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AFSA Offence Referral Update

Recent updates to the Alleged Offence Referral to AFSA template now provide for the inclusion of details of any person (individual or corporate) acting on behalf of, or assisting, a bankrupt or debtor. This can include a spouse, child, friend, accountant or lawyer assisting a bankrupt in an informal capacity, as is often the case.

As trustees are aware, they have a duty under section 19(1)(i) of the Bankruptcy Act 1966 to refer to AFSA any evidence of an offence committed by a bankrupt. However, there are often circumstances where it is unclear whether there is sufficient evidence to support an offence referral. AFSA has available a Pre Referral Enquiry (“PRE”) program that is a convenient and efficient way to deal with such matters. PREs can be as simple as emailing AFSA with a summary of the circumstances and suspected offence/s and are particularly useful:

  1. for suspected trivial offences (e.g. failure to advise the trustee within 21 days of new employment) that do not impact on an administration;
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CREDITORS AND THE INSOLVENCY LAW REFORM ACT 2016

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.

As the 2017 year draws to a close, creditors would be aware that both instalments of the Insolvency Law Reform Act 2016 (“the ILRA”) have come to pass.

What should creditors be aware of under the new regime?

The ILRA is an attempt to reform the insolvency law but also to provide an improvement in the confidence of the public in the overall performance of the trustees and liquidators appointed to the various estates and administrations that are commenced every day.

Under the Corporations Act 2001 only the liquidator of the company can commence an action for preference payments or voidable transactions. The ILRA allows a liquidator to assign a voidable transaction to a third party (including creditors!). This may result in claims being commenced which the liquidator thought were not commercial to pursue.

Under the ILRA creditors are given significant additional powers to call meetings, request information, and documentation regarding the administration of a bankrupt or corporate insolvency administration. This gives control, upon the passing of a resolution, to give certain directions to the trustee or liquidator and in addition, to remove the trustee or liquidator, although the practitioner has a right to apply to the Court to avert removal.
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CREDITORS AND THE INSOLVENCY LAW REFORM ACT 2016

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.

As the 2017 year draws to a close, creditors would be aware that both instalments of the Insolvency Law Reform Act 2016 (“the ILRA”) have come to pass.

What should creditors be aware of under the new regime?

The ILRA is an attempt to reform the insolvency law but also to provide an improvement in the confidence of the public in the overall performance of the trustees and liquidators appointed to the various estates and administrations that are commenced every day.

Under the Corporations Act 2001 only the liquidator of the company can commence an action for preference payments or voidable transactions. The ILRA allows a liquidator to assign a voidable transaction to a third party (including creditors!). This may result in claims being commenced which the liquidator thought were not commercial to pursue.

Under the ILRA creditors are given significant additional powers to call meetings, request information, and documentation regarding the administration of a bankrupt or corporate insolvency administration. This gives control, upon the passing of a resolution, to give certain directions to the trustee or liquidator and in addition, to remove the trustee or liquidator, although the practitioner has a right to apply to the Court to avert removal.
Continue reading…

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Disproportionately proportionate – the Sakr remuneration decision overturned

By Georgina King a Senior Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

A 5 member Full Court of the Supreme Court of NSW Court of Appeal has unanimously overturned the decision of Brereton, J in the much anticipated Sakr Nominees Pty Ltd (In Liquidation) insolvency practitioner remuneration appeal.

Justice Brereton had limited the remuneration of the liquidator, Clifford Sanderson, for work he had undertaken in the final stages of a liquidation, to $20,000 (including GST). This was only a portion of the total remuneration sought to be approved ($63,577.80). In reaching this decision, His Honour relied heavily on the fact that remuneration may be by way of commission (a proportion of assets realised or distributed) rather than time based and a view that in smaller liquidations “questions of proportionality, value and risk loom large, and liquidators cannot expect to be rewarded for their time at the same hourly rate as would be justifiable when more property is available.”
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When is a PPS registration effective?

By Hayley Hitch, a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

A Personal Property Security (“PPS”) registration is effective from the date of registration. However, many variables or factors may invalidate a registration and therefore cause issue in respect of priority placement between security interests.

In the matter of Accolade Wines Australia Limited and Ors [2016] NSWSC 1023 (“Accolade”), the Plaintiffs registered a security agreement on the PPS register against various grantors. However, the Plaintiffs registered the security interest under the name and ABN of each grantor but failed to register the agreement under the ACN of the various grantors. By failing to register the PPS under the ACN of each relevant company, this invalidated the PPS registration.

The issue with not registering a security interest against a grantor’s ACN is that a search of the PPS register in respect of a corporate entity will not show all security interest which should appear against the entity’s record.
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The Administrative Appeals Tribunal and the Bankruptcy Act – How far does its jurisdiction extend?

By Bonnie McMahon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In the recent Administrative Appeals Tribunal (“the Tribunal”) decision of Lavin and Inspector General in Bankruptcy [2016] AATA 798 (“Lavin”), the Inspector-General in Bankruptcy (“Inspector-General”) has successfully argued that the Tribunal does not have the jurisdiction to:

  • review a decision of a Trustee in Bankruptcy (“the Trustee”) in relation to an assessment of the bankrupt’s income and contributions, when the Inspector-General refused to conduct a review of the Trustee’s decision under section 139ZA(5) of the Bankruptcy Act 1966 (Cth) (“the Act”): and
  • determine that a refusal made by the Inspector-General to conduct a review of the Trustee’s decision under section 139ZA(5), is as a matter of fact a different decision or decisions than that stated by the Inspector-General.

The Applicant in Lavin was a bankrupt seeking a review of the decision her Trustee had made, in relation to her income and contributions under section 139Y of the Act. The Applicant had previously sought an internal review of the Trustee’s decision by the Inspector-General. The Inspector-General had refused to undertake this review under section 139ZA(5), and as a result the Applicant had applied to the Tribunal seeking a review of the Inspector-General’s decision under section 139ZF(b).
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Insolvency set-off trumps building and construction security of payments regime

By Georgina King a Senior Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

Three recent Supreme Court cases, in 2 different States and the Australian Capital Territory, have dealt with insolvent companies seeking to rely upon Building and Construction Industry Security of Payment legislation to recover amounts from parties that have significant set off claims and grounds to dispute the amounts sought to be recovered.

The judgments and comments made by the Courts in each case make it clear that notwithstanding the ordinary operation of the security of payment provisions, which are designed to provide for quick interim payment of progress claims by construction companies, the provisions are not to be interpreted as providing for amounts to be recovered by currently or soon to be insolvent companies without any right of set off or challenge to the debt by the opposing party being taken into account.

Two of the cases, concerning the same construction company now in liquidation, involved applications to stay action by the company to enforce a judgment or adjudication determination obtained pursuant to Building and Construction Industry Security of Payment legislation. The stays were sought so that any right of set off or challenge to the debt was able to be taken into account before payment was made. This was critical in terms of the net result for these parties given the impact the insolvency of the company would have had on their ability to recover any amount they paid.
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