If your terms of trade documents don’t have the correct provisions, you can lose goods supplied to a customer that becomes insolvent, even though you may have title to the goods.
A recent Supreme Court decision highlights the need for retention of title suppliers to have adequate terms of trade documents and to register security interests on the Personal Property Securities Register (PPSR) to avoid losing assets if a customer becomes insolvent.
The Farm Debt Mediation Act 2011 (Vic) (the Act) has been in operation for some two years and is in large part modelled on New South Wales legislation which has been operative since 1994. Since the commencement of the Act in Victoria, over 180 mediations have taken place with 95% of those mediations resulting in a settlement agreement between the parties.
The UNCITRAL Model Law on Cross-Border Insolvency is designed to supplement States' insolvency laws with a framework to address cross-border insolvency proceedings.
Defects in statutory demands have regularly prevented creditors from obtaining winding up orders against debtor companies.
The recent decision in Poolrite Australia Pty Ltd (In Liq) v Structural Pools Aust Pty Ltd [2013] FCA 1100 (Poolrite) confirms the Courts’ inclination to facilitate the efficiency of the winding up process by disregarding technical deficiencies in statutory demands where no substantial injustice is caused.
Facts
The Corporations Act 2001 (Cth) (Act) and the Corporations Regulations 2001 (Regulations) contain various rules regulating the lodgment of Proofs of Debt by creditors. Often Proofs of Debt are lodged by creditors to entitle them to vote at a second meeting of creditors convened by an Administrator under section 439A of the Act.
In many bankruptcies the trustee is without funds to undertake litigation for the benefit of the bankrupt estate. In some cases a creditor is willing to indemnify the trustee in respect of the costs of such litigation where there are strong prospects of a successful conclusion with sufficient funds realised to distribute a dividend to creditors.
In the recent Victorian Supreme Court decision of Central Cleaning Supplies (Aust) Pty Ltd v Elkerton and Young (in their capacity as joint and several liquidators of Swan Services Pty Ltd (in liquidation))[1], the Supreme Court considered the issue of whether the Plaintiff's credit application signed by Swan Services Pty Ltd (Swan Services) before 30 January 2012 was a 'transitional security agreement' within the meaning of that term in the Personal Property Securities Act
Our Insolvency Update of 3 March 2014 refers to the Federal Court’s decision in Australian Building Systems Pty Ltd (in liq) v Commissioner of Taxation . The court held that liquidators and receivers and managers cannot be held personally liable for any CGT liability subsequently assessed as due (where funds are remitted in the ordinary course and to secured creditors before the Commissioner of Taxation issues the assessment).
In the decision of JPMorgan Chase Bank, National Association v Fletcher; Grant Samuel Corporate Finance Pty Limited v Fletcher [2014] NSWCA 31, the Court of Appeal of New South Wales confirmed that liquidators may apply under rule 36.16(2)(b) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to further extend the time within which they may bring voidable transactions proceedings. We considered the first instance judgment in a