It goes without saying that the law is a complex language. Indeed, it is so complex, and at times, so incoherent, that the Merriam Webster Dictionary has a specific term for it: ‘legalese’. As the law of insolvency is no exception, this article has compiled some of the most frequently used (and ambiguous) insolvency terms.

Bankruptcy notice

Amirbeaggi as trustee of the bankrupt estate of Hanna v Hanna [2021] FCA 988

Background:

This past week the Federal Court handed down an interesting bankruptcy decision concerning the late lodgement of cross-claims. The respondent in this matter on two separate occasions failed to serve a cross-claim within the allotted time. This was despite being granted an extension. The question for the court was whether should be granted to permit the applicant to serve the cross-claim notwithstanding these delays.

This week’s TGIF considers the recent ruling of the Federal Court of Australia in Tuscan Capital Partners Pty Ltd v Trading Australia Pty Ltd (in liq)[2021] FCA 1061, where a liquidator’s decision to accept a ‘proof of debt’ was successfully challenged due to a lack of evidence that

In November 2021, the High Court of Australia will consider the application of the Convention on International Interests in Mobile Equipment done at Cape Town on 16 November 2001 (the Convention) in Australia in light of facts arising out of the administration of the Virgin Australia group.

In brief

Australia's borders may be closed, but from the start of the pandemic, Australian courts have continued to grapple with insolvency issues from beyond our shores. Recent cases have expanded the recognition of international insolvency processes in Australia, whilst also highlighting that Australia's own insolvency regimes have application internationally.

Key takeaways

In a substantial recent decision arising from the Arrium liquidation[1], the Supreme Court of New South Wales considered the materiality of significant future liabilities in assessing the company’s solvency.

The Court at first instance held that the Applicants failed to establish that the Company was insolvent. The key findings that informed the Associate Judge’s conclusions included the following:

• the funds that were available to the Company to pay its debts included funds in an offset account in the name of the director (and an account in the name of the director’s wife); and
• the Applicants’ claims were based on unreconciled accounts of the Company.

The Applicants were granted leave to appeal and appealed the decision of the Court a quo.

A hotly anticipated decision in the ongoing saga of the Babcock & Brown liquidation was handed down last week, resulting in another win for the liquidator (represented by Johnson Winter & Slattery) and further highlighting the challenges facing liquidators when they are thrust into a quasi-judicial function when assessing proofs of debt.

On 2 August 2021, Treasury released a consultation paper on proposed reforms to improve creditors’ schemes of arrangement in Australia. The proposed reforms are intended to complement the simplified liquidation and debt restructuring process introduced for small businesses on 1 January 2021, as a result of the COVID-19 pandemic.

What is a scheme of arrangement?

Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025