation which has been operative since 1994. Since the commencement of the Act in Victoria, over 180 mediations have taken place with 95% of those mediations resulting in a settlement agreement between the parties.

The UNCITRAL Model Law on Cross-Border Insolvency is designed to supplement States' insolvency laws with a framework to address cross-border insolvency proceedings.

Defects in statutory demands have regularly prevented creditors from obtaining winding up orders against debtor companies.

The recent decision in Poolrite Australia Pty Ltd (In Liq) v Structural Pools Aust Pty Ltd [2013] FCA 1100 (Poolrite) confirms the Courts’ inclination to facilitate the efficiency of the winding up process by disregarding technical deficiencies in statutory demands where no substantial injustice is caused.

Facts

The Corporations Act 2001 (Cth) (Act) and the Corporations Regulations 2001 (Regulations) contain various rules regulating the lodgment of Proofs of Debt by creditors. Often Proofs of Debt are lodged by creditors to entitle them to vote at a second meeting of creditors convened by an Administrator under section 439A of the Act.

This case serves as an important reminder that board appointments should not be taken lightly - even as a “personal favour”.  Directors should ensure that they are sufficiently abreast of the affairs of their companies and actively involved in their management.  An argument that a director was “not really involved” in management is unlikely to find favour when the company finds itself in strife.

On 21 February 2014, the Federal Court handed down its decision inAustralian Building Systems Pty Limited v Commissioner of Taxation [2014] FCA 116 (Australian Building Systems). The Court found that a liquidator was not legally required to retain an amount out of the proceeds on disposal of assets as part of the winding up of a company to pay tax which is or will become due in respect of a capital gain.

The Victorian Court of Appeal recently held that a payment, disposition or grant of security by a company to a person on behalf of, or for the benefit of a director of the company, extends to a mortgage of land given by the company to a creditor of the director in consideration of a covenant by the creditor not to sue the director. 

As a result, insolvency practitioners now have stronger judicial guidance as to what constitutes a 'benefit' for the purposes of setting aside or varying voidable transactions, which should assist in recovering proceeds for unsecured creditors.