We recently released an e-alert on the law reforms on directors’ derivative liability. Although not directly part of the derivative liability reforms, the close of 2011 and the first half of 2012 has seen a variety of exposure drafts, submissions, and parliamentary jostling over another key area of directors’ liability – the Federal Government’s law reforms to counter phoenix activities.
The recent Victorian Supreme Court case of Grapecorp Management Pty Ltd (in liq) v Grape Exchange Management Euston Pty Ltd provided an interesting analysis of when set-off, pursuant to section 553C(1) of the Corporations Act 2001, may be claimed.
When can a set-off be claimed against debts owed to an insolvent company?
The recent Victorian Supreme Court decision of Grapecorp Management Pty Ltd (in liq) v Grape Exchange Management Euston Pty Ltd [2012] VSC 112 clarifies the application of set-off provisions for insolvent companies.
BACKGROUND
Grape Exchange Management Euston Pty Ltd (Grape Exchange) provided various services in relation to vines and grapes, pursuant to a Management Agreement with Grapecorp Management Pty Ltd (in liq) (Grapecorp).
Grape Exchange claimed that it had a right of set-off under section 553C of the Corporations Act.
The recent case of Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Limited [2012] FCA 363 is a rare example of the Court allowing an adjournment of a winding up application in connection with a tax debt pending an appeal.
Facts
Background: the Timbercorp Group
On 15 February 2012 the Commonwealth Government introduced the Corporations Amendment (Similar Names) Bill 2012.
Purpose
The purpose of this Bill is to amend the Corporations Act such that directors of failed companies can be jointly and individually liable for the debts of a company that has a similar name to a pre-liquidation name of a failed company.
The Bill itself is purportedly part of the Government’s election commitment from the Government’s Protecting Workers Entitlements Package announced in July 2010.
Amaca Pty Ltd v McGrath & Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90
Following the 2011/2012 Federal Budget announcement that directors will be made personally liable for any unpaid superannuation guarantee contributions, Treasury has released the Tax Laws Amendment (2011 Measures No. 7) Bill 2011 (Bill).
The legislation extends the current director penalty regime for unpaid PAYG. Whilst the announcement from Bill Shorten MP on 5 July 2011 highlights the need to prevent companies engaging in phoenix activities, the legislation will have a much broader impact.
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FACFC 89 concerned the powers of liquidators in Australia. In 2009, joint liquidators were appointed to Octaviar Limited (Octaviar) and Octaviar Administration (Funder). Fortress claimed to be a secured creditor of Octaviar under a charge, and was owed approximately $71 million. The liquidators arranged for Octaviar and the Funder to enter into funding agreements that provided for the Funder to fund an investigation into the actions of Fortress and to commence litigation against Fortress.
In Saker, in the matter of Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation), the plaintiffs were the liquidators of Great Southern Managers of Australia Limited (GSMAL).