INSOLVENCY SUMMER 2009/10

LECTURE 1 WELCOME TO THE COURSE Lecturers My background New course outline - structure Prescribed texts  Murray, M., Keay’s Insolvency: Personal and Corporate Law and Practice, 6th ed., Thomson Reuters, 2008  Nichols, P., Annotated Bankruptcy Act 1966, 2009 edition, LexisNexis BRING NICHOLS TO LECTURES 1-6  2009 Corporations Legislation published by Thomson Reuters Assignment

INSOLVENCY SUMMER 2009/10 COMPULSORY ASSIGNMENT On 1 January 2007 Nolira transferred his interest in his family home and a parcel of shares in BHP worth $200,000 to his wife Veronica. Nolira then went into business as a superannuation consultant. On 1 January 2008 Nolira absconded to Bolivia with trust funds of his clients and is wanted by the Federal Police. On the day of his departure he gave Veronica a satchel of diamonds worth $250,000 for their wedding anniversary. Veronica then sold the family home for $500,000 and used the proceeds to buy another parcel of shares in BHP taking her share holding to $1 million. On 1 July 2008 a creditor’s petition was presented against Nolira and a sequestration order was subsequently made against his estate appointing a trustee in bankruptcy. Discuss whether the Trustee in Bankruptcy can claim any of the assets held by Veronica.

INSOLVENCY SUMMER 2009/10 The exam –Detailed discussion in lecture 9 –Open book but not electronic –Previous exam papers on website Cases - we will tell you the essential cases Lecture hours Questions during and after lectures Don’t mind if you leave early to catch transport

INSOLVENCY SUMMER 2009/10 HISTORY OF BANKRUPTCY LAW Roman Law of the Twelve Tables England 1542 Commonwealth Constitution s 51(xvii) Bankruptcy Act 1966 Statute based rather than case based THE SYSTEM Federal Courts deal with bankruptcy matters - s 27s 27 The Inspector-General in Bankruptcy - ss 11,12ss 1112 Insolvency and Trustee Service Australia (ITSA)(ITSA) Official Receiver - s 15s 15 Official Trustee - ss 18, 19ss 1819 Registered trustees - s 154A ffs 154A

INSOLVENCY SUMMER 2009/10 PURPOSES OF BANKRUPTCY LAW Pari passu distribution Protection Investigation Restrictions on dealings Interaction with contract, property, insurance, family, tax and superannuation law Effect of being bankrupt Restrictions on behaviour Challenging certain transactions Right to practise law - the bankrupt barristers scandal

INSOLVENCY SUMMER 2009/10 PERSONAL INSOLVENCY  Bankruptcy Act 1966 s 5 [Nichol 65]:s 5 (2) A person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable. (3) A person who is not solvent is insolvent.  Inability to pay all debts as and when they become due and payable o How do you prove insolvency? o Failure to comply with a bankruptcy notice  Sandell v Porter 115 CLR 666 Sandell v Porter o Barwick CJ o Realisable assets o Borrowing ability

INSOLVENCY SUMMER 2009/10 COURSE OF A BANKRUPTCY  Voluntary and compulsory bankruptcy o Creditor’s petitions s 43 [Nichols 147]s 43 o Debtor’s petitions s 55 [Nichols 181]s 55  Acts of bankruptcy o s 40,41 [Nichols 113,126]4041  Sequestration orders o What does “sequestration” mean?  Vesting of property o s 58 [Nichols 192] s 58

INSOLVENCY SUMMER 2009/10 58 Vesting of property upon bankruptcy—general rule (1)Subject to this Act, where a debtor becomes a bankrupt: (a)the property of the bankrupt, not being after ‑ acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b)after ‑ acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.

INSOLVENCY SUMMER 2009/10 (3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. ……………………………………………………………………... (5) Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security.

INSOLVENCY SUMMER 2009/10  Realisation of assets o ss 54, 64, 82 ff  Payment of dividends o s  Discharge o s 149, 153A149153A  The importance of the date of commencement of bankruptcy o s  Relation back o s  Void and voidable transactions o ss 120, 121,

INSOLVENCY SUMMER 2009/10 Next week: Lecture 2 Acts of bankruptcy Bankruptcy notices Reading: Keays Bankruptcy Act ss 40,41 Nichols