Hold on tight as there is much emerging on the legal horizon. Here are our predictions of the hot issues for 2011.
We have not yet seen the last chapter in the Sons of Gwalia saga. In late 2010, the Corporations Act was amended to reverse the impact of the Sons of Gwalia decision which restored the ranking of shareholder claims to their position prior to the High Court’s intervention. The new law, which is yet to be tested, applies only to claims arising after 18 December 2010. So we are stuck with some Gwalia hangover for now.
Courts and insurers will be busy dealing with property valuation negligence claims. Already we have seen an expansion of the heads of recoverable damage. The Full Federal Court of Australia in La Trobe Capital v Hay Property Consultants has considered what quantum of damages a secured lender may recover where it lends money in reliance on a negligent valuation. It is now clear that a lender can recover its opportunity cost − income lost from capital which might otherwise have been deployed to a more favourable transaction. Stay tuned for more cases which clarify, extend or expand the law in this arena.
And, on the reform agenda, it is now one year since proposed reforms to insolvent trading were announced. Will this re-emerge on the political landscape in 2011? There is a small reprieve from the commencement of the Personal Properties Securities Act which has been deferred until October 2011. But don’t leave it until then to implement compliance and training programs as the task ahead is enormous.
Better late than never, CAMAC has been asked to advise on the winding up of managed investment schemes, particularly in agribusiness, and whether the regime provides adequate guidance for liquidators, creditors, growers and investors. We await CAMAC’s views on whether the current RE framework enables the transfer of viable MIS businesses where the original RE is under financial stress, and if not, whether it should be reformed or replaced. CAMAC will report back by 30 September 2011
We predict a busy year on the dispute resolution front with NSW repositioning itself to become a hub for class actions. This follows reforms introduced late last year to bring the NSW Supreme Court into line with the Federal Court on dispute resolution matters. From mid-2011, it will be necessary to take “reasonable steps” to resolve any civil dispute or to narrow the issues before proceedings are commenced.
On matters international, the Model Law on cross-border insolvency has been successfully put to use in four applications in Australia. But we are yet to see it applied locally in any intense battle between foreign and local interests, especially involving secured creditors. It is only a matter of time.