In a decision handed down by Downes J on 4 July 2024, the Federal Court of Australia provided guidance on the treatment of capital gains in bankruptcy, and endorsed the approach that has been taken by the ATO: Robson as trustee for the bankrupt estate of Lanning v Commissioner of Taxation [2024] FCA 720 (Decision).
Key takeaways
We are pleased to present our first edition of the Annual Return, reporting on landmark cases, legislative reform, and the implications for your practice.
Uncharted waters
In Pearce, in the matter of Bandiera Holdings Pty Ltd (Receiver Appointed) (in liquidation) v Bandiera Holdings Pty Ltd [2022] FCA 876, the Federal Court of Australia considered when a summons for the examination can require the production of any professional indemnity insurance policy against which the company might have a claim, even in circumstances where the examinee asserts that any potential claims against it were weak.
The Probuild and Virgin Australia administrations confirm that virtual meetings in external administrations are now an integral part of insolvency in a post-pandemic world. Although recent changes to the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) provide greater flexibility, there are aspects that insolvency practitioners need to consider and Court directions may be necessary.
The liquidators of Intellicomms applied to the Court for relief in relation to a sale agreement entered into between Intellicomms and a related company for the sale of business assets, claiming it was a creditor-defeating disposition and a voidable transaction.
In Re Nicolas Critini Pty Ltd (in Liquidation) [2022] NSWSC 1149, the New South Wales Supreme Court confirmed that a statutory debt for a disputed progress claim does not crystalise under SOPA’s[1] distinct 'pay now, argue later' process until an adjudication determination is delivered.
Liquidators generally have the power to assign causes of action belonging to a company, or claims conferred on the liquidator by the Corporations Act 2001 (Cth) (Act). However, a liquidator’s power to sell or assign causes of action has certain limitations which were considered in Anderson v Canaccord Genuity Financial Limited [2022] NSWSC 58 (Anderson Judgment).
The amendments follow the recent high profile decision in The Australian Sawmilling Company Pty Ltd (in liq) & Ors v EPA & Anor [2021] VSCA 294 (TASCO Judgment). Insolvency practitioners should be aware that the amendments are aimed at preventing liquidators from disclaiming liability for environmental clean-up costs.
TASCO Judgment
The Supreme Court of Victoria is the first Australian court to test creditor-defeating disposition laws designed to defeat illegal phoenix activity: In this latest article, Maddocks Insolvency & Restructuring team unpack illegal phoenix activity, summarise the key takeaways from the recent case Re Intellicomms Pty Ltd (in liq) [2022] VSC 228 (Re Intellicomms), and consider implications for insolvency practitioners, companies and directors.
What is phoenix activity and why is it illegal?
The appointment of voluntary administrators to Probuild in March 2022 sent shockwaves through the construction industry. External administrations of other recognised brands such as Grocon, ABD Group, Privium and Condev have also caught media attention. Overall, external administrations in the construction industry have been increasing, notwithstanding that the insolvency numbers generally have declined to historical 20-year lows. The insolvency of each builder impacts numerous parties including developers, principals, sub-contractors, suppliers, consultants and employees.