News

Applying A Wider Restitutionary Basis To Equitable Liens Created Under The Universal Distributing Principle

In the recent decision of Re Australia’s Residential Builder Pty Ltd (in liq) [2019] VSC 115, the Victorian Supreme Court considered and extended the Universal Distributing equitable principle. This principle states that a secured creditor should not have the benefit of a fund created by a liquidator’s efforts during winding up, without the liquidator being reimbursed for their associated time and expense. On these facts, the Court was willing to extend this principle beyond the direct liquidator to a third-party liquidator.

What To Do With An Insolvent Corporate Trustee?

In the recent decision of Cremin, in the matter of Brimson Pty Ltd (in Liq) [2019] FCA 1023, the Federal Court provides useful guidance of what a liquidator should do when faced with an insolvent corporate trustee with a right of indemnity over trust assets. In situations where the corporate trustee ceases to be the trustee upon becoming insolvent, Brimson highlights the need to approach the Court before the liquidator is able to realise the assets of the trust to meet the company’s liabilities. The decision is one of the first since the handing down of the High Court’s findings in Carter Holt Harvey (Amerind) concerning the nature of the right of exoneration and the limit of what it can be used to indemnify.

Initiating Proceedings In The Name Of A Company: Lessons From Junior Academy

The recent decision of the Victorian Supreme Court in Re Junior Academy ELC Pty Ltd (No 3) [2019] VSC 161 serves to highlight how dishonest and deceptive conduct of one director is highly relevant when determining whether the Court could grant leave allowing that director to bring a claim against another director in the name of the company.

In this matter, Mr Urban brought an application seeking leave to bring an action against Mr and Mrs Lahmy (the Lahmys) in the name of a company of which they were equal shareholders. Mr Urban alleged that the Lahmys breached their director’s duties by developing a childcare centre on the same road as a child care centre they owned and operated jointly.

In refusing to grant leave, Justice Robson highlighted the circumstances where granting leave to bring a case is inappropriate, and what considerations about the person bringing an application are relevant.

Corporate Insolvency Regime Reform: The ‘Combatting Illegal Phoenixing’ Bill

Illegal phoenix activity is a significant problem that affects the government, businesses and employees. A report conducted by PricewaterhouseCoopers in July 2018 for the Phoenix Taskforce estimated that the annual direct cost of illegal phoenix activity was between $2.85 billion and $5.13 billion in 2015/16. As a result, on 13 February 2019 the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) (Bill) was introduced into Commonwealth Parliament as part of the government’s reform of Australia’s corporate insolvency regime. The Bill intends to amend the Corporations Act 2001 (Cth) to introduce penalty provisions for individuals and officers who engage in phoenixing-related conduct. It also proposes to give ASIC the power to reverse such transactions.

These proposed amendments have received significant public interest, and no doubt insolvency practitioners are already keeping tabs on the progress of the Bill. This article summarises the background to the changes set out in the amendments as at 13 February 2019 and outlines this area of insolvency laws for business owners to increase their awareness of phoenixing and detail courses of action if they fall victim.