Alinta Finance restructuring
Schemes of arrangement are re-emerging as an effective tool for restructuring companies with unsustainable secured debt. The Supreme Court of New South Wales recently made orders approving four schemes of arrangement between companies in the Alinta Finance group and their scheme creditors which effected a restructure of secured debt owed by those entities and a transfer of the ownership of the companies in Alinta Finance group to a company owned by the lenders. Senior Associate Christopher Prestwich reports.
Who gets what's left?
A recent case in the NSW Court of Appeal (Residential Housing Corporation v Esber & Ors [2011] NSWCA 25) gives some important clarification on aspects of a mortgagee's obligation following the exercise of a power of sale. Partner John Gallimore and Lawyer Jacinta Dyer report on how the court dealt with the issue of contested surplus funds.
New legislation will impact on covered bonds
The Federal Government has released its exposure draft legislation relating to the issue by authorised deposit-taking institutions of covered bonds. Partners Matthew Allchurch and David Clifford outline the proposed legislative regime and comment on its implications.
Thursday, March 31, 2011
Tracing issues in insolvency
Senior Associate Chris Peadon has recently had an article published in the Insolvency Law Journal entitled "Tracing misappropriated funds in a liquidation: The Bishopsgate exceptions" (see (2011) Insolvency Law Journal 37).
In summary, the article concerns whether a person from whom an insolvent entity has misappropriated funds can gain priority over secured and other unsecured creditors by tracing the misappropriated funds into the assets of the insolvent entity, and the consequences of the funds being deposited in an overdrawn account.
Chris has been called to the Bar and will be leaving Allens for 7 Selborne Chambers, Sydney and available to accept briefs from 28 May 2011 in commercial (including insolvency), equity and tax matters.
In summary, the article concerns whether a person from whom an insolvent entity has misappropriated funds can gain priority over secured and other unsecured creditors by tracing the misappropriated funds into the assets of the insolvent entity, and the consequences of the funds being deposited in an overdrawn account.
Chris has been called to the Bar and will be leaving Allens for 7 Selborne Chambers, Sydney and available to accept briefs from 28 May 2011 in commercial (including insolvency), equity and tax matters.
Wednesday, March 30, 2011
Pre-litigation requirements for civil disputes
Recently, there have been significant legislative developments regarding pre-litigation requirements for civil disputes federally, in New South Wales and in Victoria.
Commonwealth
On 24 March 2011, the Civil Dispute Resolution Bill 2010 (Cth) was passed through parliament.
Commonwealth
On 24 March 2011, the Civil Dispute Resolution Bill 2010 (Cth) was passed through parliament.
This Act aims to 'ensure that, as far as possible, people take genuine steps to resolve the dispute before certain civil proceedings are instituted'. If efforts at dispute resolution are unsuccessful and proceedings are issued, each party must file a 'genuine steps statement' to the effect that genuine steps have been taken to resolve the dispute.
The Act does not prescribe what genuine steps must be taken but rather permits the parties to prescribe what steps are appropriate in the circumstances.
The main provisions of the Act will commence on a date to be proclaimed.
New South Wales The pre-litigation requirements contained in Schedule 6.2 of the Courts and Crimes Legislation Further Amendment Act 2010 (NSW) have been proclaimed to commence from 1 April 2011. Schedule 6.2 will amend the Civil Procedure Act 2005 (NSW) by inserting a new Part 2A, titled 'Steps to be taken before the commencement of proceedings'.
The pre-litigation requirements include that each person to a civil dispute must take reasonable steps to resolve the dispute or clarify or narrow the issues in the dispute. Reasonable steps include:
- notifying the issues
- responding by communicating about the issues
- exchanging correspondence, information and documents
- considering and proposing options for resolving the dispute
- taking part in alternative dispute resolution processes
Victoria
On 24 March 2011, the Civil Procedure and Legal Profession Amendment Bill 2011 (Vic) was passed through parliament.
This Act repeals the pre-litigation requirements of the Civil Procedure Act 2010 (Vic) which were due to come into effect on 1 July 2011. However, the Act does provide that the court can make specific protocols for specified civil proceedings or classes of civil proceeding including mandatory or voluntary pre-litigation processes. The Act will commence when Royal Assent is received.
Friday, March 25, 2011
Enforceability of the flawed asset - more to consider?
A recent English High Court decision indicates that a divergence may be developing between English law and Australian law on the interpretation of the flawed asset under the ISDA Master Agreement.
A non-defaulting party under an ISDA Master Agreement who purports to avoid making payments to a defaulting counterparty rather than terminating their relationship should consider the decision in Lomas v JFB Firth Rixson Inc & Ors [2010] EWHC 3372 (Ch). This decision introduces conditions on relying on flawed asset clauses, particularly with respect to the ISDA Master Agreement.
Lomas v JFB Firth concerned the interpretation of s2(a)(iii) of the ISDA Master Agreement (which provides that a party's payment obligations are subject to the condition precedent that there is no continuing event of default – the 'flawed asset'). In this case, the respondents were swap counterparties of Lehman Brothers International (Europe) under five interest rate swap agreements governed by one or other of the 1992 or 2002 versions of the ISDA Master Agreement. The respondents had relied on section 2(a)(iii) of the ISDA Master Agreement to stop making payments to Lehman Brother International (Europe) that otherwise would have fallen due on subsequent payment dates.
For more information, please see our Banking and Finance group's Focus on this case.
A non-defaulting party under an ISDA Master Agreement who purports to avoid making payments to a defaulting counterparty rather than terminating their relationship should consider the decision in Lomas v JFB Firth Rixson Inc & Ors [2010] EWHC 3372 (Ch). This decision introduces conditions on relying on flawed asset clauses, particularly with respect to the ISDA Master Agreement.
Lomas v JFB Firth concerned the interpretation of s2(a)(iii) of the ISDA Master Agreement (which provides that a party's payment obligations are subject to the condition precedent that there is no continuing event of default – the 'flawed asset'). In this case, the respondents were swap counterparties of Lehman Brothers International (Europe) under five interest rate swap agreements governed by one or other of the 1992 or 2002 versions of the ISDA Master Agreement. The respondents had relied on section 2(a)(iii) of the ISDA Master Agreement to stop making payments to Lehman Brother International (Europe) that otherwise would have fallen due on subsequent payment dates.
For more information, please see our Banking and Finance group's Focus on this case.
Insured's entitlement to reinsurance recoveries of HIH entities
Members of the former James Hardie Group insured by HIH have established their entitlement to payment of reinsurance recoveries held by the liquidators of HIH.
Amaca Pty Ltd and Ors v McGrath & Anor as Liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90 concerned a claim for an order under section 562A(4) of the Corporations Act in respect of reinsurance monies received by the liquidators of HIH.
This case arose in relation to claims made under insurance policies providing cover against liability for asbestos injury in the business carried on by Amaca Pty Ltd (formerly James Hardie & Coy Pty Ltd) and Amaba Pty Ltd (formerly Hardie-Ferado Pty Ltd) (the plaintiffs). This insurance was issued by HIH Underwriting and Insurance (Australia) Pty Ltd and arranged by CE Heath Underwriting Agencies Australia Pty Ltd.
The plaintiffs sought recovery under the insurance policies as a result of asbestos claims made against them. Following the collapse of HIH, the liquidator of Heath Underwriting held monies received from London reinsurers. As asbestos liabilities were expected to continue to eventuate in claims for many decades yet, the plaintiffs anticipated that the liquidator of HIH Underwriting and Insurance would, in future, receive additional monies from London reinsurers.
The plaintiffs sought orders that the liquidators be permitted and required to apply amounts received from London reinsurers exclusively towards the claims of the plaintiffs. The plaintiffs also sought similar orders in respect of future recoveries under relevant reinsurance agreements but not yet received by the liquidators.
The court determined to grant the relief sought by the plaintiffs in relation to the sums actually received under reinsurance arrangements but determined that it could not grant relief in relation to reinsurance payments not yet received.
This outcome was almost certainly not intended as a matter of policy and it is anticipated that steps will be taken to amend the legislation in order to enable orders to be made with respect to future reinsurance assets coming into the hands of liquidators after the making of the court order, as well as in relation to assets currently held by liquidators as at the date of the order.
For more information, please see our Insurance and Reinsurance group's Focus on this case.
Amaca Pty Ltd and Ors v McGrath & Anor as Liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90 concerned a claim for an order under section 562A(4) of the Corporations Act in respect of reinsurance monies received by the liquidators of HIH.
This case arose in relation to claims made under insurance policies providing cover against liability for asbestos injury in the business carried on by Amaca Pty Ltd (formerly James Hardie & Coy Pty Ltd) and Amaba Pty Ltd (formerly Hardie-Ferado Pty Ltd) (the plaintiffs). This insurance was issued by HIH Underwriting and Insurance (Australia) Pty Ltd and arranged by CE Heath Underwriting Agencies Australia Pty Ltd.
The plaintiffs sought recovery under the insurance policies as a result of asbestos claims made against them. Following the collapse of HIH, the liquidator of Heath Underwriting held monies received from London reinsurers. As asbestos liabilities were expected to continue to eventuate in claims for many decades yet, the plaintiffs anticipated that the liquidator of HIH Underwriting and Insurance would, in future, receive additional monies from London reinsurers.
The plaintiffs sought orders that the liquidators be permitted and required to apply amounts received from London reinsurers exclusively towards the claims of the plaintiffs. The plaintiffs also sought similar orders in respect of future recoveries under relevant reinsurance agreements but not yet received by the liquidators.
The court determined to grant the relief sought by the plaintiffs in relation to the sums actually received under reinsurance arrangements but determined that it could not grant relief in relation to reinsurance payments not yet received.
This outcome was almost certainly not intended as a matter of policy and it is anticipated that steps will be taken to amend the legislation in order to enable orders to be made with respect to future reinsurance assets coming into the hands of liquidators after the making of the court order, as well as in relation to assets currently held by liquidators as at the date of the order.
For more information, please see our Insurance and Reinsurance group's Focus on this case.
Thursday, March 24, 2011
Setting aside statutory demand - meaning of 'genuine dispute'
A recent decision of the Western Australian Court of Appeal highlights that, in order to have a statutory demand set aside on the basis of a genuine dispute between the parties, there must be a plausible contention requiring investigation at the time of the hearing of the application.
Central City Pty Ltd v Montevento Holdings Pty Ltd[2011] WASCA 5 dealt with an application for leave to appeal against a decision of the Master not to set aside a statutory demand. The debtor company argued that there was a genuine dispute as to whether a contract for loan from the creditor to the company could be inferred and if so what were the terms of the loan.
The court concluded that, on the evidence before it, there was a plausible contention requiring investigation that there was a loan contract. The court therefore granted leave to appeal on the grounds that there was a 'genuine dispute' between the parties within the meaning of s 459H(1)(a) of the Corporations Act 2001.
Central City Pty Ltd v Montevento Holdings Pty Ltd[2011] WASCA 5 dealt with an application for leave to appeal against a decision of the Master not to set aside a statutory demand. The debtor company argued that there was a genuine dispute as to whether a contract for loan from the creditor to the company could be inferred and if so what were the terms of the loan.
The court concluded that, on the evidence before it, there was a plausible contention requiring investigation that there was a loan contract. The court therefore granted leave to appeal on the grounds that there was a 'genuine dispute' between the parties within the meaning of s 459H(1)(a) of the Corporations Act 2001.
ASIC grants further extension of Class Order 10/333
ASIC has recently announced its intention to extend the interim class order relief granted to lawyers and funders involved in legal proceedings structured as funded representative proceedings and funding claims lodged with liquidators to prove in the winding up of an insolvent company.
The extension of the relief until 30 June 2011 will enable the temporary operation of litigation funding schemes and proof of debt funding schemes without compliance with the requirements of the Corporations Act 2001. This is to allow additional time for the Federal Government to implement the legislative reform for litigation funding schemes and proof of debt schemes it previously announced, and to avoid any interim disruption that could adversely impact plaintiffs or interfere with the timely and efficient running of litigation.
The extension of the relief until 30 June 2011 will enable the temporary operation of litigation funding schemes and proof of debt funding schemes without compliance with the requirements of the Corporations Act 2001. This is to allow additional time for the Federal Government to implement the legislative reform for litigation funding schemes and proof of debt schemes it previously announced, and to avoid any interim disruption that could adversely impact plaintiffs or interfere with the timely and efficient running of litigation.
Wednesday, March 23, 2011
Growers' rights extinguished to enable receiver sales to proceed
In each of the recent decisions of Re Timbercorp Securities Limited (in liq) [2011] VSC 83 and Re Timbercorp Securities Limited (in liq) (No 4) [2011] VSC 24, Allens acted for the receivers and managers of Align Fund Management Limited in its capacity as the responsible entity of the Timbercorp Orchard Trust, which, in each case, sought to settle contracts for the sale of property and associated water rights. In both cases, the property and water rights were encumbered by the rights of certain investors in a number of managed investment schemes for which Timbercorp Securities Limited (In Liquidation) (TSL) was the responsible entity (Growers).
Each application was brought by the liquidators of TSL seeking orders that the liquidators were justified in extinguishing the rights of Growers in respect of the land and water, so that each could be sold by the receivers to third party purchasers free of these encumbrances.
In both cases the Court made the orders sought by the liquidators and receivers, enabling the liquidators to extinguish the rights of the Growers in respect of each property and the associated water rights, and accordingly facilitating the unencumbered settlement of the sale of property and water by the receivers.
When considering the issue of whether to make the orders sought by the liquidators and receivers, in both cases the Court considered a number of common key factors, including:
Each application was brought by the liquidators of TSL seeking orders that the liquidators were justified in extinguishing the rights of Growers in respect of the land and water, so that each could be sold by the receivers to third party purchasers free of these encumbrances.
In both cases the Court made the orders sought by the liquidators and receivers, enabling the liquidators to extinguish the rights of the Growers in respect of each property and the associated water rights, and accordingly facilitating the unencumbered settlement of the sale of property and water by the receivers.
When considering the issue of whether to make the orders sought by the liquidators and receivers, in both cases the Court considered a number of common key factors, including:
- whether the liquidators were acting reasonably and properly in the circumstances;
- whether the receivers had conducted a robust sale process in relation to each property and its associated water rights (in accordance with the receivers' obligations under section 420A of the Corporations Act);
- that the net proceeds of each sale would be held on trust, providing the Growers with an opportunity to claim a right to part of those net proceeds;
- had the liquidators chosen to wind up the relevant projects in which the Growers had invested by direction of the Court or under section 601NC of the Corporations Act, the growers' rights would have been terminated under the terms of the growers' licences; and
- the fact that ASIC had not opposed the liquidators' application, and the existence and weight of any opposition on the part of the Growers to the liquidators' application.
Friday, March 18, 2011
INSOL Singapore Conference
INSOL is the major association of insolvency professionals in the world and most local associations (like the IPA in Australia and the IPA in the UK) and their members are members of INSOL.
INSOL held its most recent conference in Singapore on 14 and 15 March 2011 with an Insurance Insolvency Ancillary day held on 13 March. Over 570 lawyers, bankers, accountants and others interested in insolvency and restructuring attended INSOL Singapore.
Allens made a major contribution to the organisation of these conferences. Matthew Skinner of our Singapore office was on the Technical Committee organising the technical content for the Insurance Insolvency Ancillary day. John Morgan from our Sydney office was a presenter on regulatory issues on that day. Michael Quinlan from our Sydney office was the Technical Co-Chair and chaired and presented at a session comparing the restructuring regimes of Australia, Canada, the UK and the US. As Technical Co-Chair, Michael co-chaired the Technical Committee which identified the topics and technical content for the conference.
Other speakers from Australia included Miles Grant (ANZ), Peter Gothard (Ferriers), Steve Parbery (PPB), Chris Honey (McN+). The next INSOL regional conference will take place in Miami (2012) with the quadrennial conference taking place in The Hague the following year.
INSOL held its most recent conference in Singapore on 14 and 15 March 2011 with an Insurance Insolvency Ancillary day held on 13 March. Over 570 lawyers, bankers, accountants and others interested in insolvency and restructuring attended INSOL Singapore.
Allens made a major contribution to the organisation of these conferences. Matthew Skinner of our Singapore office was on the Technical Committee organising the technical content for the Insurance Insolvency Ancillary day. John Morgan from our Sydney office was a presenter on regulatory issues on that day. Michael Quinlan from our Sydney office was the Technical Co-Chair and chaired and presented at a session comparing the restructuring regimes of Australia, Canada, the UK and the US. As Technical Co-Chair, Michael co-chaired the Technical Committee which identified the topics and technical content for the conference.
Other speakers from Australia included Miles Grant (ANZ), Peter Gothard (Ferriers), Steve Parbery (PPB), Chris Honey (McN+). The next INSOL regional conference will take place in Miami (2012) with the quadrennial conference taking place in The Hague the following year.
Thursday, March 17, 2011
Alinta: creditors' scheme of arrangement
Justice Barrett of the New South Wales Supreme Court has today made orders approving schemes of arrangement between four companies in the Alinta Finance group and their scheme creditors. Those orders were made after the scheme creditors had agreed to the proposed schemes of arrangement at meetings on 15 March 2011.
Under the terms of the schemes, the debt owed to the secured creditors will be restructured and partially converted to equity. Ultimate ownership of the companies in the Alinta Finance group will be transferred to an entity controlled by the secured creditors.
Following the introduction of the voluntary administration regime it appeared that creditors' schemes of arrangement may have disappeared as a restructuring tool. The Sons of Gwalia, Opes Prime and Lift Capital schemes signalled their return as a means of achieving restructures which required creditors to release not only claims against scheme companies but also third parties.
The Alinta Finance schemes mark another important stage in the return of schemes of arrangement as effective restructuring tools, in particular for restructuring companies with unsustainable secured debt. Allens acted for the Security Trustee and Agent on behalf of the secured creditors in the Alinta restructuring.
Under the terms of the schemes, the debt owed to the secured creditors will be restructured and partially converted to equity. Ultimate ownership of the companies in the Alinta Finance group will be transferred to an entity controlled by the secured creditors.
Following the introduction of the voluntary administration regime it appeared that creditors' schemes of arrangement may have disappeared as a restructuring tool. The Sons of Gwalia, Opes Prime and Lift Capital schemes signalled their return as a means of achieving restructures which required creditors to release not only claims against scheme companies but also third parties.
The Alinta Finance schemes mark another important stage in the return of schemes of arrangement as effective restructuring tools, in particular for restructuring companies with unsustainable secured debt. Allens acted for the Security Trustee and Agent on behalf of the secured creditors in the Alinta restructuring.
Thursday, March 3, 2011
Insolvency team ranked top tier
We have been named by Chambers Asia as a Band 1 firm (the highest band) for 2011 in the area of Restructuring and Insolvency. Our team has been commended for their depth of talent, technical expertise and the ability to work across practise areas to give industry specific advice.
The following partners were named as leading individuals: Michael Quinlan (Band 1), Clint Hinchen, Alf Pappalardo, Geoff Rankin, Ian Wallace and John Warde (Band 2), and Simon Lynch (Band 3). Please click here to view the complete results.
Across the firm we have 17 practice areas in Band 1, more than any other Australian firm. These include: Banking & Finance: Acquisition Finance, Banking & Finance: Asset Finance & Leasing, Banking & Finance: Corporate Finance, Banking & Finance: Debt Capital Markets, Banking & Finance: Property Finance, Corporate/M&A, Dispute Resolution: Solicitors, Energy & Natural Resources, Environment, Insurance, Intellectual Property, Native Title, Projects, Real Estate, Restructuring/Insolvency, Tax, and Technology, Media, Telecoms (TMT).
A complete list of our 2011 Chambers Asia rankings is now available.
The following partners were named as leading individuals: Michael Quinlan (Band 1), Clint Hinchen, Alf Pappalardo, Geoff Rankin, Ian Wallace and John Warde (Band 2), and Simon Lynch (Band 3). Please click here to view the complete results.
Across the firm we have 17 practice areas in Band 1, more than any other Australian firm. These include: Banking & Finance: Acquisition Finance, Banking & Finance: Asset Finance & Leasing, Banking & Finance: Corporate Finance, Banking & Finance: Debt Capital Markets, Banking & Finance: Property Finance, Corporate/M&A, Dispute Resolution: Solicitors, Energy & Natural Resources, Environment, Insurance, Intellectual Property, Native Title, Projects, Real Estate, Restructuring/Insolvency, Tax, and Technology, Media, Telecoms (TMT).
A complete list of our 2011 Chambers Asia rankings is now available.
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