The Supreme Court of Victoria’s decision in AAD Services Pty Ltd (in liq) v ALD Wholesale Pty Ltd and Ors (No 3)  VSC 546 highlights the issues that insolvency practitioners can face in regards to recouping funds. On these facts, an assignment created between family members had legal operation and meant that the trustee in bankruptcy was unable to access proceeds of judgment.
The Federal Court of Australia’s decision in ACN 093 117 323 Pty Ltd (In Liq) v Interlara Engineering Consultants Pty Ltd (In Liq)  FCA 1489, is of great interest to restructuring and insolvency practitioners. Interlara Pty Ltd had attempted to restructure its business to move priority creditors to a new entity, so ensuring that upon winding up creditors with personal guarantees against Interlara’s directors were paid out. In holding the scheme to be an uncommercial transaction, an insolvent transaction, an unreasonable director related transaction and a voidable transaction, the decision of Derrington J highlights how the Court will treat the phoenixing of a company aimed at defeating the rights of priority creditors.
In the recent decision of Cremin, in the matter of Brimson Pty Ltd (in Liq)  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.