City Insolvency Discussion Group 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
Requests to inspect records Hector West 3
Topics Section 486 of the Act Section 531 of the Act Case authority 4
Re Addstone Pty Ltd • 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 otherwise orders. 07/06/2017 5
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 07/06/2017 6
What does s486 say? • “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 or contributories accordingly, but not further or otherwise .” 07/06/2017 7
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 07/06/2017 8
Meaning of “creditor” and “contributory” A member or A company with past member to No definition – share capital - a contribute to ordinary holder of fully property of the meaning paid shares in company if it is the company wound up 07/06/2017 9
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 of 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 order: s511 of the Act 07/06/2017 10
Court’s discretionary power No fishing expedition Just and with conditions Legitimate interest 07/06/2017 11
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 otherwise orders, personally or by an agent inspect them.” 07/06/2017 12
5.6.01 of the Regulations • “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 otherwise orders, personally or by an agent inspect them.” 07/06/2017 13
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 07/06/2017 14
New provision – Division 70, Subdivision C Section 70-35 • 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. 07/06/2017 15
What books can be inspected? Ordinary and natural meaning Inspect “proper books” kept by liquidator = books containing “entries” or “minutes” of meetings of liquidator’s administration of company Do not need to produce documents protected by privilege 07/06/2017 16
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 07/06/2017 17
Matrix Group (In Liq) (Trustee) v Oates (No 3) [2017] FCA 417 • 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. 07/06/2017 18
The Court held… • 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. 07/06/2017 19
Thank you 20
Reforms to FEG Eleanor Taylor 21
Personal Property Securities Register Helene Chryssidis 22
Topics What is a defective registration? What makes a registration “seriously misleading” Case analysis 23
What is a defective registration? Examples of General rules defects – Seriously - S164 of the s165 of the misleading Act Act 07/06/2017 24
Seriously misleading No definition in PPSA Canada and New Zealand lead the way Objective test 07/06/2017 25
CASE ANALYSIS 07/06/2017 26
Facts • 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 27
Registration • The ABN, not the ACN, of OneSteel (the grantor) was provided 004 651 325 ACN 42 004 651 325 ABN • Later, OneSteel appointed administrators • The administrators informed Alleasing that they would not return the crusher and spare parts 28
The error • Because OneSteel (the grantor) was a corporation with an ACN, its ACN had to be included in the registration: Body corporate Details Source Body corporate that is Registered National Names Index the responsible entity of scheme's ARSN a registered scheme, if the scheme has an ARSN Body corporate that has ACN National Names Index an ACN Body corporate that has ARBN National Names Index an ARBN Any other body corporate Name of body corporate, Body corporate's as provided for in body constitution or corporate's constitution or equivalent document equivalent document 29
What is the effect of the defect? • 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 30
Consequence of the ineffective registration Order made, or resolution passed, for the winding up of 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 31
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. 32
Thank you 33
City Insolvency Discussion Group Next CIDG session: Wednesday, 5 July 2017 Extracting Goodwill from Sale of a Professional Services Practice Tom Meagher, Murfett Legal
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