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Michael Murray’s on-going commentary on issues in corporate and personal insolvency law and related policy and law reform, in Australia and internationally. Given the scope of insolvency, this extends to business, consumer and professional conduct, and ethics, governance and regulation, criminal, tax, environmental and administrative law, and the courts and government.

 

NSW Law Society’s Specialist Accreditation Conference 2019

I am presenting to senior lawyers at the NSW Law Society’s Specialist Accreditation Conference 2019 on 9-10 August, in the Business Law component. The topic is, simply, current issues in personal and corporate insolvency.

The focus and content is different when the audience comprises lawyers, rather than insolvency practitioners (IPs).

Lawyers have a range of tasks in an insolvency, and their perspective depends on for whom they are acting

Acting for a trustee or liquidator (IPs) brings in the law concerning voidable transaction proceedings, examinations, advices, challenges to decisions on proofs of debt, and related issues of independence and remuneration. Or there may be disciplinary matters for the IP, involving ASIC, AFSA or ARITA.

Acting for a debtor or a director is quite different, and can involve a defence of bankruptcy or winding up actions, of voidable claims, and insolvent trading; responses may be needed to director penalty and garnishee notices, or challenges made to tax liabilities; or, ultimately, the initiation of voluntary administration or liquidation, or bankruptcy. Safe harbour advice may also be called for.

In acting for a creditor, the lawyer may be instructed to bring winding up or bankruptcy proceedings, involving statutory demands and bankruptcy notices, and drafting and timing issues; or, defending preference actions, challenges to proofs, examinations and creditors’ meetings. There may be applications to remove an IP or appoint a special purpose IP.

Broader obligations

Lawyers have obligations to the court in the conduct of litigation, and depending on the client, model litigant duties, and also depending on the nature of the respondent. Lawyers’ conflicts and remuneration, and costs disclosures, can also be in issue. Pre-insolvency advice can raise issues about the scope of the duty of a lawyer. I don’t purport to know or present on the extent of lawyers’ particular or penumbral duties[1] but there are concerns about the advice given to clients in financial difficulty.  Much valid advice can be given, but other advice may be questionable.  I may raise for discussion some of those situations, and other more general issues, all often seen in an insolvency, and all based on case law.

For example:

  • A client suffers a large judgment against himself, beyond his total assets. He asks the lawyer to transfer his share in the family home to his son. What if a creditor’s petition was pending at the time of the transfer?
  • What should the Law Society do about a lawyer who in a similar situation advised the debtor clients to “liquidate all your assets and apply the proceeds where they cannot be traced [and] and re-locate yourselves with new identities”?
  • A sole director and shareholder instructs her lawyer to transfer all the company’s assets – real estate – to her spouse under a binding financial agreement under the Family Law Act?
  • In the midst of bringing voidable recovery proceedings for a liquidator, it becomes apparent to the lawyer that any proceeds of recovery will only meet the liquidator’s remuneration and the lawyer’s fees.
  • Your creditor client knows that another creditor is taking winding up proceedings against their corporate debtor. The client instructs you to issue a payment demand which, surprisingly, is paid.  The company goes into liquidation.
  • After acting for a petitioning creditor in a sequestration order, the lawyer then seeks to act for the trustee in an examination.

These are only an aspect of the issues to be raised.

Questions?

It should be an interesting session, from which I expect to learn much myself, courtesy of an active audience.

Any questions or issues to me beforehand are welcome.

Michael Murray

[1] See Richtoll Pty Ltd v WW Lawyers (in Liq) Pty Ltd [2016] NSWSC 438

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