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) [2013] VSC 416 .

FACTS

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”) [1].  Hall applied for orders to set aside the summons in so far as it related to the production of documents [11].

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 [10].

Hall’s submissions

Hall objected on the following bases:

1. 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 »

The consequences of an examinee not claiming privilege against self incrimination during a public examination by a liquidator are dealt with in Ferguson J’s decision in Le Roi Homestyle Cookies Pty Ltd (in liquidation) v Gemmell [2013] VSC 452.

FACTS

The Liquidators of Le Roi Homestyle Pty Ltd allege that the Defendants have contravened the insolvent trading provisions of the Corporations Act 2001 (“The Act”).  Before issuing proceedings the Liquidators conducted public examinations of each of the Defendants pursuant to section 597. In large part, the insolvent trading claim against the Defendants is based on information elicited in the course of the public examinations.

Neither defendant claimed either privilege during his examination.The Associate Judge before whom the public examination read out the provisions of section 597(1) of the Act and explained its meaning and operation [20] – [21].

The Defendants applied Read the rest of this entry »

The Senate Standing Committees on Legal and Constitutional Affairs has reported on the Privacy Amendment (Privacy Alerts) Bill 2013.  The Committee endorsed the Bill.

The report relevantly provides (absent footnotes, introduction and appendices)

RECOMMENDATION
Recommendation 1
2.30 The committee recommends that the Senate pass the Bill.

CHAPTER 1
INTRODUCTION
1.1 On 29 May 2013, the Privacy Amendment (Privacy Alerts) Bill 2013 (Bill) was introduced into the House of Representatives by the Attorney-General, the Hon. Mark Dreyfus QC MP.1 On 17 June 2013, the Bill was introduced into the Senate and was referred on 18 June 2013 to the Legal and Constitutional Affairs Legislation Committee (committee) for inquiry and report by 24 June 2013.
Background to the Bill
1.2 In his second reading speech, the Attorney-General Read the rest of this entry »

In Arhanghelschi v Ussher [2013] VSC 253 the Supreme Court, per Ferguson J, consider the claim of oppression and the construction of the unit trust deed.

FACTS

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 [13]. On 7 March 2013 the defendants gave notice requiring the trust to convene a meeting [15]. 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 [17].  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 [19].

DECISION

Is there an obligation of good faith and reasonableness

Her Honour stated that a Unitholders Deed must Read the rest of this entry »

The Full bench of the Federal court in McCracken v Phoenix Constructions (Queensland) Pty Ltd [2013] FCAFC 41 by unanimous decision and per Lander J’s reasons, upheld an appeal against a sequestration order made by the Federal Magistrate’s Court.  The issue on appeal, at [34], is succinctly described as:

“..first, whether if a debt is relied upon for the issue of the bankruptcy notice and as an act of bankruptcy, that debt must continue to be owing at the time when the creditor’s petition is heard for the Court to make a sequestration order; secondly, if the debt is no longer owing at that time, whether the petitioning creditor can rely upon a later debt which first arose after the act of bankruptcy and after the filing of a creditor’s petition; and thirdly, if that debt can be relied upon at the hearing of the creditor’s petition and at the time of the making of the sequestration order, must that debt be for a liquidated sum.”

Facts 

The Appellant (“McCracken”) and the Respondent (“Phoenix”) were involved in a proceeding which culminated in judgement being entered for Phoenix in the sum of $2,025,212.17 on 15 June 2011. On 7 July 2011 the official receiver issued a bankruptcy notice directed to McCracken [4]. On 12 July 2011 McCracken filed a notice of appeal [5] and on 13 July the trial judge ordered McCracken to pay Phoenix’s cost of the proceedings [6]. Those costs were never assessed. On 10 August 2011 a bankruptcy notice was served on McCracken [12] with Phoenix filing a creditor’s petition on 11 August 2011. The creditors petition relied on a number of acts of bankruptcy including McCracken absenting himself from Australia and his dwelling house to avoid service. It did not rely upon the appellants failure to pay the judgement sum [13].  On 27 September 2011 in the Court of Appeal refused McCracken’s application for a stay of the judgement [15] and the Federal Magistrates Court refused his application for a stay of the bankruptcy proceeding [16]. On 18 October 2011 Phoenix filed an amended creditors petition relying upon McCracken’s failure to comply with the bankruptcy notice [17].

On 18 May 2012 the Court of Appeal allowed McCracken’s appeal and set aside the orders made by the trial judge [19]. On 19 July 2012  the Federal Magistrates Court heard the petition and made a sequestration order against McCracken on 14 September 2012 [22]. Their Honours’ noted that at the time the Federal Magistrates Court heard the creditor’s petition the debt which was relied on in both the bankruptcy notice and the creditor’s petition no longer existed, having been discharged by the Court of Appeal [23]. The Federal Magistrate concluded that even though the amount may have changed there was an ongoing debt that which was still doing due and owing [31] and that once an act of bankruptcy had been committed it remained available for the purposes of a sequestration order and did not rely on other acts of bankruptcy relied upon by Phoenix, such as the conduct of the appellants to avoid service [33].

Decision

Where the debtor who has committed an act of bankruptcy is ordinarily resident in Australia the court may make a sequestration order against the estate of the debtor [51].  The first requirement to found that jurisdiction is that the debtor has committed an act of bankruptcy [52]. The second necessary fact is that the debtor comes within one of the descriptions and section 43(1) (b) of the Bankruptcy Act 1966 (the “Act”).

The Court found that whilst the debt need not be the same debt as was relied upon to the act of bankruptcy it must be a debt which existed at the time of the act of bankruptcy [63]. The debt must Read the rest of this entry »

The UK Times has published the award winning and second and third winnings essays of the topic Privacy and the press: is state regulation in the public interest. They are found here.

They provide:

On May 10, 1768, the crackle of musketry tore through a crowd that had gathered at St George’s Fields. The imprisonment of John Wilkes for seditious and obscene libels had helped to trigger widespread protests against the Government, and the St George’s Fields Massacre was but another bloody milestone in the broader struggle for civil and political liberties in Britain.

Wilkes was not a wholly sympathetic character. A bawdy womaniser, occasional MP and radical journalist, his writing veered between passionate criticisms of the Government and downright obscenity. A practical joke of his involving Read the rest of this entry »

In Re Australian Property Holdings Limited (in liq) (recs & mgrs apptd) (No 2) [2012] VSC 576  Robson J considered applications by the defendants to stay the proceedings, which was refused, and to file limited defences, which was granted.

FACTS

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 [1].  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 [5].  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 [7], which they were in August 2007[8] 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 [13] 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[14]. ASIC commenced proceedings in the Federal Court on 21 August 2012 [15].

Both proceedings allege that APCH breached its statutory duties under the Act in amending the trust to the detriment of the unit holders [10] and both rely upon section 601FD [11].

DECISION

STAY OF PROCEEDINGS

The Supreme Court has an inherent power to stay proceedings in the interests of justice [19] (which is the overriding consideration [24]).  His Honour set out, at [21], 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 »

Griffiths J in Platinum Communications Pty Ltd v Computer Networks Pty Limited [2012] FCA 1260 considered an amendment to application to set aside a statutory demand.

FACTS

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 [1].  When the software was switched on the plaintiff suffered difficulties in many of its stores [7].  The plaintiff claimed Read the rest of this entry »

Re Willmott Forests Limited [2012] VSCA 202 is a very important decision in insolvency jurisprudence. The Victorian Court of Appeal upheld an appeal from a finding of a trial judge that the disclaimer of a lease agreement by the liquidator did not have the effect of extinguishing the leasehold interests in land [19]. In doing so the court undertook a detailed analysis of section 568 of the Corporations Act.

FACTS

The majority defined the question as, at [1]:

whether a leasehold interest in land is extinguished by the disclaimer of the lease agreement by the liquidator of the lessor, pursuant to s 568(1) of the Corporations Act 2001 (Cth) (‘the Act’)

Willmott Forests Ltd (“WFL”) owned leases from third parties freehold properties. It entered into 25 year leases. The liquidators of WFL sought to sell the interest in the properties unencumbered by the leases and seek to disclaim the lease agreement.  They applied to the court for approval of such disclaimers [2]. Sale contracts for the sale of the land contained conditions precedent to their completion of the liquidators obtaining orders and directions from a court authorising the liquidators, at [9]:

a) to exercise the powers to terminate, relinquish or surrender the project documents of the registered MIS and Professional Investor MIS; and

(b) to disclaim the project documents of the contractual and partnership MIS as onerous pursuant to s 568(1) of the Act.

The liquidators made application under section 511 of the Act and 477 (2B) for approval of their entry into contracts.

 DECISION

Warren CJ and Sifris AJA

Regarding the operation of section 568 their honours stated:

1. liquidators have the power to disclaim property of a company in liquidation or contracts entered into by the company [15]
2. it is to enable a liquidator to Read the rest of this entry »

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 »