In the decision of Divitkos, in the matter of ExDVD Pty Ltd (in liq) [2014] FCA 696, White J may have created a new class of equitable subrogation by allowing a secured creditor to prove in a liquidation as a priority creditor in respect of amounts paid to employees under s433 of the Corporations Act.

FACTS

The Financial System Inquiry was formed on 20 November 2013 by our Federal Treasurer to examine how our financial system could be positioned to best meet Australia’s evolving needs and support economic growth. The Inquiry received over 280 first round submissions and released it’s Interim Report earlier this week. ^[1] 

The High Court recently delivered judgment in the matter of Stewart v Atco Controls Pty Ltd (In Liquidation).^[1] The case turned on the application of the well-known principle in Universal Distributing

In the decision Equititrust Limited (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) in its capacity as responsible entity of the Equititrust Income Fund v Equititrust Limited (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) in its own capacity [2014] FCA 692,the Federal Court of Australia considered an application to set aside or stay indefinitely liquidator examinations of former auditors under s596B of the Corporations Act 2001 (Cth).

The decision Akers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57 demonstrates that Australian Courts may be willing to depart from the philosophical basis for cross border insolvency in order to protect the interests of Australian based creditors.

Background

In Re John Pettit Pty Limited (Subject to a Deed of Company Arrangement) [2014] NSWSC 728, the Supreme Court of NSW considered an application by the deed administrators of John Pettit Pty Ltd (John Pettit) seeking directions to sell property potentially owned by third parties and orders which limited the Deed Administrators’ personal liability in relation to the sale.

BACKGROUND

In the recent decision of First Strategic Development Corporation Limited (in liq) and Anor v Chan and Ors [2014] QSC 60, the Supreme Court of Queensland considered the solvency of a company with no assets or formalised line of credit, but with a director who claimed to be willing to fund the $2.5 million that the company had committed to spending.

FACTS

In Stewart v Atco Controls Pty Limited (in liquidation) [2014] HCA 15, the High Court confirmed the Universal Distributing principle that a liquidator is entitled to be paid his or her remuneration and expenses in realising assets in priority to a secured creditor.

BACKGROUND

The recent WA Supreme Court decision in White v Spiers Earthworks Pty Ltd [2014] WASC 139, highlights the consequences of not registering a security interest under the Personal Property Securities Act 2009 (PPSA) when a company becomes insolvent.

The case also provides guidance about certain PPSA savings provisions, the treatment of transitional security interests and the primacy of PPSA over pre-PPSA legislation.

BACKGROUND

The ability of limited recourse provisions to protect borrowers and financiers against insolvency risks may be weaker due to a recent English court case.

Limited recourse clauses are often used in project and structured finance transactions. Borrowers want to avoid the risk of their directors being liable for trading while insolvent; and financiers may want to avoid the possibility of insolvency clawback actions if they seek to enforce their security documents.