Legal updates

The Supreme Court of Queensland has delivered a significant judgement concerning the obligations of liquidators to cause an insolvent company to incur the costs of complying with State environmental laws, in priority to other unsecured creditors.

Section 433 of the Corporations Act 2001 (Cth) (the Act) concerns the payment to employees as priority creditors by a receiver from the assets subject to a circulating security interest. This provision in large part mirrors the payment waterfall contained in section 556 that applies in a winding-up.

There are a number of reasons why liquidators might want to slow things down when it comes to commencing or prosecuting proceedings. A liquidator might want more time to fully investigate certain claims or secure appropriate funding before incurring substantial costs or adverse costs exposure. While there are options available to liquidators looking to delay either the commencement or service of a particular proceeding, each comes with its own risks.

This Update covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation to 1 April 2017.

The Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 (Misuse of Market Power Bill) has passed the House of Representatives and is currently before the Senate.

Prior to passing the Misuse of Market Power Bill through the House of Representatives, the government amended the commencement date and removed the mandatory factors for consideration by the Courts when determining whether alleged conduct substantially lessens competition.

The Federal Government has released the Exposure Draft for the much anticipated introduction of:

  • A safe harbour for company directors from personal liability for insolvent trading; and
  • A stay on the enforcement of ipso facto clauses in limited circumstances.

The High Court of Australia recently dismissed an application brought by former Queensland Nickel Pty Ltd (QN) directors Mr Clive Palmer and Mr Ian Ferguson for a declaration that section 596A of the Corporations Act 2001 (Cth) is constitutionally invalid. The High Court’s decision in Palmer v Ayres; Ferguson v Ayres [2017] HCA 5 is a reassurance to administrators and liquidators that section 596A mandatory examinations remain a legitimate tool for investigating the affairs of a company in administration or liquidation.

As you may recall, in 2013 ASIC wrote to all liquidators to announce the commencement of an industry-wide project to test all registered liquidators’ compliance with the requirement to publish certain notices on ASIC’s “published notices website” and to lodge forms with ASIC. ASIC refers to this initiative as the “PNW Project”.

As technology advances, opportunities to update business practices are offered. However, the law is often one step behind, making it difficult for companies to employ new efficient business practices. Although many transactions are now conducted electronically, there are several exceptions to the validity of electronic signatures which limit the use and effectiveness of electronic communications.

On 13 February 2017 the Federal Court delivered its decision in relation to whether claims made by Domain Group (‘Domain’) that it had the “#1 property app in Australia” were misleading or deceptive and constituted false or misleading representations in breach of sections 18 and 29 of the Australian Consumer Law (ACL’).

The Competition and Consumer Amendment (Country of Origin) Bill 2016 (Bill) was passed by the Senate on 8 February 2017 and will commence the day after it receives royal assent, which is imminent.

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