Summary

This decision is a testament to the flexibility of schemes of arrangement in Australia as a means of effecting settlements with a company’s creditors as well as third parties such as the company’s insurers. The Federal Court also demonstrated its propensity to take a liberal interpretation of what constitutes a “compromise or arrangement” to enliven its jurisdiction to convene a meeting of creditors for the purpose of considering a proposed scheme of arrangement.

Section 560 of the Corporations Act provides that a person who loans money to a company in liquidation, for the purposes of making a payment towards employee wages and other employee benefits, will have the same right of priority as the employees would have had in the winding up of the company.

The spate of insolvencies in the NSW construction sector shows no signs of easing. On 24 October 2013, the Building and Construction Industry Security of Payment Act Amendment Bill 2013 was introduced into Parliament. The Bill is part of the government’s broader reform package to address the level of insolvency being experienced in the NSW construction sector.

Partner, Michael Lhuede and Senior Associate, Ben Hartley discuss the recent Federal Court decision of AMWU v Beynon that dealt with directors’ personal liability for the payment of employee entitlements.

Introduction

Insolvency practitioners need to be aware of the potential for incurring personal liability under civil penalty provisions for contraventions of the Fair Work Act and how they can protect themselves from claims when accepting appointments.

General corporate

ASIC reports on corporate insolvencies 2012–2013

Wentworth Metals Group Pty Ltd (Wentworth) applied under the Corporations Act 2001 (Cth) (Act), for a review by the Federal Court of Australia of a decision by the liquidators of Bonython Metals Group Pty Ltd to sell Bonython's interest in a joint venture mining project to Pure Metals Pty Ltd. 

You are a judgment creditor with a charge over the judgment debtor’s assets and have lodged a caveat over a property owned by judgment debtor. You finally receive word from the judgment debtor that the property has been sold and you are asked to provide a withdrawal of caveat. You agree, subject to being paid the judgment debt at settlement in exchange for the withdrawal. Your request is followed by silence, and then a lapsing notice is served upon you. Your caveat will lapse unless you go to the expense of Supreme Court proceedings to extend the life of your caveat.

In the decision of Allied Express Transport Pty Ltd v Exalt Group Pty Ltd (Administrator Appointed) (No 2) [2013] FCA 477, Exalt Group Pty Ltd (Exalt) sought an adjournment of a winding up application under s440A(2) of the Corporations Act on the basis that the creditors had voted by a majority in favour of a resolution that Exalt enter into a DOCA.

On August 27, 2013, in a case of first impression, the Third Circuit rejected an attack on a foreign liquidator’s petition for recognition of an Australian insolvency proceeding under Chapter 15 of the US Bankruptcy Code premised on the argument that the foreign proceeding violated US public policy.