Insolvency Update February 2007

Son's of Gwalia: The third strike against the shareholder/ creditor distinction

Mr Margaretic was an on-market purchaser of shares in Sons of Gwalia Limited. Mr Margaretic claimed that he had suffered loss equal to the amount of the price of his shares as a result of misleading behaviour on the part of the company. On 30 January 2007, the High Court of Australia confirmed that shareholders in the position of Mr Margaretic can claim in competition with other creditors under a deed of company arrangement. The case has excited a great deal of comment and concern. Insolvency practitioners are concerned about the effect of the judgment on the cost and efficiency of the voluntary administration process. Lenders have also weighed into the argument and the call for reform has been made loud and clear.

Receivers could face new liabiltiy

In a decision that could have massive implications for receivers and managers, Commissioner McKenna of the Industrial Relations Commission of NSW (“NSWIRC”) has allowed receivers and managers to be joined to unfair dismissal proceedings brought by a former employee of a company under external administration. 

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