Retired U.S. Bankruptcy Judge Robert E. Gerber once observed that “issues as to the interplay between environmental law and bankruptcy are among the thorniest on the litigation map.” Difficulties navigating this interplay largely stem from the inherent conflict between the goals of bankruptcy and environmental laws, with the former aimed at providing debtors with a fresh start, while the latter cast a broad net to hold parties (even some innocent parties) responsible for past harm to the environment.

Following an August 4, 2022 memorandum opinion from Judge Brendan L. Shannon of the United States Bankruptcy Court for the District of Delaware, a party to a safe harbored contract can qualify as a “financial participant” under section 546(e) of the Bankruptcy Code even where the party was not a financial participant at the time of the transaction.

Part 1 of this two-part series explored potential legislative changes which could impact the Australian insolvency landscape in 2022 and beyond. Part 2 addresses the recent major developments in case law that have the potential to shape the insolvency landscape in Australia for many years to come.

In Re Swiss Cottage [2022] EWHC 1495 (Ch), junior creditors argued that administrators appointed to two companies had exceeded their powers and breached their duties when selling two properties.

Background

According to a ruling by the German Federal Court of Justice (BGH) on 5 May 2022, a passenger's claim for reimbursement due to a flight cancellation in insolvency needs to be established in the schedule of creditors, otherwise it remains a claim for air transport that cannot be enforced in insolvency proceedings if the flight was booked and paid for before the insolvency proceedings.

In Stratford Hamilton (joint liquidator of Mobigo Ltd (in liquidation)) v James Mcateer, Teresa Delgaudio [2022] the court dismissed the directors' application to strike out misfeasance claims against them. 

Background 

This week’s TGIF considers Krejci, in the matter of Union Standard International Group Pty Limited (in liq) (No 7) [2022] FCA 890, in which the Federal Court gave liquidators approval to conduct extensive and expensive public examinations despite there being limited expected return to creditors, in part to try and uncover the truth behind $585 million that cannot be accounted for in the company’s dealings.

Key takeaways

The Hong Kong court has confirmed that – going forward – the court is ready to recognize and assist a foreign insolvency process conducted in the company’s center of main interests (COMI) and that it will no longer be necessary for the foreign insolvency process to be carried out in a company’s place of incorporation. The judgment sets out a practical roadmap for the future of cross-border insolvency in Hong Kong, where listed companies that use complex holding company structures find themselves in difficulty.

Background

Voting rights in Austrian restructuring proceedings (which require the approval of more than half the creditors holding more than half of the company's debt) are often contested, as the company's assets are liquidated if the creditors vote against the proposed restructuring or debt cut.

Secured creditors may only participate in the vote with the unsecured part of their claim and must file an application for the right to vote. It was unclear whether such an application for a voting right for a specific amount could subsequently be changed.

Under the Insolvency and Bankruptcy Code, 2016 (Code), a financial creditor may initiate corporate insolvency resolution process (CIRP) if there is a default of INR 10 million, by filing an application before the National Company Law Tribunal (NCLT). The settled principle is that an application made by a financial creditor under the Code must be admitted and CIRP initiates against the corporate debtor, if the NCLT is satisfied that a default has occurred in payment of debt.