When thinking about the value of a minority shareholder’s shares, it is sometimes said that a “minority discount” applies. This price reduction may reflect the inability of a minority to influence the company, or perhaps the undesirability of being in business with the majority shareholder.
In a recent decision of the Victorian Supreme Court, Joint v Program IT Pty Limited & Ors [2020] VSC 867, the Court considered the right price for the sale of the minority shareholder’s shares, including whether the discount applied.
A minority shareholder recently applied to the Court for orders requiring the majority shareholder to by their shares.
All parties agreed that a share purchase was best. What was not agreed upon was the price. The majority shareholder said that a minority discount should apply.
The law is clear in this area: if there has been oppressive conduct, there will be no minority discount.
The facts in the matter were complex.
For many years, the minority shareholder had owned their shares and had previously won an oppression suit, requiring another party to buy them. However, the would-be buyer became insolvent, and that sale fell through.
Later, a company director became the majority shareholder and brought the company back “into the black”; doing hard work in the years 2009 to 2012 to improve the company’s financial performance.
From this time, that director was paid substantial fees.
In 2015 that directed transferred their shares to the current majority shareholder and began to cause them also to be paid fees, and for both to be paid for travel expenses. Later, in 2020, the director caused the appointment of administrators after the legal proceedings had been commenced.
The Court found the payment of post-2012 fees, payment of travel expenses, and appointment of administrators was oppressive and that the majority shareholder would have to pay “full whack” for the shares, with no minority discount.
When thinking about a company’s shares or structuring your affairs, it is essential to get expert advice to avoid the problematic situation that the minority shareholder found themselves in, described above.
If you have any legal questions about commercial and corporate law, reach out to our specialists at Chamberlains Law Firm!
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Discovery is a process often required in civil proceedings in most Australian jurisdictions. During discovery, you must provide your opponents with any documents related to the case before the Court. Discovery ensures that parties are able to obtain proper advice from their solicitors, consider their prospects of success and effectively prepare their case prior to trial. This allows parties to avoid any surprises at the hearing and encourage the settlement of disputes.
In the Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd (No 6) [2020] NSWSC 1883, Justice Stevenson made orders, one of which included an order that the defendants give discovery of certain email correspondence.
Those orders for discovery were for the following documents:
Documents held by the First Defendant and created between 23 March 2018 and 9 April 2019 (inclusive):
The parties sought guidance as to what those orders specifically required.
In ascertaining the interpretation of the Orders, his Honour noted that Court orders are subject to “ordinary rules of construction” and that the Court does not enquire the subjective intentions of the judge or magistrate making the orders. This is also where he did not draft the orders sought; instead, it was the plaintiff that included this in their motion for discovery.
The plaintiffs submitted to the Court that the orders should be:
“… interpreted so that if one email in a thread or part of a document includes the relevant term or falls within the required category, the whole email thread or document is produced, rather than just the component of the relevant document that uses the relevant term or falls within a required category”.
His Honour confirmed that the orders required production of documents created during the specified timeframe, and any attachments to the emails within this time period must be produced in full, whether or not those attachments include any keywords.
The defendants noted that with respect to the documents to be produced, they would seek to maintain confidentiality for commercially sensitive material. For the documents that could not be agreed upon between the parties, the defendants sought orders to allow them to apply for leave from the Court within two days for confidentiality to be maintained.
His Honour noted that if the documents to be produced included commercially sensitive information, arrangements could be made to accommodate and protect the defendants’ legitimate interest by way of an appropriate commercial confidentiality regime. Absent any orders by the Court permitting redactions in the emails, and all documents were required to be produced subject to any claim for legal professional privilege.
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Former Canberra Football Coach Stephen Porter (“Porter”) has pleaded guilty to four counts of sexual crimes against children.
In 2015, Porter was found to have aligned himself with a family to gain access to their child. Porter offered the child one-on-on coaching, proposing to make him a better player, to which his parents agreed. Over approximately a one-year period, Porter developed a coaching relationship, turned friendship, with activities such as playing board games together with the child’s family and having dinners at the child’s family home.
After developing the above-mentioned relationship, in approximately 2015, Porter invited the child over to his house and played Xbox with the child, before commencing a conversation regarding how Porter had made other junior football players “feel good”. Porter then placed him arms on the child’s shoulder, walked the child to his bedroom and said, words to the effect, “You’re not going to regret this,”. What occurred next was found by the Court to be sexual assault.
During the disputed facts hearing before ACT Supreme Court Justice Chrissa Loukas-Klasson, Porter claimed the sexual encounters occurred 14-15 times and that of those times, penetration occurred two to three times. The prosecution asserted that every time after the first encounter of sexual abuse, rape had occurred and that Porter had actually sexually assaulted the child between 35 to 45 times. Her Honour found Porter had attempted to minimise his crimes and that the victim’s account was believable. Ever more disturbingly, during the disputed facts hearing Porter claimed he was very close friends with the boy and gave evidence that he “felt like he was my little brother”.
On 1 September 2022, Porter was sentenced to 20 years imprisonment with a non-parole period of 12 and a half years, giving him eligibility for release in May 2034. Justice Chrissa Loukas-Klasson indicated that the long sentence reflected the seriousness of the crimes.
At Chamberlains, we support our clients in seeking restorative justice, by pursuing financial compensation from the institution responsible or individual perpetrator in historic and current sexual abuse claims.
If you would like to discuss a claim you may have or have been a witness to abuse, please contact Ms Sarah Hayman of our Personal Injury Team on sarah.hayman@chamberlains.com.au
A waiver is a legal document or clause in a legal document that seeks to limit the liability of an organisation in the event that a participant suffers a loss or injury. This limitation of liability can only be done within the framework of the relevant laws of the State or Territory, or they will be deemed void.
Waivers may have greater benefits in managing risk by highlighting the hazards inherent in the activity to the participant. Making the participant aware of these dangers may cause them to modify their behaviour and therefore make safer decisions. It also prevents any claims later on that the participant was not aware of the activity’s risks.
Additionally, by including a self-assessment in the risk acknowledgement declaration, it provides some protection for the organisation if there is a claim arising from the incompatibility of a horse and rider. It places some liability back on the participant who overrates his or her ability to the organisation or business.
Waivers and risk acknowledgement declarations are essential for organisations, businesses and individuals in the horse industry. Whether you are a large riding school, an event organiser, a private instructor, or a potential buyer riding a horse for sale, waivers and risk acknowledgements are very important to ensuring everyone is aware of the risks involved and where the liability falls should there be an accident.
It is a common misconception that a waiver in a contract will protect an equine professional from any and all liability when someone is hurt (or dies) whilst engaged in an equine-related activity. While waivers should be used, they cannot protect you from all liability whatsoever, and misunderstanding your legal obligations may have a severe impact on your business.
The law recognises that horses (or other defined equine) are big, unpredictable and easily startled (amongst other things) and cannot always be controlled by an equine professional. The law recognises those characteristics to be the inherent risks of equine activities and does not impose liability for personal injury on an equine professional for injuries caused by those inherent risks.
That protection does not prevent liability if the equine professional:
Equine Activity is broadly defined at law to include anything from participating in shows, fairs and competitions through to farrier work, and most activity in between.
This is the only necessary comparison section. Everything else remains in narrative form as you provided.
| Jurisdiction | Relevant Risk Warning Law | Special Requirements |
| NSW | Civil Liability Act 2002 (NSW) | Risk warnings available for dangerous recreational activities and obvious risks. No prescribed wording. |
| ACT | Civil Law (Wrongs) Act 2002 (ACT) | Mandatory wording for warning signs. Letters must be at least 2 cm high and displayed conspicuously near the arena. |
| QLD | Civil Liability Act 2003 (Qld) | No mandatory statutory wording. Risk warnings should be given before participation. |
| WA | Civil Liability Act 2002 (WA) | Equine activities are dangerous recreational activities. No mandatory wording but warnings should be clear and visible. |
NSW
Risk warnings under the Civil Liability Act 2002 (NSW) can protect an equine operator from liability for injuries resulting from the inherent risks of horse riding and associated activities. Written or verbal warnings should be clearly provided before the activity.
ACT
The Civil Law (Wrongs) Act 2002 (ACT) requires an equine professional to display the following warning:
WARNING
Under the Civil Law (Wrongs) Act 2002, an equine professional is not liable for injury to, or the death of, a participant in an equine activity that results from an inherent risk of the activity. This is subject to limitations set out in the Act.
The notice must be in black letters at least 2 cm high and displayed in a conspicuous place near the arena.
Queensland
Under the Civil Liability Act 2003 (Qld), equine activities qualify as dangerous recreational activities. A clear risk warning should be given before participation. No mandatory wording applies.
Western Australia
Under the Civil Liability Act 2002 (WA), equine activities are categorised as dangerous recreational activities. A clear and visible risk warning should be given, although WA has no mandatory wording requirements.
Obtain legal advice on the appropriate wording to include in your written contract, which should be provided to each participant prior to the provision of professional equine services.
Insurance should cover more than the inherent risks of equine activities. It must extend to circumstances where the equine professional may have been negligent, or where, for example, a horse bolts onto a road and causes an accident.
You should also ensure that you are complying with your obligations at law and have proper insurance in place to protect you where the law does not.
Chamberlains specialist equine law team can help you prepare the correct waivers and can offer discounted packages on a range of other documents, including:
It is important to note the fundamentals of protecting your intellectual property (IP) and getting your IP strategy right when starting your business.
Identifying Your IP
Starting a new business is exciting, and it is often when much of your intellectual property is created. There are many things that differentiate you from your competitors, whether it is your business name or a new innovative processes you have created. As your business grows, it will become more important to protect your intangible assets.
Your IP Options
It is important to understand the characteristics and advantages of the different types of IP. Patents protect inventions, while the way something looks is protected by a design registration. Registered trademarks protect a brand including the name and logo of your business.
Confidentiality
Until your idea is protected, keep it confidential. If you are sharing your idea with others, use a non-disclosure agreement (NDA) to prevent others from disclosing your idea without permission.
If registering for a patent or design is an interest of yours, maintaining secrecy until your application has been filed is a crucial step. While you may choose to keep your invention a secret rather than applying for a patent, which is known as a trade secret, it does mean if someone discovers your trade secret and you do not have a patent application in place, there is nothing stopping them from utilising your invention.
For example, the formula for Coca-Cola has remained a trade secret for generations. There is no patent protection, and therefore no onus on the company to publicly disclose the recipe. Trade secrets work best where the product is difficult to reverse engineer or replicate, and the knowledge can be protected with confidentiality agreements.
Register Your Idea or Brand
Registering a patent, trade mark or design with IP Australia can offer protection for your intellectual property. When determining whether to protect your intellectual property, the positives and negatives of each rights must be examined to assist with your decision making. Speak to a Patent and/or Trade Mark Attorney in the first instance if you are considering pursuing intellectual property protection.
Commercialisation
You must commercialise your idea to bring your idea to market. Using a model of your invention can assist with finding and convincing prospective financial backers to envision your idea and its market potential. However, it is important that you do not disclose your idea before filing for the relevant intellectual property right and/or having a confidentiality agreement in place.
Market Research
It is imperative that research is conducted to understand possible consumers, buyers, licensees, investors, manufacturers, and distributors. Market research can be the basis for determining the unit cost and the competitiveness of your product.
Patent, trade mark and design databases can be used to ensure your ideas are original and do not infringe the rights of others. These databases can be found below:
Searching for new business opportunities and competitor activities can provide the edge needed to successfully execute your idea.
Infringement
It is important to monitor your intellectual property rights and the market. In the event that you believe your product is being infringed, speak to your Patent and/or Trade Mark Attorney immediately. Infringement of your intellectual property can cause a decline in market share, and poor-quality imitations can rapidly shatter your brand’s reputation.
If you have questions or concerns about intellectual property agreements, contact one of our intellectual property lawyers today.
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Starting a new business can be a daunting time. This guide lists 6 legal considerations you should consider when launching a start-up.
Business structure
The business structure you choose each has their own associated risks. For each structure you must apply for an Australian Business Number (ABN) online through the Australian Business Register for free. The three main structures are:
Sole trader
This can be considered one of the most cost-effective ways to set up a business if you will be the only person running the business. As a sole trader you will be personally liable for the debts of the business.
Partnership
If you are going into business with someone else, a partnership structure will allow you to jointly operate the business. Similar to sole traders, you will both be personally liable for the debts and liabilities of the business. Since you are in business together, you will need a partnership agreement to define your relationship, roles, responsibilities, and obligations.
Company
A company provides the most protections from personal liability. When setting up a company, there is a requirement to provide information of the shareholders and directors of the company to ASIC. Once the Company is established and unlike sole traders and partnerships, the Company will be a separate legal entity from the directors, meaning the company is liable for its own debts. Either an individual or a group may establish a company making it a popular choice for start-ups and new businesses where this type of structure and protection is advantageous.
If you choose to use the company structure, you and the other people will need to decide who will be the directors, secretary and shareholders and sign consents to be appointed these positions. Lawyers can help you draft a shareholders agreement to accurately reflect the agreement you and your business parties reach.
Most companies will be registered as proprietary limited but if you are a not for profit you may want to consider a company limited by guarantee. Lawyers frequently create constitutions for each of these company structures and register them with ASIC on your behalf to streamline the start-up process.
Once a company is registered, they will be required to keep a company register. This document includes the constitution, consents and registers of current officeholders and members. Again, your law firm can put this document together for you.
Contracts: employees and suppliers
As your business grows, you may require staff. When hiring employees, ensure you have checked the relevant award to know you are correctly paying your employees. Further requirements include superannuation and pay as you go instalments (PAYG). Each of these should be outlined in the employment contract before the employee begins working for you.
Relationships with contractors may be more appropriate for your business. Contracts should also be prepared in this scenario and cover payment, hours and who the work they produce ultimately belongs to.
Almost all businesses will require some contracts, whether with buyers or suppliers. Lawyers can help you draft terms and conditions regarding things like payment and refunds. While an additional upfront cost, these contracts can protect you and your business from future loss.
Trademarks and Intellectual Property
We recommend you register your business name, logo and slogan as trademarks. Once they have been registered they are part of a searchable database that shows that particular graphic is owned by you or your company. This means you have the sole ability to use those words or images and can enforce intellectual property rights against anyone else pretending to be you.
Tax
As a sole trader you can use your personal tax file number (TFN) however companies and partnerships must apply for their own separate TFN. It is best to do this while applying for an ABN.
The threshold for GST is revenue of more than $75,000 (or $150,000 for non-profits). At this point you will need to register for GST through the ATO.
The consequence of not registering for GST when you should have is you will be required to backpay the GST on sales that you did not include GST in previously.
Insurance
Workers’ compensation insurance is compulsory if you have employees. Some industries require businesses to hold a certain insurance cover. Public Liability insurance may be advisable, if not mandatory, if your business is interacting with clients. Other insurance you may want to look into broadly include:
Taking out insurance on key assets is the best way to protect yourself from loss.
Regulations
In addition to insurance, before beginning operations, check the regulations relevant to your industry. For example, if you run a small food business selling cakes, you will still require a food handling certificate. If you sell alcohol you will require your business and employees to follow responsible service of alcohol laws. Local council regulations may also apply zoning rules or require permits. Industry bodies and councils can inform you which regulations you will need to follow.
Keys takeaways
The beginning of any new business or start-up is an exciting time. It is also the best time to ensure you and your business are compliant with regulations and protected as best as you can be from risks. Before opening the business, determine your business structure and the relationship between everyone involved in the start-up. Important people to speak with include solicitors and accountants.
(Assisted by; Jacqueline Healy)
If you have any legal questions about commercial and corporate law, reach out to our specialists at Chamberlains Law Firm!
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Litigation can be a confusing and tiresome process with the numerous procedures in the ACT Courts and Tribunals. That’s why we at Chamberlains are committed to helping you through the processes should any concerns arise. We have outlined below a rough guide on the ACT Court processes and options available in order to make a claim.
Making a claim
The ACT Civil and Administrative Tribunal (ACAT) has jurisdiction to determine civil claims up to $25,000 in value. The process for recovering a debt above this amount is by commencing proceedings in the ACT Magistrates Court (ACTMC) by way of an Originating Claim & Statement of Claim (collectively, Documents). Unlike ACAT, ACTMC is a costs jurisdiction, which has its pros and cons (particularly when the proceedings are defended).
Commencing Proceedings
As stated above, proceedings in the ACTMC will need to be commenced by way of filing the Documents. Filing fees apply, and the Applicant is required to personally serve the Documents (by way of a process server) on the Defendant.
The Applicant is entitled to claim pre-judgment interest on the principal sum and costs, depending on whether the proceedings will be defended or undefended.
Undefended Proceedings
If the Defendant does not file a Notice of Intention to Respond or a Defence within 28 days after the Documents are served on them, then the Applicant may apply for Default Judgment.
Once Default Judgment has been obtained, the Applicant will need to serve a Form 2.49 Notice about Court Order and Enforcement Options on the Defendant along with the Judgment. Once seven days have lapsed from this date of service, the Applicant will be able to commence enforcement action in the ACTMC.
Defended Proceedings
Suppose the Defendant does file a Notice of Intention to Respond or a Defence within 28 days (or occasionally even beyond this time period), and the matter does not otherwise settle outside of Court. In that case, the Applicant will be required to progress through the various stages of litigation, including considering the Defendant’s Defence (and potentially Counterclaim), attending directions hearings, preparing the Applicant’s evidence, considering the Defendant’s evidence and preparing the Applicant’s evidence in reply, potentially undertake discovery and issue any subpoenas or notices to produce, attend to any necessary interlocutory applications, potentially attending a mediation, preparing submissions and eventually attending a final hearing.
If the matter is contested on a completely meritless basis, the Applicant may make an Application for Summary Judgment, whereby the Court may strike out a Defence for lack of merit and award Judgment in favour of the Applicant without the need for the parties to take part in the further stages of litigation. However, this is a very high threshold test and is only occasionally successful, for instance, where a Defendant lacks any reasonable defence whatsoever.
Recovering Costs
If the proceedings are contested, costs in the ACTMC follow the general rule that ‘costs follow the event’, meaning that the unsuccessful party must pay the successful party’s costs. Costs orders, however, are always at the Court’s discretion, so the orders may vary as follows:
Party – party basis: where the successful party may recover between 40% and 60% of its costs from the other party;
Indemnity basis: where the successful party may recover between 60% and 80% of its costs;
Solicitor – client basis: where the Court must also have regard to the allowable costs;
Or on any other basis, the Court considers appropriate.
The Court may also make adverse costs orders in respect of the conduct of the matter. For example, the Court may make costs orders in response to non-compliance with the Court timetable or in respect of the other party’s costs thrown away for subsequent amendments made to the Statement of Claim after the close of pleadings.
Costs orders are commonly ‘as agreed or assessed’, meaning that the parties ought to try to agree on the amount of the costs sought, and if agreement cannot be reached then the legal costs must go through a costs assessment process, which is a separate Court application.
An indemnity costs order is a type of costs order in which a party is ordered to pay a higher percentage of the successful party’s expenses in a scenario where a reasonable offer is made and is not accepted, and the successful party obtains an outcome the same or better than the amount of the offer. Indemnity costs orders are challenging to obtain, and very compelling evidence needs to be relied upon in order to seek such an order successfully.
Enforcement options
If the Applicant is successful in obtaining a judgment, and the Defendant fails to make payment of the judgment debt, the following enforcement options are available:
I. Statutory Demand
This is relevant where the Defendant is a corporation.
If the Defendant is served with a Statutory Demand and it fails to comply with it within six months of service (as per the current insolvency laws in light of COVID-19, otherwise it is 21 days), the Defendant will be presumed to be insolvent for a period of 3 months in accordance with section 495F of the Corporations Act 2001 (Cth) (Act).
Upon service of the Statutory Demand, the Defendant will be able to apply (within six months of service as of now) for the Statutory Demand to be set aside or varied on one or more of the following grounds:
a. There is a genuine dispute about the existence or amount of the debt.
b. The Defendant has an offsetting claim, being a ‘genuine claim’ that it has against the Applicant by way of a counterclaim, set-off or a cross-demand.
c. There is a defect in the Statutory Demand issued by the Applicant, whereby substantial injustice will be caused unless the demand is set-aside (see section 459J(1)(a) of the Act).
d. There is some other reason why the demand should be set aside (see section 459J(1)(b) of the Act).
If the Defendant fails to have the Statutory Demand set aside or varied, the Applicant will be able to seek that the Defendant be wound up, and a liquidator be appointed to manage its affairs. In such a scenario, whether the Applicant will be able to recover any amount owing under the judgment will depend on the financial affairs of the Defendant, as determined by a liquidator.
II. Bankruptcy Notice
This is relevant where the Defendant is a natural person.
If the Defendant is served with a Bankruptcy Notice and it fails to comply with it within six months of service (as per the current insolvency laws in light of COVID-19, otherwise it is 21 days), the Defendant will have committed an act of bankruptcy, which can be used to commence any sequestration proceedings to bankrupt the Defendant and have a trustee appointed over his/her affairs. In such a scenario, whether the Applicant will be able to recover any amount owing under the judgment will depend on the financial affairs of the Defendant, as determined by the trustee in bankruptcy.
In the meantime, the Defendant will have the opportunity to contest the Bankruptcy Notice if it wishes to do so as well as any sequestration proceedings to show that he/she is not insolvent.
III. Enforcement Hearing
This is an enforcement mechanism in the ACTMC and is a means to obtain information about the financial affairs of the Defendant, including the Defendant’s income, assets, liabilities, investments and other factors relevant to its financial position. Any information obtained here can be used to assist with one of the below enforcement orders.
Once the Enforcement Hearing subpoena is filed and served, the Court will allocate a date for the enforcement hearing to occur, which the Defendant (or in the case of a corporation, the Defendant’s director) will be required to attend.
At this Enforcement Hearing, the Registrar will preside over the matter and orally examine the Defendant or its director to ascertain the Defendant’s financial position. After this, the Court may order the judgment debt to be paid by instalments or issue one of the below enforcement orders. The Court can also award costs incurred by the Applicant.
If, however, the Defendant fails to appear at the Enforcement Hearing, the Court can issue a warrant for their arrest.
A filing fee is also payable on application for an Enforcement Hearing, and the Applicant will be required to pay the process server’s costs associated with personally serving the Enforcement Hearing Subpoena. The Defendant will also need to be supplied with conduct money to meet their reasonable expenses in appearing at the Enforcement Hearing in order to deem service effective.
IV. Seizure and Sale Order
This is an enforcement mechanism in the ACTMC which authorises a Sheriff’s Officer to attend the property of the Defendant (as nominated by the Applicant) and seize goods belonging to the Defendant for the purpose of auctioning them to recover money owed to the Applicant. These goods must be fully owned by the Defendant.
Here, the Defendant may then apply to the Court to have the judgment debt paid by instalments. Based on the evidence presented before the Court concerning the financial affairs of the Defendant, the Court will either accept or reject this application.
V. Redirection Order
This is an enforcement mechanism in the ACTMC which allows the Court, upon application by the Applicant, to make an order to redirect funds out of the Defendant’s nominated bank account in order to pay the Applicant. The Court is also able to redirect monies owed by a third party to the Defendant.
VI. Earnings Redirection Order
This is an enforcement mechanism in the ACTMC for a Defendant that is a natural person, as it allows the Court, upon application by the Applicant, to make an order to redirect wages from a nominated employer of the Defendant in order to pay your client.
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As part of the ACT Government’s Managing Buildings Better reforms, changes to the Unit Titles Legislation Amendment Act (the Act) come into effect on 1 November 2020.
Some of the major changes to come into effect include:
Fairer Voting
Improved Administration
Greener Living
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The Bankruptcy Regulations 1996 (the existing Regulations) manages the procedural and administrative aspects of the Bankruptcy Act 1966 (the Act). The Act regulates Australia’s personal insolvency system and provides a framework for people to manage or discharge their debts whilst allowing assets to be distributed to affected creditors.
The Regulations are essential in effectively administering bankruptcies, debt agreements and other formal insolvency options governed by the Act; however, the existing Regulations are set to be renewed on 1 April 2021. The Attorney-General’s Department has released an Exposure Draft for the Bankruptcy Regulations 2021 (the new Regulations), seeking stakeholder views and responses to effectively update and modernise the 1996 Regulations.
Chamberlains’ Managing Director and leading insolvency, restructuring and litigation lawyer, Mr Stipe Vuleta, considers and proposes a response to the Exposure Draft of the new Regulations.
Minor and Technical Amendments
1. We agree with the commentary by the Attorney-General’s Department that there are several minor and technical amendments in the Proposed Regulations which are implemented for otherwise practical or innocuous reasons are broadly not contentious, and no submissions are specifically made. The move away from calendar days to business days in our view creates less certainty rather than more and creates challenges where debtor and Trustee may be located in differing jurisdictions.
2. The move to the list identifier ‘Section’ as opposed to ‘Regulation’ is supported in that it simplified and modernises the language of the Proposed Regulations.
Substantive or Clarifying Amendments
In considering the more substantive or other clarifying amendments proposed in the Proposed Regulations, we have considered each major item and any specific questions raised in the Discussion Paper in order of appearance and then considered any other matters which require submissions.
New Definition of Preliminary Remuneration and Expenses
3. From a practical perspective though section 50 orders pursuant to the Bankruptcy Act 1966 (Cth) (Act) are not common, they are common enough to warrant the need for clarification in the Proposed Regulations of practical issues which might arise in the course of their implementations by Trustee.
Exchange Rates
4. Changes to Exchange Rate provisions are uncontroversial.
Proof of Debts and Foreign Currency
5. This is a helpful and uncontroversial change.
Modernised List of Household Property
6. The new modernised list of household goods is practically irrelevant and does not provide meaningful guidance to Trustees, any more than the existing (now significantly outdated) list does. A more practical approach would be to rely solely on the proposed sections 27(1)(c) and 27(4) of the Proposed Regulations and remove any list (whether expanded or otherwise).
Transfers exempt from Being Void Against a Trustee
7. The points raised in the Discussion Paper are all relatively practically effective and conform with current practice and views.
Income of a Dependant
8. The move to annual indexations is a welcome change. It minimises administrative costs and complexities for estates however indexation should occur at the time the income is incurred rather than at the time of assessment as it creates and economic rent for circumstances where debtors are slow to attend to this process (whether with good reason or without).
Timing for Filing a Consent to Act Instrument
9. Question 5: We have some concerns about the timing of this process being moved to be concurrent with or prior to formal appointment as it creates additional expense for practitioners in matters where a matter may resolve post-filing of a CTA but prior to sequestration. It is preferred that any administrative burden be handled by the OR rather than transferred to private Trustees.
Amended Timeframe for Notification of Termination of a Personal Insolvency Agreement
10. Question 6: Yes, two days is a reasonable time frame for notification.
11. Question 7: Other than the use of business days and any matters specifically mentioned in this submission the Proposed Regulations attend to clarifying most timeframes appropriately, particularly noting, they are not a substantive shift away from the existing regulations.
Information to be Entered in the NPII
12. Question 8: The proposed tables are a welcome change to the existing Schedule 8.
Changes to Bankruptcy Notice Form
13. Question 9: We agree with the proposed change to use the word ‘accompanying’ as a more accurate and technology agnostic verb.
14. Question 10: We otherwise do not submit that any further changes to the Bankruptcy Notice form are required in the foreseeable future.
Changes to Calculation of FBT for Motor Vehicles
15. The proposed changes are appropriate and effectively harmonise the Proposed Regulations with existing Federal Legislation.
Clarification of Certain Offences and their application to the IG, OT or OR
16. This is a practical and necessary suite of amendments which ensures AFSA instrumentalities are not overburdened with internal disputes and conflict.
Monetary Figures Subject to Indexation
17. Updating baselines for indexation is uncontroversial and consistent with the drafting of the existing Regulations.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
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In the recent Federal Court of Australia case Sands Contracting Pty Ltd v Foodcorp (Vic) Pty Ltd1, the Court reaffirmed that replacing a liquidator is a ‘rather extreme step,’ warranted only by significant breaches of duty or misconduct by the liquidator.
When will the Court remove a liquidator?
When deciding whether to remove a liquidator, the Court considers what will be beneficial for the liquidation and persons with an interest in the assets of the company. The Court also gives weight to the course of action that will maintain confidence in the integrity and objectivity of winding up.2 The plaintiff might raise grounds for removal ranging from ‘moral turpitude, to bias or partiality, lack of independence, incompetence, or other unfitness for office.’ 3
The Case
In this case, the plaintiffs alleged that the liquidator had failed to make proper enquiries of the proof of debt of creditors. The liquidator failed to correct their initial mistake of stating in a circular that a creditor was owed, rather than claiming, $250,000.00.
The Court noted that certain decisions made by the liquidator were ‘not adequately explained’ and that ‘more should have been done to examine the plaintiffs’ claim.’ 4 However, Justice McKerracher found that the liquidator’s deficiencies did not reach the threshold required to warrant a replacement, staying true to a previous court’s view that ‘it should not be seen to be easy to remove a liquidator merely because it can be shown that… his conduct has fallen short of ideal.5
The case is a pertinent reminder that liquidators will not be removed merely because creditors disagree with their decisions or because there is a lack of confidence in the liquidator.6 The Court maintains a cautious approach to replacing liquidators and will generally choose alternative forms of relief.
1 [2020] FCA 1274.
2 Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544 (at 550).
3 Domino Hire Pty Ltd v Pioneer Park Pty Ltd [2003] NSWSC 496 at [58].
4 Sands Contracting Pty Ltd v Foodcorp (Vic) Pty Ltd [2020] FCA 1274, 124.
5 AMP Music Box Enterprises Ltd v Hoffman [2002] BCC 996.
6 Multi-Core Aerators Ltd v Dye [1999] VSC 205, 48.
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