Problem question in textbook:

Noonameena Caravan Park Pty Ltd (Noonameena) operates a holiday park on The Coorong in South Australias Upper South East. A second company, Coorong Boating and Hire Pty Ltd (CBH) has identical shareholders to Noonameena. Mark and John are directors of both companies. Together they have substantial personal assets.

The Coorong has become seriously threatened due to salinity and lack of water flow from the Murray River. The South Australian Government decides to take extreme measures and closes the Coorong to all activities. This means that Noonameena and CBH suffer from declining business and they become financially unviable.

Rainbow Chemicals is the supplier of domestic supplies to Noonameena. It has ignored past failures by Noonameena to pay outstanding debts, but the supplier is now owed $15,600. This amount has been outstanding for three months.

Mark and John decide to appoint an administrator, Alan, to Noonameena. At the first meeting of creditors Rainbow Chemicals objects to Alans appointment. The meeting decides to replace Alan with a new administrator, Derrick.

Derrick, while in charge, consults with the State Government and is told the Government will be agreeable to compensate the company for some loss of business. However, the Government have concerns brokering such a deal as both John and Mark have poor track records as company directors. John and Mark have been disqualified from participating in the management of a corporation in the past. Derrick does not mention any of this to creditors at their next meeting when the vote is taken to have the company enter into a Deed of Company Arrangement.

Blue Ribbon Bank Ltd holds a debenture charge over CBH with a clause allowing for the appointment of a receiver should the company default on interest payments.

CBH defaults in July and Tania, a receiver, is appointed to CBH. She sells three fishing runabouts that CBH owned and received only $600 each. The value of these boats would conservatively be $12,000. Further enquiry suggests that she sold these to her retired father without advertising them or providing an opportunity for members of the public to purchase them.

a) What options are available to Rainbow Chemicals or any other creditor who has substantial debts and is waiting to be paid by CBH?

b) How could the directors have appointed Alan and then finished up with Derrick running their company?

c) Has Tania breached any provisions of the Corporations Act?

d) Can Blue Ribbon Bank play any role in the voluntary administration?

e) If a liquidator were appointed to CBH and found that Mark had repaid a loan on behalf of the company to his family just three weeks before the appointment, could this be recovered?