Year in Review - Australia Law in 2016
The Federal Court of Australia has handed down a decision that is a salutary reminder to directors that, in any corporate tax planning, it is important not to miss the forest for the trees. In a recent Federal Court of Australia decision, contentious tax planning was found to constitute a breach of directors’ duties for the directors involved, resulting in them becoming personally liable for ATO debts of the company.
What happened?
Two’s company when it comes to debt funding. Surely, three makes things a little crowded? It doesn’t have to be that way.
In August I presented on cross-border insolvency at the joint Federal Court of Australia and Law Council of Australia conference on corporations law. The audience consisted of over 30 Federal Court judges and a range of other experienced corporate and insolvency lawyers.
This week’s TGIF considers a recent decision in which the Court directed that liquidators would be justified in utilising trust funds to conduct further investigations to identify and pursue potential claims available to a trustee.
WHAT HAPPENED?
The plaintiffs were appointed as voluntary administrators of the trustee company (Trustee) and subsequently became its liquidators. The Trustee acted as responsible entity and trustee within a corporate group that funded property investment and development activities.
The Timbercorp Group invested in agribusiness Managed Investment Schemes on behalf of some 18,500 investors. Many investors in the schemes entered into loan agreements with Timbercorp Finance to finance their investments.[1]
Summary
The unanimous decision of the High Court on 9 November 2016 in Timbercorp Finance Pty Ltd (in liq) v Collins & Timbercorp Finance Pty Ltd (in liq) v Tomes may increase the likelihood of satellite litigation by individual group members following group proceedings.
It follows from the decision that, if group proceedings are heard, group members are only bound by the answers to common questions and the pleadings; they are not, for example, precluded from raising individual claims which were not raised in the group proceeding.
Last year’s Queensland District Court decision in Morton v Rexel Electrical Supplies Pty Ltd [2015] QDC 49 (Rexel) caused quite a stir in insolvency circles. In Rexel, Searles DCJ (a former partner of McCullough Robertson) found that section 553C of the Corporations Act 2001 (Cth) (Act) could apply to reduce an unfair preference claim brought by a liquidator, by allowing the amount still owing by the company to be set-off against the liquidator’s claim.
Section 447A
JOEL COOK Associate, Litigation and Dispute Resolution Group, McCabes
ANDREW LACEY Principal, Litigation and Dispute Resolution Group, McCabes
legal update
ONE SIZE DOES NOT FIT ALL
Varying the scope of the Part 5.3A moratorium on proceedings against companies in voluntary administration.
Welcome to the first edition of the Herbert Smith Freehills Guide to Restructuring, Turnaround and Insolvency, Asia Pacific .