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When Will a Court Replace a Trustee of a Bankrupt Estate?

Recently, the Federal Court of Australia (Justice Perry) in Yan v Spyrakis (Trustee), in the matter of the bankrupt estate of Liu [2024] FCA 768 considered when a Court may make an order to replace a trustee of a bankrupt estate under section 90-15 of Schedule 2 to the Bankruptcy Act 1966 (Cth) (“the Schedule”).

Facts

In December 2017, Mr Yan loaned $10 million to Mr Liu and GR Capital. In November 2021, Mr Liu became bankrupt, and Mr Spyrakis (“the Trustee”) was appointed as his trustee in bankruptcy. In March 2022, the Trustee published a report to the creditors of the bankrupt estate of Mr Liu (“the Estate”) stating approximately $64 million was owed to creditors and that Mr Yan, Ruifa Wang, and Yuqing Liu and Xingfeng Australia International Investment Pty Ltd (“Xingfeng”), were the unsecured creditors owed the largest debts. [...]  READ MORE →

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How to Take Someone To Court Once they have been declared bankrupt

How to Take Someone To Court Once they have been declared bankrupt – Lessons from Tse v Evans as Trustee in Bankruptcy for Ngo [2024] FCA 787

Many people understandably think that once someone has been declared a bankrupt, any unsecured money that the bankrupt owed them will be diminished significantly or disappear altogether. This is understandable, as the bankrupt loses control of their own assets and a third-party steps in to distribute those assets between all the people the bankrupt owed before they were declared bankrupt.

However, the Court does not entirely close the option of bringing or continuing legal proceedings against a bankrupt in person. The advantage of this is that if the proceedings are successful, the litigant will recover more of their money back than if they joined the queue of unsecured parties waiting for the Trustee in Bankruptcy to distribute whatever is left after their fees are paid. [...]  READ MORE →

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When will courts pull the plug? Understanding the termination of a Deed of Company Arrangement under section 445D(1)(g) of the Corporations Act 2001 (Cth)

When will a Court terminate a Deed of Company Arrangement (DOCA) for ‘some other reason’ under section 445D(1)(g) of the Corporations Act 2001 (Cth) (”the Act”)? In two recent cases, two separate courts have shed light on whether, and when, ‘public interest’ serves as a compelling reason to terminate a DOCA.

Yan v The Won Capital Pty Ltd [2024] NSWSC 758

Facts

In December 2017, Mr Yan loaned $10 million to GR Capital. In October 2018, GR Capital appointed administrators who reported to creditors the preliminary view that GR Capital had been insolvent since at least December 2017. Despite the administrators’ recommendations against the DOCA, creditors resolved on 30 January 2019 that GR Capital execute a holding DOCA allowing time to complete a property development before creditors could take action against GR Capital. Mr Yan commenced proceedings seeking termination of the DOCA under section 445D(1) of the Act to allow a liquidator to investigate insolvent trading claims. Mr Yan offered to provide funding to the liquidator for the investigations. As the limitation period on any insolvent trading claim was about to expire, it became urgent whether the DOCA was to be terminated and a liquidator appointed. [...]  READ MORE →

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How can property, of a bankrupt, not be “property of the bankrupt”?

By Jacob Reardon, a solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

One of the most entrenched distinctions between the personal and corporate insolvency regimes in Australia is the manner in which the property of the insolvent individual is treated. In a liquidation, for example, the title to the company’s property remains with the company upon the appointment of a liquidator, who is only an agent for the company. However, the position is fundamentally different under the Bankruptcy Act 1966 (Cth) (“the Act”). [...]  READ MORE →

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Solvency? I’m no expert, but …

By Ewurama Appiah, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Proving solvency (or insolvency) can be a critical, complicated, and costly aspect of insolvency litigation. However, it is not always necessary to have an expensive expert to establish solvency. The Supreme Court of Queensland recently handed down a judgment in favour of a respondent to a winding up application, in which the respondent’s solvency was established by documents other than external expert reports. [...]  READ MORE →

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How Bankruptcy Can Go Entirely Wrong – for a Successful Creditor!!

A creditor can apply to a Federal Court for an order to make a debtor bankrupt. This application is called a creditor’s petition and if everything is in order, will lead to the Court making a sequestration order against the debtor. Normally, Registrars of the Federal Courts are the ones responsible for hearing Creditor’s Petitions.

However, did you know that registrars have no power of their own to make a sequestration order? Instead the whole system hangs upon registrars exercising delegated judicial authority, and a “Constitutional imperative” that means Judges (ie those appointed under Chapter III of the Australian Constitution) must be ready to re-hear the creditor’s petition all over again (that is, a hearing de novo)? [...]  READ MORE →

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Attention Company Directors – DIN or discipline?

By Ewurama Appiah a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

The Australian Securities and Investments Commission (ASIC) has sent company directors a clear message: if you don’t have a DIN, you will suffer discipline at the hands of the regulator.

ASIC has commenced its first prosecution against a company director for failing to have a director identification number (DIN). Section 1272C(1) of the Corporations Act 2001 (Cth) stipulates that

‘’an eligible officer must have a director identification number’’. [...]  READ MORE →

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Out of the Shadows…

By Jacob Reardon a solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Over the years, decisions such as In the matter of Condor Blanco Mines Ltd [2016] NSWSC 1196 and ASIC v Planet Platinum and Anor [2016] VSC 120 have served as sober reminders for voluntary administrators of the need to be satisfied of the validity of their appointment.

Under section 436A of the Corporations Act 2001 (Cth) (“the Act”), a company may appoint an administrator if the board resolves to the effect that: [...]  READ MORE →

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Australia’s personal insolvency system expected to surge; those with small savings buffers to bear the brunt

By Keely Wunsch a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In October 2023 the Australian Financial Security Authority (AFSA) released a “State of the Personal Insolvency System Report” current to 31 August 2023. The report focused on two key areas, namely the current state of the personal insolvency system in Australia, and the regulatory focus of AFSA in managing the system under the Bankruptcy Act 1966 (Cth).

The report predicts that due to the cost of living crisis currently faced by Australian households and individuals, annual personal insolvency volumes are expected to rise in the next two years, by 23% in 2023-24 to around 12,250 and by a further 20% in 2024-2025 to around 14,750. It should be remembered that during COVID-19 personal insolvency numbers hit record lows, and were in decline even before that, so in part this increase is only partly increasing personal insolvency numbers towards historic (pre-COVID) averages. This figure anticipated in August 2023 also is belied somewhat by more current figures released in late January 2024 (for the December 2023 quarter) showing a decrease in personal insolvencies for that quarter, although the December quarter is traditionally quieter in personal insolvency. [...]  READ MORE →

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Fighting the Rearguard Action – s 459S and Winding Up Applications

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In an application to wind up a company for failure to comply with a statutory demand, section 459S of the Corporations Act 2001 (Cth) (“the Act”) operates to exclude grounds that a defendant either did rely on, or could have relied on, in an earlier application to set aside a statutory demand.

In the Explanatory Memorandum to the Corporate Law Reform Bill 1992, the stated policy goal of section 459S is to: [...]  READ MORE →

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The House that Estoppel Built?

The full version of this article was originally published in the Lexis Nexis Insolvency Law Bulletin

By Jacob Reardon, solicitor, and Stephen Mullette, Principal, Matthews Folbigg Lawyers

How long does a bankruptcy trustee have to sell a bankrupt’s home? What if the Trustee allows the bankrupt to live in the property, and pay the mortgage, council, and water rates, and repair the property for almost 5 years? Or for 8 years? More? Will the Trustee eventually become estopped from selling the property after such a long period? The answer may surprise. [...]  READ MORE →

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Dangers of Division 7A Loans In Liquidation

By Ashley Muscat, Law Clerk at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

It is common for associates and shareholders of companies in Australia to withdraw company funds through a loan account. There are lots of tax reasons why this is a popular way to access profits from a corporate vehicle. Of course, the ATO knows this, and so if the loan is not properly documented and does not satisfy the criteria to be a Division 7A loan, the amount will be deemed to have been paid out as a dividend, and taxed in the hands of the shareholder, usually unfranked. [...]  READ MORE →