Annual Review of Insolvency & Restructuring Law 2008 - Allens

208 Pages·2009·0.61 MB·English

2008
Annual Review of Insolvency & Restructuring Law
For further information about Ins ol ven cy & Restructuring Law, please contact:
SYDNEY SINGAPORE MELBOURNE
Andrew Boxall Robert Fish Tania Cini
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Paul Nicols PERTH Anne Ferguson
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[email protected] Tim Lester [email protected]
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Michael Quinlan [email protected] Clint Hinchen
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[email protected] Kim Reid [email protected]
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Ian Wallace [email protected] Simon Lynch
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[email protected] BRISBANE [email protected]
John Warde Alf Pappalardo
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[email protected] [email protected]
HONG KONG Geoff Rankin
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Jim Dunstan
[email protected]
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[email protected] Michael Ilott
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Simon McConnell
[email protected]
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[email protected]
Visit our website at www.aar.com.au/services/insolv/ for:
(cid:129) An electronic version of this Review at
http://www.aar.com.au/pubs/arir/index.htm
(cid:129) Electronic versions of past editions of this Review
(cid:129) Papers delivered at our regular forums and newsletters covering new cases and
legislative developments
We would very much like your feedback on this Review.
If you would like further information about our regular forums on Insolvency & Restructuring Law,
please contact: Jessie Plaia on [phone].
Annual Review of Insolvency & Restructuring Law 2008
Also available online at:
http://www.aar.com.au/pubs/arir/index.htm
© Allens Arthur Robinson 2009
Written and published by Allens Arthur Robinson
Deutsche Bank Place, Corner of Hunter and Phillip Streets, Sydney NSW 2000
www.aar.com.au
The summaries in this review do not seek to express a view on the correctness or otherwise of any court
judgment. This publication should not be treated as providing any defi nitive advice on the law.
It is rec om mend ed that readers seek specifi c advice in relation to any legal matter they are handling.
Preface
It gives us great pleasure to introduce our Annual Review of Insolvency & Restructuring Law 2008.
This marks the tenth edition of the Review. It is notable that we have reached this milestone in a year that has seen unprecedented
economic upheaval and a spate of high profi le insolvencies in Australia and around the globe.
A full online version of this edition can be found at http://www.aar.com.au/pubs/arir/index.htm.
2008 saw a number of signifi cant insolvency and restructuring decisions and developments in the law. In particular:
• the long-awaited decision in the Bell Group matter;
• the Green v CGU decision relating to plaintiff liquidators providing security for costs where they are backed by litigation funders;
• the introduction of legislation to implement part of the Federal Government's fi nancial stability package, including the Financial
System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 and the Financial Claims Scheme
(General Insurers) Levy Act 2008;
• the entire Cross-Border Insolvency Act 2008 came into force on 1 July;
• various publications from CAMAC, including those relating to issues in administration, long-tail liabilities and the Personal Property
Securities Bill 2008;
• the decision of the House of Lords in HIH; and
• the introduction of dramatic legislation, including the US Emergency Economic Stabilisation Act 2008 signed by President Bush
which is expected to provide some short-term liquidity in the market.
These developments (and more) are set out in this Annual Review of Insolvency & Restructuring Law 2008.
In 2007, we noted that the likely effects of the sub-prime loan market meltdown and the corresponding credit crunch continued to be
debated. In 2008, we saw those problems erupt into a global fi nancial crisis, with the collapse of many doyens of the market, dramatic
reductions in the value of equity markets around the globe and a sharp fall in commodity prices.
Some of the key features of the GFC (as it affected Australia in 2008) included a 42 per cent fall in the total value of the Australian
share market (with a 41 per cent fall in the S&P/ASX 200 alone), drastic measures by the Reserve Bank of Australia of reducing
interest rates by 2.5 per cent, rising unemployment and a signifi cant reduction in consumer confi dence. The medium-term impact of
dramatic government intervention in Australia and around the globe continues to be debated. In the meantime, our insolvency and
restructuring practice remains very busy dealing with the current phase of the 'de-leveraging' process.
We thank all of the partners, senior associates, lawyers, research assistants and summer clerks at Allens Arthur Robinson who have
contributed to yet another outstanding publication. We give particular thanks to Anne Ferguson in Melbourne, Michael Ilott and
Stephen Hurford in Brisbane and Rebecca O'Brien in Perth for coordinating the preparation of the case notes. Other signifi cant
contributors to whom we are grateful include Michael Popkin, Tim Robinson and Christopher Prestwich. Thanks also to the
publications team, led by John Savic and Arlene Cullen, and the design team, led by Kelly Royle.
We hope that you fi nd the Review an informative and useful reference tool. We welcome your feedback and comment, and look forward
to the opportunity to work with you as clients of our insolvency and restructuring practice in 2009.
Kim Reid, Partner and co-editor Angela Martin, Senior Associate and co-editor
March 2009
Editors
Kim Reid Angela Martin
Contributors
David Allen Claire Harris Claire Nichols
Kate Austin Sarah Hine Rebecca O'Brien
Lisa Bau Michael Hogan Claire Palmer
Helen Beatty Katharine Horne Michael Popkin
Mary Berton James Hughes Christopher Prestwich
Eleanor Bishop Stephen Hurford Michael Quinlan
Luke Bona Michael Ilott Gavin Rakoczy
Patrick Crisp Melanie Jasper Tom Randall
Eloise Dias Peter Jones Kim Reid
Bryn Dodson Liis Kirk Tim Robinson
Simon Eggins Przemek Kucharski Chris Rosario
Chris Erfurt Anthony Lepere Bree Rosewell
Mark Farquhar Diccon Loxton Malcolm Stephens
Anne Ferguson Matthew McCarthy Ross Stitt
Liz Fertuck Simon McConnell Lisa Tibbitts
Hugh Foley Angela Martin Elena Tsangari
Claire Forster John Morgan Leesa Vanmali
Alice Fraser Lisa Mortimer John Warde
Goran Gelic Nicholas Ng Mun Yeow
Rebecca Hardie
Allens Arthur Robinson Insolvency & Restructuring
Allens Arthur Robinson (Allens) has been servicing clients in Australia for 180 years and in the Asia region for the past three
decades. Allens is one of the largest law fi rms in the Asia region, with 190 partners and more than 600 other legal staff. We provide
a full range of commercial legal services to many of the region’s leading corporations and government organisations, including more
than half of Australia’s, and a dozen of the world’s, top 100 companies.
Banks, corporations, directors, receivers, administrators, creditors and liquidators know our reputation for rapid response and quality
work in insolvency and restructuring.
If you are dealing with troubled corporations in Australia, Asia or internationally, our experienced team can work with you to provide
the fast, effective solutions you require.
Our commitment is to provide a team, on the ground, to manage the critical stages of a matter. Experienced insolvency and
restructuring lawyers are backed by the fi rm’s specialists in relevant industries and areas of law.
Our expertise extends to every corporate insolvency situation; we have handled some of Australia’s and South East Asia’s most
signifi cant insolvencies and restructures in recent years.
We have acted in numerous corporate restructurings: our detailed knowledge of corporate and tax law helping our clients to achieve
results with certainty and speed. Our dealings with international corporate groups have kept us at the leading edge of global trends in
corporate restructuring.
Clint Hinchen Geoffrey Rankin Michael Quinlan
National Practice Leader National Practice Leader Deputy Practice Leader
Partner, Melbourne Partner, Brisbane Partner, Sydney
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[email protected] [email protected] [email protected]
Andrew Boxall Tania Cini Jim Dunstan
Partner, Sydney Partner, Melbourne Partner, Hong Kong
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[email protected] [email protected] [email protected]
Anne Ferguson John Gallimore Michael Ilott
Partner, Melbourne Partner, Brisbane Partner, Brisbane
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[email protected] [email protected] [email protected]
Tim Lester Diccon Loxton Simon Lynch
Partner, Perth Partner, Sydney Partner, Melbourne
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[email protected] [email protected] [email protected]
Simon McConnell Paul Nicols Alf Pappalardo
Partner, Hong Kong Partner, Sydney Partner, Brisbane
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[email protected] [email protected] [email protected]
Steve Pemberton Kim Reid Adam Thatcher
Partner, Melbourne Partner, Perth Partner, Brisbane
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[email protected] [email protected] [email protected]
Ian Wallace John Warde
Partner, Sydney Partner, Sydney
T [phone] T [phone]
[email protected] [email protected]
Table of Contents
Deeds of company arrangement and voluntary administration
Can a court rewrite pre-existing contractual arrangements to increase the
property available under a DOCA? 19
International Air Transport Association v Ansett Australia Holdings Limited
Retrospective validation of appointment as administrators 21
Carrello v Health Resorts of Australasia Pty Ltd
Extension of the convening period for a creditors' meeting 23
In the matter of Canberra RSL Memorial & Citizens Club Limited
(Administrators Appointed) and Ezio Marco Senatore and Stephen John Hundy
Extension – Committee says no, court says yes 25
In the matter of Lift Capital Partners Pty Ltd (admins apptd)
Using the magic provision to back-date the 'relation back day' 27
Chief Commissioner of State Revenue v Rafferty's Resort Management Pty Ltd (in liq)
Deed administrators' entitlement to remuneration may be
limited to assets identifi ed in a DOCA 30
Wellnora Pty Limited v Pino Fiorentino and William James Hamilton
Principles for extension of convening period for second creditors' meeting 32
In the matter of LED Builders Pty Ltd (Admins Apptd):
LED Builders Pty Ltd (Admins Apptd) & Ors
Who pays the costs of 'test case' that clarifi es the rights of numerous creditors 34
Beconwood Securities Pty Ltd v The Australia and New Zealand Banking Group Limited (No 2)
Holders of redeemable preference shares as creditors under Part 5.3A 36
Heesh v Baker
What happens if an adjourned second creditors' meeting is not reconvened? 38
In the matter of LMP Developments Pty Ltd and ZLM Property Holdings Pty Ltd
Easier said than done: bringing an administration to an end 40
Manuel Giouzeppos v Window Décor Australia Pty Ltd (ACN 102 558 823) & Anor
Challenge to administrator's admission of proofs of debt
and grounds for terminating a DOCA 42
In the matter of Longreach Capital Pty Limited (administrators appointed); Irving v Smith
Administration or liquidation? Whether a winding-up application
should be adjourned to allow the appointment of administrators 44
Re Octaviar Limited (formerly MFS Limited)
Administrators must be independent and must be seen to be independent 46
Monarch Gold Mining Co Ltd ACN 100 038 266
(Receivers and Managers appointed) (Administrators appointed)
Appointing administrators? Bona fi de opinion that the company is insolvent
or likely to become insolvent is required 48
Smolarek v Brian Keith McMaster as Administrator of Eznut Pty Ltd [No 2]
Deregistered companies
Reinstating a company for the purpose of litigation 49
J P Morgan Portfolio Services Limited v Deloitte Touche Tohmatsu
Reinstatement of a deregistered company – can a sole shareholder
and/or director be a 'person aggrieved'? 51
Application of Michael Kandy
Reinstating a company to enliven the apportionment legislation 53
Tyrrell v Tyrrells Building Consultancy Pty Ltd
Power of court to reinstate deregistered company 55
In the matter of Newfront Pty Ltd (Deregistered) (ACN 053 228 489)
Effect of a caveat lodged before deregistration and what happens on reinstatement 56
Brown v Hodgkinson
Reinstatement of a company on application of the Commissioner 58
Deputy Commissioner of Taxation v James Hardie Australia Finance Pty Ltd (Deregistered)
Directors and corporate governance
No indemnity for company directors from insolvent trading claims 60
New Cap Reinsurance Corporation Ltd v Daya
Failed appeal by directors leads to an order for indemnity costs 61
Williams (as liquidator of Scholz Motor Group P/L (in liq)) v Scholz & Anor
Determination of insolvency, or likely insolvency, for
purposes of appointment of administrator 63
Mt Nathan Land Owners Pty Ltd (in Liq) v Morris & Ors
Lending and securities
Court orders that security for debentures be immediately enforceable 65
Perpetual Trustees WA Limited v Elderslie Finance Corporation Limited
Is a close-out netting clause effective and how are creditors' claims
estimated for voting purposes? 67
Lindholm, in the matter of Opes Prime Stockbroking Limited
(administrators appointed) (receivers and managers appointed)