Snapshot
- This High Court decision is a reminder for liquidators that, when seeking a pooling order, the gateway requirements in sections 579E(1)(b)(iii) and (iv) of the Corporations Act 2001 (Cth) are met by the present ownership or operation of property, and the present or past, not future, use of that property in connection with a joint business, scheme or undertaking.
- However, the sale of assets of the business does not represent a joint undertaking, rather an act of disposing of the business, and so would not satisfy the gateway requirements. In this decision, this meant a chose in action arising out of sale of a joint business to provide printing services did not have any nexus to the former carrying on of that business.
- This decision indicates a shift away from the legislature’s objective of utilising pooling orders to improve outcomes for creditors, such as minimising the costs of a liquidation.
Pooling orders allow the debts and claims of multiple insolvent companies to be grouped together and treated as one. This enables the liquidator to conduct a single liquidation instead of several separate ones. The rationale behind this is it minimises costs in administrating the liquidation and enhances the distribution of payments to priority creditors, especially when the insolvent companies are part of a complex corporate structure.
The regime for the grant of a pooling order under section 579E(1) of the Corporations Act 2001 (Cth) (‘Act’) requires at least one of four conditions or ‘gateways’ under section 579E(1)(b) must be satisfied for the Court to consider whether the pooling order is ‘just and equitable’. No prohibition exists on making the order. One of these conditions, in section 579E(1)(b)(iv), requires ‘one or more companies in the group own particular property that is or was used, or for use, by any or all of the companies in the group in connection with a business, a scheme, or an undertaking, carried on jointly by the companies in the group’.
The High Court has recently considered the intricacies in granting pooling orders in Morgan v McMillan Investment Holdings Pty Ltd [2024] HCA 33 (per Gageler CJ, Edelman, Steward, Gleeson and Beech-Jones JJ). The judgment clarifies the application of section 579E(1) and, in doing so, broadly discusses the connection of particular property to a particular business in a way that might inform more general interpretation of the Act.
