While the winding up of a company is a last resort in the context of shareholder oppression, the discretion to order a winding up will be exercised by the Courts if the circumstances dictate that it is the most appropriate remedy, such as where it will provide finality and certainty for the shareholders without undermining the value of the company’s projects to a potential purchaser on winding up.
Background
A recent Federal Court of Australia decision in the administration of the Hastie Group Limited (Hastie Group)1 illustrates a number of important points for administrators, secured parties and purchasers under the new regime established under the Personal Property Securities Act 2009 (Cth) (PPSA). If you would like to discuss the implications of this case with any of our PPSA or insolvency litigation experts, please do not hesitate to contact us.
The facts
The Western Australian Court of Appeal has today delivered its judgment in the appeal of Westpac Banking Corporation v The Bell Group Ltd (in Liq) [2012] WASCA 157 ( The Bell Appeal ). The Court substantially rejected the appeal. The decision has important implications for directors, financiers and bondholder investors. It is a salutary reminder for financiers of the consequences of "knowingly receiving" a benefit from a breach of directors' duties.
Background
Whether you are a John Donne, Ernest Hemingway or Metallica fan, the above clause rings a bell. Last week the Court of Appeal for Western Australia joined those “Riding the Lighting” and provided its own musings on “For Whom the Bells Tolls” down under. Rather than affirming that the bell tolls for the infamous Spanish guerrilla fighters or a tortured metaphysical poet, the Australian court provided a new answer: The Bell [decision] tolls for “would be” secured lenders.
After 448 days in court, over 85,000 documents and more than 10 judgments, a special bench of the Western Australian Court of Appeal handed down its decision in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No.3) [2012] WASCA 157 (Bell Appeal Decision). The Bell Appeal Decision raises issues relating to the integrity of transactions with companies facing insolvency, which may create serious liability issues for company directors and lenders alike.
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
In Peter Grossman v Australian Securities and Investment Commission [2011] AATA 6, the Administrative Appeals Tribunal upheld a 5 year disqualification period against former director Mr Grossman who was at the helm of 3 companies that met financial demise. The Tribunal affirmed ASIC’s decision to grant the maximum disqualification period made pursuant to s 206F of the Corporations Act which was returned after finding Mr Grossman participated in phoenix activities deemed to lack commercial morality and blatantly disregard the interests of creditors.
On 7 December 2011, the Supreme Court of New South Wales (Court) delivered its decision in In the matter of Nugisi Pty Ltd [2011] NSWSC 1512, clarifying the circumstances in which courts will allow the appointment of a provisional liquidator.
Facts
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?
Under section 596B of the Corporations Act 2001 (Cth) (Act), liquidators and other eligible applicants can apply to the Court for orders to examine certain persons in connection with the affairs of a corporation. Under section 596C, the affidavit in support is not available for inspection unless a court otherwise orders.
In the case of Sutherland v Pascoe; Re Matrix Group Ltd(as trustee for the Matrix Group Unit Trust (in liq)) [2012] FCA 453, the Federal Court granted examinees access and discussed the applicable principles.