Statutory demands are a quick and convenient way to prove a debtor company’s insolvency. But they’re sensitive creatures. There seems to be an endless list of potential defects to make the demand challenge-worthy.

Luckily for creditors, a recent decision of the WA Court of Appeal means there is one less way for a demand to fail.

The loan and the demand

Garuda Aviation is a small WA operator that borrowed $27 million from CBA to buy a plane. The loan was secured by a mortgage over the plane.

The Full Court of the Federal Court of Australia recently affirmed the decision of Justice Barker in disallowing Mr Oswal, the director of Burrup Holdings Limited (BHL) and Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) (BFPL) access to certain books and records of the companies.

In the recent decision of Re Sports Alive Pty Ltd (in liquidation) [2013] VSC 69, the Supreme Court of Victoria dealt with questions referred to it by a liquidator in respect of segregated bank accounts which might either be available for costs and the general body of creditors or alternatively only for beneficiaries on whose behalf the trustee should have held funds.  It was accepted that the determination was essentially a question of fact, and in the face of ambiguous facts, the Court determined that the onus was on the beneficiaries and not the liquidator. 

Generally speaking, other than in limited prescribed situations, an insolvency practitioner can only be removed by Court order. Often applications are made for the removal because of a perceived bias, however these are not always successful, as was seen in Cote v Devine [2013] WASC 79, handed down last week. New reforms allowing creditors to resolve to remove insolvency practitioners without recourse to the Court have the potential to significantly affect this.

The recent New South Wales Supreme Court decision In re MF Global Australia Ltd (in liq) No 2 [2012] NSWSC 1426 confirmed that the remuneration, costs and expenses incurred by liquidators in preserving, recovering and realising trust assets should be paid out of the trust property generally, rather than being restricted to assets held on trust for the benefit of the company itself.

The recent New South Wales Supreme Court (Court) decision in In re MF Global Australia Ltd (in liq) No 2 [2012] NSWSC 1426 (23 November 2012) confirms that liquidators who properly incur costs and expenses in seeking court directions regarding the distribution of trust property and, in recovering such property, will generally be able to recover their relevant remuneration, costs and expenses from that trust property.

In August 2012 the NSW Government commissioned an Independent Inquiry into Construction Industry Insolvency. The Inquiry was asked to assess the causes and extent of insolvency in the building and construction industry and to recommend measures to better protect subcontractors from the effects of insolvency.

The recent decision of the Federal Court in Carter in the matter of Damilock Pty Ltd (Damilock) highlights the need for liquidators to review current practices when paying priority creditors (e.g. employee entitlements).

Facts

The plaintiffs were appointed as administrators of Damilock on 26 June 2007 and subsequently appointed as liquidators by creditors’ resolution at a meeting on 7 September 2007.

In the recent decision of Oswal v Burrup Fertilisers Pty Limited (Receivers and Managers Appointed) [2013] FCAFC 9, the Full Court of the Federal Court of Australia recently confirmed that receivers and managers will be justified in refusing to allow a director access to books and records of the company where access may adversely impact on the realisation of the secured assets.

THE FACTS

In brief - Bill implements reforms proposed in options paper