News

Assignments Between Family Members: An Issue For Insolvency Practitioners

The Supreme Court of Victoria’s decision in AAD Services Pty Ltd (in liq) v ALD Wholesale Pty Ltd and Ors (No 3) [2019] 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.

Why The Term ‘Legal Phoenix’ Is An Oxymoron

The Federal Court of Australia’s decision in ACN 093 117 323 Pty Ltd (In Liq) v Interlara Engineering Consultants Pty Ltd (In Liq) [2019] 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.

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.