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Perrine v Carrello [2017] WASCA 151

THE COURT OF APPEAL in Western Australia recently upheld a trial judge’s decision that a holding company was insolvent, and that the Directors, Mr and Mrs Perrine, were liable for insolvent trading.

In this case there was a flexible payment arrangement between the holding company, Perrinepod, and its subsidiary company, Perrine Architecture. This flexible arrangement meant that payments on the running account were only made by Perrinepod to Perrine Architecture as and when Perrinepod had funds to make a payment.

The Directors appealed on the grounds that the specific payment arrangement meant that the debts owed to Perrine Architecture had not fallen due and payable, and thus Perrine Architecture had not actually suffered a loss, and the trial judge erred in finding otherwise.

The appeal was dismissed (see [58]-[61]).

The evidence was that the debt was repayable when (notably not ‘if and when’) the company was in a position to pay it; hence the company was insolvent.

See also Hussain v CSR Building Products [2016] FCA 392, and our recent blog post on that case here.

To access the full judgment, follow this link: http://decisions.justice.wa.gov.au/supreme/supdcsn.nsf/PDFJudgments-WebVw/2017WASCA0151/%24FILE/2017WASCA0151.pdf

Catchwords:

• Insolvent
• Insolvent trading
• As and when debt repayable
• If and when debt repayable
• Solvent

Korda, in the matter of Ten Network Holdings Ltd [2017] FCA 914

IT IS THE PUBLIC’S OPINION that matters, not that of the profession, when determining if there is the apprehension of a conflict of interest of an administrator.  That is what the Federal Court held recently anyway.

In this well-known case, the application of the ARITA Code was considered as to whether it provided “exceptions” to the “rule” regarding the apprehension of a conflict of interest.

The Federal Court found that compliance with the ARITA Code won’t necessarily be enough to satisfy courts that there is no conflict. Justice O’Callaghan noted that the code “has no legal status”, but that it is permissible for the court to take into account what the guide says to garner what is common practice and the profession’s own view of proper standards. (See [93]-[95]).

The court confirmed that the relevant test for whether there is an apprehension of a conflict of interest is that of a fair-minded lay observer (so not the perspective of other insolvency practitioners but that of the public). (See in particular [71]-[80]).

To access the full judgment, follow this link – http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2017/914.html

Key Words

• ARITA Code
• Conflict of interest
• Fair-minded lay observer
• Guidelines
• Compliance

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