Review: Insolvent Investments

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Insolvent Investments, Stewart J Maiden eds., LexisNexis Butterworth, 2015, Chatswood, Australia

This is not a read for the lighthearted. But, Insolvent Investments is a fantastic specialist textbook examining the system of managed investments schemes and their related vehicles. Insolvent investments are a complex and increasingly frequent part of litigation having particularly emerged over the last 15 years. These schemes and the sheer complexity of them takes up an inordinate amount of court time and judicial contemplation.

Managed investment schemes are governed primarily by 5C of the Corporations Act but the judiciary has often been called in to fill the gaps. Specifically, the courts have had to create jurisprudence on how to wind up managed investment schemes and define the duty of officers operating pursuant to such schemes, ultimately defining their obligations as arising primarily under the act and not in a strict fiduciary role.

Insolvent Investments covers everything from directors duties to the rights of third parties and the role of creditors verses the pecking order for allocation of assets following dissolution.

Insolvency and bankruptcy are key areas of legal practise that tangentially permeate so many different areas of law that every practitioner should at least have a fundamental understanding of to allow them offer their clients a full view of their obligations and options.

At the end of the day, if this is not your specialist area of practise, then you will need to consult a specialist. However, to consult that expert on a somewhat level pegging, this book certainly does take you a long way to getting there and will empower you to engage that practitioner from a level of informed knowledge, with all the power of an in-depth exploration drawing from the finest legal, academic and judicial minds dedicated to exploring this specific area of law.

This review has been written for the ACT Law Society who provided the writer with the book.
Tom Barrington-Smith is currently completing his Australian Restructuring, Insolvency &  Turnaround Association advanced certification to supplement his legal qualifications towards certification as a specialist insolvency practitioner.

Erectile Dysfunction Merchant Guilty of Contempt of Court

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I don’t want to be premature but a well planned blog is a lot like erecting a tent; annoying as hell but better than having a dysfunctional tent that collapses too early leaving everyone disappointed. As such I have considered the values imposed by the Canberra Commercial Law editorial team and have agreed not to make any lewd puns when reporting this case. Disclaimer fulfilled.

Australian Competition and Consumer Commission -v- ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 1441 dealt with an application by the ACCC asking the Federal Court to make findings of contempt against the Advanced Medical Institute over its continued advertising despite court orders.

I think deep down we all knew it was coming. Erectile dysfunction ads have always skirted that fine line between paying $8 for popped salt-air at the cinemas and literally selling snake-oil…you choose which one of those is less ethical. Preying on male insecurity seems to have paid the bills for a number of years, but the guardians of consumer justice have finally caught up AMI.

In April 2015, North J made orders restraining the Australian Medical Institute and a number of associated individuals and entities (AMI) from advertising their erectile dysfunction and premature ejaculation products as effective. At hearing the ACCC accused the AMI of unconscionable conduct in it’s marketing and that this constituted a breach of (as then) s51AB of the Trade Practices Act 1974 (Cth). As part of the orders, the AMI was still allowed to advertise but was not allowed to make claims as to the efficacy of their products to any prospective patients.

Civil Contempt

The ACCC brought proceedings seeking a finding of civil contempt following a number of advertisements from the AMI on radio, television and publications on their website despite the orders.

To satisfy the test of civil contempt ACCC was required to show that the orders were clear enough not to be ambiguous and that AMI was capable of complying with them. In terms of an injunction this test is somewhat lightened by the circumstances alone as the test now becomes essentially the question of: were the orders clear and could the AMI have stopped itself from publishing the ads? This test has developed over a number of cases and is articulated clearly in Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [31]. The test seems simpler when put in terms of a negative and the Court barely hesitated on the point even noting that Senior Counsel did not contend the point that the advertisements were deliberate. [54]

AMI based its argument primarily on the definition of “prospective patients” contending that the term “prospective patient” is not clear and unambiguous and alternatively that a “prospective patient” is only someone that expresses an interest rather then the public at large therefore rendering the ads not in breach.

In the views of Moshinsky J, a “prospective patient” extended beyond people who contacted AMI and included those members of the general public suffering from sexual dysfunction. Therefore the advertisements being broadcast to the general public were capable of reaching “prospective patients”.

Given the Court’s findings that the previous orders were clear, unambiguous and capable of compliance, Mohinsky J accordingly made declarations of contempt and listed the matter for a hearing on costs and damages.

BONUS: schedule 1 of the judgment contains transcripts from 20 premature ejaculation ads…it’s grim stuff but still better than watching any of the Star Wars prequels…shots fired.

When Are Your Pleadings Embarrassing?

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If a Judge or practitioner ever refers to your pleadings as embarrassing don’t necessarily take it personally. Embarrassing pleadings is a defined term and refers more to the intention of the pleading instead of the skill of the person drafting it.

Embarrassing Pleadings

A pleading is embarrassing where it is “unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him” Meckiff v Simpson [1968] VR 62 at 70.

In Shelton v National Roads & Motorists Association Limited [2004] FCA 1393 at [18], Tamberlin J explained the concept of “embarrassment” with respect to pleadings:

“Embarrassment in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing: see Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434.”

Pleadings can be embarrassing even when they do contains an adequate cause of action if the facts they rely upon are expressed in such a way as to leave difficulties or doubts about figuring out what they are exactly referring to. This can be through generalities, vagueness or any other framing of the proceedings that prevents the defendant from knowing in advance the case it is required to meet.

Remedy

If the court considers pleadings to be embarrassing then the appropriate remedy is to strike out the pleading rather than to order the provision of particulars. This may seem harsh, but the reality is that it is not the function of particulars to replace the necessary components of a pleading, simply to augment them.

Pleadings are everything. Actions are often commenced with insufficient pleadings with too many lawyers thinking that they can simply amend at a later date if the pleadings are found to be insufficient. Unfortunately, for the client, this will normally be accompanied with a big costs order if the court allows it at all.