This week’s TGIF considers the decision of EH 2015 Pty Ltd (in liq) v Caratti (No 3) [2017] WASC 210 which concerned the rights of a liquidator to funds paid into court as security by a company which subsequently became insolvent.

What happened?

On 20 January 2016, a liquidator was appointed to a trustee company pursuant to an order of the Federal Court.

The innocuously named Treasury Laws Amendment (2017 Enterprise Incentives No 2) Bill 2017 (Cth) (the Bill) makes only a small number of amendments to the Corporations Act 2001 (Cth) insofar as the safe harbour reforms of Australia’s insolvent trading law are concerned.

Key Points:

In a decision of considerable concern to creditors1, the High Court has determined that a bankruptcy notice founded on a judgment debt is open to challenge on the basis that there is a “sufficient reason” for questioning the underlying debt – even if that judgment was the product of a fully contested trial in which both parties were legally represented, and was not procured by fraud or collusion.

The Senate Economics Legislation Committee has recommended that the Treasury Laws Amendment (2017 Enterprise IncentivesNo. 2) Bill 2017 (Bill) which provides a ‘safe harbour’ defence and automatic stays on certain ipso facto clauses be passed. We expect that the Bill will be passed by Parliament this year, giving company directors more flexibility when dealing with financial distress.

History

This update deals with “onerous property” and the issues involved when a trustee in bankruptcy disclaims onerous land, including the potential impact on lenders.

Disclaimer of onerous land by a trustee in bankruptcy

At any time, the trustee of a bankrupt estate may disclaim land which is burdened with onerous covenants or is unsaleable or not readily saleable (s 133 of the Bankruptcy Act 1966 (Cth)).

The NSW Supreme Court has given a Landlord leave to commence proceedings against a company for rent and make good costs arising after the date of the DOCA.

BACKGROUND

On 22 August 2017, the Supreme Court of New South Wales approved the Boart Longyear creditor schemes of arrangement following substantial alterations to the terms of the schemes after clear messaging from the Court that it was unlikely to approve the schemes as originally formulated, on fairness grounds. In this article, we discuss some of the implications of this important judgment, which advisers will need to take into account when devising restructuring plans involving creditors’ schemes of arrangement.

In brief

Insolvency in the construction industry is a perennial concern for contractors who can be thinly capitalised and depend on reliable cash flow to meet obligations to staff and suppliers.

One of the harbingers of the end of the mining boom in Western Australia was the collapse of the Forge Group in early 2014. Forge Group Ltd (Forge) and the companies associated with it were substantial players in the mining services sector. Towards the end of 2013 Forge went into an extended trading halt arising from concerns about its ability to meet debt covenants. In early 2014 the company announced that it had reached a deal with its bank, ANZ, which would “solve the liquidity issues and strengthen Forge Group’s balance sheet”.