Interview with: Trevor Withane, Partner

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Blackwattle Legal founding Partner, Trevor Withane, highlights how being a specialist firm has allowed Blackwattle Legal to adapt to the changing legal market and become a leading firm in its practice areas of commercial litigation, insolvency and restructuring. He also provides his view on trends in the commercial litigation and insolvency space in Australia.

What do you see as the main points that differentiate Blackwattle Legal from your competitors?

When I launched Blackwattle Legal, I was clear about what I wanted to build – a truly specialist, focused and intellectually rigorous commercial litigation and insolvency law practice, supporting domestic and international clients in complex and challenging matters.

Our proposition stands out in the market, and our team is eager to deliver a different approach to litigation and insolvency law. Whilst many smaller firms support an industry or specific client type or try to be all things to all people, we instead focus on our technical legal and strategic expertise, backed by a commitment to service quality.

What claims are you seeing on the rise in Australia?

We have seen an increase in the number of fraud claims being investigated and pursued. Increased instances of fraud typically follow global catastrophes, such as the GFC. COVID-19 has had a similar effect. Additionally, expanded remote working and use of cloud-based technology to conduct business leaves companies vulnerable to fraud. Fraud matters are delicate and effective crisis-management is paramount to preserve evidence and avoid tipping off potential fraudsters who might attempt to put assets beyond the reach of the putative claimant. Victims of fraud should consider the possibility of obtaining asset freezing orders and search orders – which Australian courts are willing to grant.

Shareholder disputes are increasingly prevalent. We have seen an increase in warranty claims under shareholder agreements, particularly where shareholders become concerned that management might have provided false or misleading pre-investment information. We are seeing an increase in cash calls being made under shareholder agreements where shareholders then seek to renege on promises to invest further.

Similarly, we are noticing an increase in claims made by investors seeking to exit underperforming investments.  These claims are often for misleading and deceptive conduct in the pre-investment material provided by the company (including in ASX announcements), on which the investor alleges it relied in making the investment.

In disputes generally, we have noticed a trend towards arbitration as the jurisdiction to resolve commercial disputes in Australia and internationally, most substantially in construction matters.

What is the Australian Court’s attitude to supporting foreign and arbitral proceedings?

The Australian courts have the power to grant orders in support of foreign proceedings. For example, Australian courts can issue freezing orders in relation to foreign proceedings to prevent a defendant from moving or dissipating assets.  Freezing orders and search orders may assist a claimant with recoverability or procuring an early settlement of the dispute.

In insolvency proceedings, a letter of request from a court of another jurisdiction may mean that an Australian court is required to act ‘in aid of’ or ‘auxiliary to’ the overseas court. Recently, this has allowed for joint insolvency proceedings to be held with a court of another jurisdiction (see Kelly, in the Matter of Halifax Investment Services Pty Ltd (in liq) (No 5) [2019] FCA 1341).

Australian courts also have, and regularly exercise, the power to grant orders in support of both domestic and international arbitral proceedings – for example by issuing anti-suit injunctions. Australian courts demonstrate an increasingly receptive attitude to recognising and enforcing arbitral awards from overseas institutions.

What are the trends in insolvency and restructuring in Australia?

The rapid introduction of regulation to combat tsunami of insolvencies due to the effects of the COVID-19 pandemic has ensured low levels of corporate insolvencies. However, we consider that these low insolvency levels reflect policy, not the economic reality of a company’s true financial state.

The first COVID-19 lockdowns in 2020 resulted in Australia’s first recession in 30 years. Economic growth did recover in 2021, but never returned to pre-pandemic levels.  We are yet to be given a proper insight into the effects of the nationwide 2021 lockdowns on GDP, and its effect on corporate Australia.

Formal insolvency appointments are likely to remain low whilst the Australian Tax Office continues its lenient approach to repayment schemes and enforcement action. However, as limitations on statutory demands ease and government wage subsidies end, many companies will begin to feel the pressure from creditors more acutely.  We expect to see an increasing number of insolvencies in the months and years to come.

This trend was evident following the GFC-triggered economic downturn of 2008. Despite the economic decline in 2008 and 2009, the appointment of liquidators was relatively low. Shortly thereafter, in the economic recovery period of 2012 to 2014, we saw a greatly elevated number of insolvency appointments.

What are the limits of Model Law recognition in Australia?

The UNCITRAL Model Law has been operative in Australia since the commencement of the Cross-Border Insolvency Act 2008 (Cth). There are three ways the recognition of the Model Law in Australian proceedings may be impeded. If an oversees insolvency matter is not considered to be a ‘foreign proceeding’ by the court, then it will not be recognisable in Australia under the Model Law. Similarly, if a person is not defined as a ‘foreign representative’ under the Model Law they are not able to obtain orders from an Australian court in relation to a foreign insolvency proceeding.  In cross border insolvencies an issue may also arise in defining the Centre of Main Interest (COMI). As recently illustrated in the NSW Supreme Court, the Model Law will not be recognised where the COMI is found to be outside a Model Law state (Re Hydrodec Group Plc [2021] NSWSC 755).

What is Australia’s primary business rescue mechanism?

Voluntary administration is Australia’s primary business rescue regime. The process of voluntary administration is temporary and has three potential outcomes. A deed of company arrangement (DOCA) may be agreed between a company and its creditors. This is a compromise which is flexible, and designed to promote the ultimate survival of the business. Alternatively, the administrator may, with or without restructuring, return this business to the directors and it will continue operating. Finally, in a situation where creditors resolve a company be wound up, the business will be placed into liquidation.

Unlike the Chapter 11 approach in the United States where the directors remain in control of the company, in Australia when a company is placed into voluntary administration, the administrator takes over the reins (often with the continued support of the management). Many companies use the voluntary administration regime to restructure their way out of debt.

Blackwattle Legal has extensive experience assisting clients through each of these outcomes. We never adopt a cookie-cutter approach to legal advice, and this reflects the flexibility of Australia’s voluntary administration framework. We apply our commercial and legal expertise to provide a unique and strategy-based approach to each client.