Taxpayers in Western Australia have been left to foot the bill after Jirsch Sutherland, liquidator for the Kimberley Diamond Company Pty Ltd (“KDC”), used a legal loophole to handball expensive mining leases back to the Department of Mines and Petroleum (“DMP”).

Care and maintenance costs for KDC’s Ellendale diamond mine amount to $100,000 (AUD) a month and environmental rehabilitation obligations are estimated to be $40 million (AUD). The DMP has been servicing these costs since KDC went into liquidation.

Today, by a majority of 3-2, the High Court of Australia in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) [2015] HCA 48 confirmed that s 254(1)(d) of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) does not impose an obligation on trustees (including administrators, receivers and liquidators) to retain sufficient moneys from the trust fund to pay tax unless a relevant assessment has been issued.

The Insolvency Law Reform Bill 2015 has been introduced into Parliament as part of the Australian Government's strategy to modernise and strengthen the nation's insolvency and corporate reorganisation framework.

This week’s TGIF considers a decision in which the Court held that an administrator who has unsuccessfully defended a proceeding may need to reinstate any remuneration previously received to satisfy the resultant costs order.

BACKGROUND

The deed administrator of a company subject to a Deed of Company Arrangement (DOCA) rejected proofs of debt submitted by a number of creditors.  The creditors successfully appealed against the rejection of the proofs of debt. 

The "running account" defence to an unfair preference claim is a fragile flower.  In a recent decision, the Queensland Court of Appeal has reminded solvent counterparties that suspension of a customer's trading account will probably break the "running account", exposing a solvent counterparty to greater unfair preference risk.

Need to know

Mango Boulevard Pty Ltd & Anor v Whitton & Ors [2015] FCA 1169

A bankruptcy trustee’s notice objecting to discharge on one of the special grounds specified in the Bankruptcy Act 1966 can be valid even if based on additional unstated reasons, so long as those reasons are directed to the achievement of a purpose of the law of bankruptcy.

Key Points:

It's unclear that safe harbours by themselves will provide genuine opportunities for restructuring distressed businesses.

The Productivity Commission's upcoming report on corporate insolvency will address two burning issues: ipso facto clauses and how to encourage directors to save financially-stressed companies.

This week’s TGIF considers the case of Bowesco Pty Ltd v Westpoint Management Ltd [2015] WASCA 184, which considered whether a guarantor had a right of subrogation enabling it to be repaid in advance of the second ranking creditor. 

BACKGROUND

The recent Full Court of the Federal Court of Australia decision of Templeton v Australian Securities and Investment Commission [2015] FCAFC 137 has considered the application of 'proportionality' in determining receivers' remuneration.

What do you do when a company owes you money? Or a creditor issues a statutory demand on your company?

This article discusses what a statutory demand is and the risks and benefits of issuing a statutory demand to recover your money.