November 28, 2014
For those solicitors and barristers practising in Corporations and insolvency law it is worth noting the passage of the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 through the House of Representatives yesterday. While anything can happen in the Senate it is hardly a contentious piece of legislation. Its passage is assured.
The Bill, as the summary on the Parliamentary Business page on the bill states, will:
provide that a general meeting of a company must only be arranged if members with at least five per cent of voting shares make the request; reduce the remuneration reporting requirements; clarify the circumstances in which a financial year may be determined to be less than 12 months; and exempt certain companies limited by guarantee from the need to appoint or retain an auditor; and Australian Securities and Investments Commission Act 2001 to: enable members of the Takeovers Panel to perform duties while in Australia and overseas; and provide that the Remuneration Tribunal is responsible for setting the terms and conditions of Chairs and members of the Financial Reporting Council, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board
The effect of the BIll include Read the rest of this entry »
December 2, 2013
The High Court will hand down its decision in Willmott Growers Group Inc v. Willmott Forests Ltd (Receivers and Managers Appointed) (In Liquidation) In its capacity as manager of the unregistered managed investment schemes listed in Schedule 2 and Ors this Wednesday 5 December 2013.
For those, like myself, who practice in the corporations and insolvency area it is a long awaited decision with significant ramifications.
The High Court transcript provides:
MR G.T. BIGMORE, QC: May it please the Court, I appear Read the rest of this entry »
September 2, 2013
Associate Justice Gardiner undertook a detailed examination of a liquidator’s powers under part 5.9 of the Corporations Act, in particular section 596D(2), in Banksia Securities Limited (Receivers and Managers Appointed)  VSC 416 .
On 25 June Gardiner AsJ ordered a summons for the examination of Michael Hall (“Hall”) under section 596B of the Corporations Act (The “Act”) by the plaintiff, the joint and several receivers of Banksia Securities Limited (“Banksia”) . Hall applied for orders to set aside the summons in so far as it related to the production of documents .
Hall is a member of the the firm MB+M. The plaintiffs are investigating an unqualified audit report for the 2008 financial year which he signed, on behalf of MB+M and whether the provisioning for some of the loans was materially inadequate. At the time of the application no proceedings had been issued against MB+M or Hall .
Hall objected on the following bases:
- while he accepted that an examinable affair of a company includes the property and that the existence of insurance in respect of a chose in action against a third party is capable of being an examinable affair however stated that the Court can not be Read the rest of this entry »
May 27, 2013
In Arhanghelschi v Ussher  VSC 253 the Supreme Court, per Ferguson J, consider the claim of oppression and the construction of the unit trust deed.
Dr Arhanghelschi, the Plaintiff, and the four defendants are radiologists who conducted a practice in Ballarat under the name Base Imaging Group Pty Ltd (“BIG”). Through BIG the doctors successfully tendered for work from the Ballarat Health Services (“BHS”) in 2009. In June 2010 they established a unit trust which performed its obligations under the BHS contract. Each doctor held 20% of the units in the trust.
The four defendant doctors wished to part company with Arhanghelschi. On 4 March 2013 three of the unit holders gave notice under the Deed stating that they wished Arhanghelschi to cease to be involved in the business with immediate effect . On 7 March 2013 the defendants gave notice requiring the trust to convene a meeting . That meeting took place on 15 March where the directors resolved that Arhanghelschi resign as a director of BIG and from his position with BHS . No reason was given at the meeting for the action taken but at trial the defendant’s evidence was that Arhanghelschi was unapproachable, he took long lunches, left early and arrived late, and finally was working for a Bendigo radiology group .
Is there an obligation of good faith and reasonableness
Her Honour stated that a Unitholders Deed must Read the rest of this entry »
January 14, 2013
In Re Australian Property Holdings Limited (in liq) (recs & mgrs apptd) (No 2)  VSC 576 Robson J considered applications by the defendants to stay the proceedings, which was refused, and to file limited defences, which was granted.
Australian Property Custodian Holdings (“APCH”) commenced proceedings in the Supreme Court against seven of its former directors to recover $30 million that was paid out of its assets it held on trust as a fee to companies controlled by Mr Lewski . ASIC commenced action in the Federal Court against APCH and 5 of its directors who are also defendants in this proceeding alleging breaches of the Corporations Act (“the Act”).
APCH is the responsible entity of the Prime Retirement and Aged Care Property Trust, a managed investment scheme under the Act . In 2006 the constitution of the Prime Trust was amended by the board of APCH to provide for a payment of a listing fee to APCH if units of the Prime Trust were listed on the ASX , which they were in August 2007 and APCH received $33m out of the assets of the trust. The Supreme Court proceedings were commenced by the liquidator on 5 March 2012 in the name of APCH  and a statement of claim was filed and served against all defendants for compensation under sections 1317H and HA or 1325 of the Act as well as a claim for equitable compensation. ASIC commenced proceedings in the Federal Court on 21 August 2012 .
Both proceedings allege that APCH breached its statutory duties under the Act in amending the trust to the detriment of the unit holders  and both rely upon section 601FD .
STAY OF PROCEEDINGS
The Supreme Court has an inherent power to stay proceedings in the interests of justice  (which is the overriding consideration ). His Honour set out, at , the relevant principles regarding a stay found in McMahon v Gould as follows (absent citations):
(a) Prima facie a plaintiff is entitled to have his action Read the rest of this entry »
December 19, 2012
Griffiths J in Platinum Communications Pty Ltd v Computer Networks Pty Limited  FCA 1260 considered an amendment to application to set aside a statutory demand.
The plaintiff, a retailer, and the defendant, a software provider, entered into an agreement whereby the plaintiff would use the defendant’s software under licence and receive related services for payment . When the software was switched on the plaintiff suffered difficulties in many of its stores . The plaintiff claimed Read the rest of this entry »
November 1, 2012
The Personal Liability for Corporate Fault Bill passed the Houe of Representatives today. The bills web page is found here.
The Bill arose from the Council of Australian Governments’ National Partnership Agreement to Deliver a Seamless National Economy whose aim is to remove regulatory burdens on directors and corporate officers that cannot be justified on public policy grounds, and to minimise inconsistency between Australian jurisdictions in the application of personal liability for corporate fault in government laws.
The relevant COAG Principles are
- Where a corporation contravenes a statutory requirement, the corporation should be held liable in the first instance.
- Directors should not be liable for corporate fault as a matter of course or by blanket imposition of liability across an entire Act.
- A ‘designated officer’ approach to liability is not suitable for general application.
- The imposition of personal criminal liability on a director for the misconduct of a corporation should be confined to situations where: Read the rest of this entry »
The Full Bench of the Federal Court in Georges v Seaborn International Pty Ltd (Trustee), in the matter of Sonray Capital Markets Pty Ltd (in liq)  FCAFC 140 considered the right of the liquidator to recover proceeds of shares the purposes of pooling and distribution to creditors.
Sonray was the holder of the Australian financial services licence from 4 May 2005 until it went into administration on 22 June 2010 . It provided access to trading platforms made available by third parties. Clients deposited money with Sonray, which was held in accounts and subject to statutory trust under the Corporations Act . It had 18 segregated accounts which were used to receive deposits in respect of margin calls, proposed trades and the return of funds. In these accounts clients’ funds were co-mingled with funds from other clients  to the point where the trial judge found that the funds were so thoroughly mixed as to be almost impossible to ascertain entitlements to each of the segregated accounts . Efax, the trustee of a family trust, entered into a written agreement in 2009 with Sonray regarding its trading activities. In April 2010 Efax instructed Sonray to purchase 78,000 shares in BHP Billiton Ltd (“BHP”)  for $3 million , which it did through Saxo Bank (“Saxo”), one of its trading platforms. Efax’s funding for the purchase was deposited into a Sonray accounted which was subject to numerous defalcations. The purchase price for the shares however was not paid out of a tainted account but rather by Saxo using its own money or by way of credit arrangements. Sonray debited Efax’s ledger account with the purchase price of the BHP shares.
The Liquidators seek a direction to allow them to pool shares purchased on instructions by Efax with proceeds attributable to all other Sonray clients which would then be distributed amongst all of the clients .
The trial judge held that Efax is entitled to resist the claim for pooling on the ground that it is entitled to the BHP shares in specie .
The Majority upheld the appeal by a 2-1 majority.
His Honour commenced his analysis by Read the rest of this entry »
October 30, 2012
In ACN 079 638 501 Pty Ltd (in liq) (recs & mgrs apptd) v Pattison & Anor  VSC 445 Justice Ferguson considered whether work in progress was covered by a charge given by company.
Mr Paul Pattison (“Pattison”), a qualified chartered accountant and registered liquidator and trustee in bankruptcy established and was sole director and secretary of the Plaintiff. Until April 2010 he conducted his insolvency practice through the Plaintiff . In November 2006 the Plaintiff charged its assets in favour of bank of Western Australia Ltd (“BankWest”). In 2010 BankWest appointed receivers and managers over the assets of the Plaintiff under the charge  &  – .
The issue in the proceeding was whether the work in progress recorded in the books of the Plaintiff, being time spent by Pattison working on insolvency administrations was an asset caught by the charge . Pattison contended that his appointments were personal to him and the Plaintiff provided services to him in connection with those appointments . The receivers contended that all work performed by him pursuant to his appointments as liquidator, deed administrator or trustee in bankruptcy was performed as an employee of the Plaintiff and his work in progress was an asset of the Plaintiff.
Her Honour found:
- the Plaintiff would raise invoices for fees and disbursements payable . The time spent by Pattison was included in the Plaintiff”s invoice on a separate charge made by him personally;
- cheques would be paid to Pattison and he would endorse them as payable to the Plaintiff. Payment was made into the company’s bank account ; and
- the Plaintiff’s payslips evidence fortnightly wages payable to Pattison as an employee although this was disputed in part .
Ferguson J framed the question as, at :
..the real question is as to the relationship between Mr Pattison and the Company and the effect (if any) that that had on ownership of the work in progress.
The fact that Pattison had certain obligations arising Read the rest of this entry »
October 11, 2012
The Victorian Court of Appeal in 360 Capital Re Limited v Watts & Ors  VSCA 234 dismissed an appeal from a decision in Watts & Watts & Ors v 360 Capital Re Limited & Anor  VSC 320 which held modifications to the 360 Capital Fund’s constitution were invalid for want to compliance with section 601GC(1)(b) of the Corporations Act 2001 (the “Act”).
The 360 Capital Industrial Fund (“360 Capital”) is a managed investment scheme under Chapter 5C of the Act. There are 180.63 million units in the Fund. The Constitution of the Fund relevantly provides, at  :
1) Clause 5.1(a): The Trustee could only issue units in accordance with clause 5 and subject to the Constitution.
2) Clause 5.2(a): The Trustee could not grant Options unless the Trust were Listed.
3) Clause 5.4: New Units were required to be issued at a price determined in accordance with clause 5.4.
4) Clause 13.5(a): An Option did not confer on the Optionholder any interest in the Fund.
On 31 May 2012 the directors of 360 Capital executed a Supplemental Deed Poll which Read the rest of this entry »