City Insolvency Discussion Group Wednesday, 7 June 2017 Insolvency - - PowerPoint PPT Presentation

Wednesday, 7 June 2017 Insolvency Hot Topics

Presented by Hector West - Partner, Dentons Eleanor Taylor – Director, Dentons Helene Chryssidis – Solicitor, Dentons

City Insolvency Discussion Group

City Insolvency Discussion Group

Requests to inspect records Hector West

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Topics

Section 486 of the Act Section 531 of the Act Case authority

• Mansfield J considered the proper construction of s486 and s531.
• Necessary to give s486 and s531 exclusive areas of operation.
• Section 486 - application made after the winding up of a company, but in

relation to the books of the company maintained up to liquidation.

• Section 531 goes further - in the case of the liquidator’s books, of

providing that they should be generally available, unless the court

• therwise orders.

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Re Addstone Pty Ltd

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Inspection under section 486 of the Act

Application for a court order under s459P of the Act Application for a court order under s462 of the Act Application by ASIC under s464 of the Act

• “The Court may make such order for inspection of the books of the

company by creditors and contributories as the Court thinks just, and any books in the possession of the company may be inspected by creditors

• r contributories accordingly, but not further or otherwise.”

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What does s486 say?

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Meaning of “books”

Wide definition in s9 of the Act. Books in possession of the company at the commencement of the winding up. Not books created or retained during the course of the winding up: Hewson v Gothard; Re Allco Finance Group Ltd (rcvrs and mgrs apptd) (In liq) [2014] FCA 320

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Meaning of “creditor” and “contributory”

No definition –

• rdinary

meaning A member or past member to contribute to property of the company if it is wound up A company with share capital - a holder of fully paid shares in the company

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Does s486 apply in the context of a voluntary winding up?

Exercise any of the powers that the Act confers on a liquidator in a winding up in insolvency or by the court: s506

• f the Act

No court order = cannot exercise any of the powers conferred on a court in a court order winding up Liquidator, creditor or contributory can apply to court for an

• rder: s511 of the Act

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Court’s discretionary power

No fishing expedition Just and with conditions Legitimate interest

“A liquidator or provisional liquidator must keep proper books in which he or she must cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, unless the Court

• therwise orders, personally or by an agent inspect them.”

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S531 of the Act

• “A liquidator or provisional liquidator must keep proper books in

which he or she must cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, unless the Court

• therwise orders, personally or by an agent inspect them.”

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5.6.01 of the Regulations

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Repealing s531 of the Act

The Insolvency Law Reform Act 2016 (ILRA) repeals section 531 S531 still applies to events that occur before 1 March 2017 S531 still applies in relation to events in respect of which, or because of which , entries or minutes must be made

• Proper books
• Entries or minutes at meetings relating to the external administration of

the company

• Such other entries as are necessary to give a complete and correct

record of the external administrator’s administration of the company.

• Must ensure books are available for inspection.
• Permit creditor or contributory to inspect unless external administrator

has reasonable excuse.

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New provision – Division 70, Subdivision C Section 70-35

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What books can be inspected?

Do not need to produce documents protected by privilege Inspect “proper books” kept by liquidator = books containing “entries” or “minutes” of meetings of liquidator’s administration of company

Ordinary and natural meaning

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Court’s power under s531 to order inspection

Interest of justice in all the circumstances Liquidator’s reasons for orders No legal or evidentiary onus

• Liquidator appointed by Court on 8 February 2008.
• Mr Oates was a creditor of the company.
• Mr Oates requested to inspect the liquidator’s files under s531 of the Act.
• The liquidator requested request with more particularity.
• Mr Oates ignored the request.
• Mr Oates made an application under s531.
• The liquidator primary reason for opposing access concerned a cross claim

made by Mr Oates against the liquidator.

• Liquidator claimed:
• It was a fishing expedition to support Mr Oates’ cross claim.
• It would be oppressive and would confer an unfair advantage on him in the

cross claim.

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Matrix Group (In Liq) (Trustee) v Oates (No 3) [2017] FCA 417

• Not satisfied that it should make an order under s486 as:
• The order sought by Mr Oates was unconfined.
• Access not legitimately required.
• Request does not cover books created or retained during the course of the

winding up.

• Not satisfied that it should make an order under s531 as:
• Not in the interest of justice.
• Inspection may disadvantage the liquidator in litigation. Conversely, Mr

Oates would not be unfairly disadvantaged.

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The Court held…

Thank you

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Reforms to FEG

Eleanor Taylor

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Personal Property Securities Register Helene Chryssidis

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Topics

What is a defective registration? What makes a registration “seriously misleading” Case analysis

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What is a defective registration?

General rules

• S164 of the

Act Examples of defects – s165 of the Act Seriously misleading

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Seriously misleading

No definition in PPSA Canada and New Zealand lead the way Objective test

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CASE ANALYSIS

• Alleasing leased a crusher (~$1m per quarter) and spare

parts (~$6,000 per quarter) to OneSteel

• Lease was a “PPS lease”
• The data on the registration should have included:
• the grantor’s details (OneSteel)
• the secured party’s details (Alleasing)
• a description of the collateral

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Facts

• The ABN, not the ACN, of OneSteel (the grantor) was

provided

• Later, OneSteel appointed administrators
• The administrators informed Alleasing that they would not

return the crusher and spare parts

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Registration

ACN

004 651 325

ABN

42 004 651 325

• Because OneSteel (the grantor) was a corporation with an

ACN, its ACN had to be included in the registration:

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The error

Body corporate Details Source Body corporate that is the responsible entity of a registered scheme, if the scheme has an ARSN Registered scheme's ARSN National Names Index Body corporate that has an ACN ACN National Names Index Body corporate that has an ARBN ARBN National Names Index Any other body corporate Name of body corporate, as provided for in body corporate's constitution or equivalent document Body corporate's constitution or equivalent document

• Registration is defective if error is seriously misleading or if

search would not be capable of disclosing the registration

• Searches of the register can be done by reference to the

grantor’s details that should have been included in the registration

• A search using the ACN of OneSteel would not reveal

registrations using its ABN

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What is the effect of the defect?

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Consequence of the ineffective registration

Order made, or resolution passed, for the winding up

• f a company

Administrator of a company is appointed Company executed a deed of company arrangement Sequestration order made against person Person becomes bankrupt by lodging debtor’s petition

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Take away points

The PSSA considers defective registrations Seriously misleading is an objective test – look to Canada and New Zealand as a guide. Security interests must be registered correctly – for Allleasing, they hard 23 million reasons to ensure its interest was registered correctly.

Thank you

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Next CIDG session: Wednesday, 5 July 2017 Extracting Goodwill from Sale of a Professional Services Practice Tom Meagher, Murfett Legal

City Insolvency Discussion Group