The first significant decision¹ under the Australian Personal Properties Securities Act 2009 has followed New Zealand and Canadian law.

The case involved competing claims by a general security holder and a lessor to three civil construction vehicles located in the Northern Territory.

The relationship between the parties

Liquidators are not limited to the procedure set out in section 295 of the Companies Act to recover a debt once an insolvent transaction has been set aside. 

Liquidators must seek a court order to recover an insolvent transaction – even where the creditor has not objected in time to a notice under section 294 of the Companies Act.

The importance of following the prescribed procedure was recently reinforced by the High Court.¹

We look at the decision and the conclusions to be drawn from it.

The case

Confirmation by the Court of Appeal that “accounts receivable” are more than just book debts and include other legally enforceable monetary obligations owed to a company will provide welcome certainty to receivers and liquidators.

The issue is significant because it determines the assets available to pay preferential claims.

New Zealand is a highly entrepreneurial society.  Even during the sluggish economic growth of the past three years, we have maintained an average company registration rate in excess of 45,000 a year. 

Recent decisions from the courts have raised the legal risk for directors and underlined the exposure to third party liability of auditors, trustees and promoters. 

As a result, we can probably expect this year to have more claims made by receivers, liquidators and out-of-pocket investors against those involved in:

Registration will be mandatory under the Insolvency Practitioners Bill as reported back to the House by the Commerce Committee.  This is a radical and far-reaching change from the negative licensing regime initially proposed in the Bill.

This Brief Counsel summarises and comments on the Committee’s report.