While testators generally have freedom to decide how to dispose of their assets in England and Wales, there are limits to this freedom, including where a beneficiary of the estate is made bankrupt. If the testator passes away during the course of the beneficiary’s bankruptcy, the legacy will usually pass to the trustee in bankruptcy for the benefit of creditors instead of to the beneficiary.
Important Features of this Judgment
- A Pt X Deed may create an equitable assignment of the rights, such that obligations continue after the Deed has come to an end.
- The Trustee of the Part X Deed of Arrangement can continue the proceedings initiated against One.Tel, despite the Deed coming to an end.
- Serves as a reminder that the enforceability of the debt does notaffect a debtor’s liability.
Facts
QUESTIONS AND ANSWERS
Q1. Is it possible to appoint a receiver over assets which have been charged by a British Virgin Islands (‘BVI’) company (a ‘Company’) under a security document?
A1. Yes, provided that the security interest which has been granted by the Company to the beneficiary (the ‘mortgagee’) over the Company’s assets allows the mortgagee to appoint a receiver. Appointing a receiver is probably the most common way of enforcing security interests granted by Companies.
This week’s TGIF considers Fordyce v Ryan & Anor; Fordyce v Quinn & Anor [2016] QSC 307, where the Court considered whether a beneficiary’s interest in a discretionary trust amounted to ‘property’ for the purposes of the Bankruptcy Act 1966 (Cth).
BACKGROUND
The decision in In the matter of Independent Contractor Services (Aust) could mean more reliance upon fair entitlements guarantee funding provided by the Commonwealth in relation to the liquidation of trading trusts.
The recent decision of the New South Wales Supreme Court in Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (no 2) [2016] NSWSC 106 found that the statutory scheme of priority does not apply to realisations from circulating trust assets. This decision has potentially profound impacts for both employees and secured creditors in the context of both liquidations and receiverships.
A summary of the case
Introduction
On 29 January 2013, the Federal Court of Australia made orders approving the creditors’ scheme of arrangement between Nine Entertainment Group Pty Limited (NEG) and its senior and mezzanine lenders (Nine Scheme).
The Nine Scheme, made under Part 5.1 of the Corporations Act, follows Alinta and Centro as the third debt for equity restructuring of a major Australian company in as many years.
The Commission has opened a formal investigation under EC Treaty state aid rules into a series of aids amounting to €40.7 million that Italy intends to grant to Legler S.p.A, a denim textile producer. The Commission doubts at this stage that the restructuring plan of Legler S.p.A. would restore the beneficiary's commercial viability and is concerned that the aid would create undue distortions of competition in this highly competitive market. The opening of the formal investigation gives interested parties an opportunity to comment on the proposed measures.
The Law Commission is looking into whether the regulation of trading trusts gives enough protection to creditors and beneficiaries in circumstances of insolvency.
Submissions are due on the issues paper by 2 March 2012.
What is a trading trust?