King (Trustee); In the matter of Zetta Jet Pte Ltd v Linkage Access Limited [2018] FCA 1979 is the latest in a series of decisions, across multiple proceedings, dealing with the dogged attempts of a United States bankruptcy trustee to recover a luxury yacht moored in Australian waters.

In this week’s TGIF, we consider the dangers of being the last one standing in ‘mothership’ preference claims. In the recent decision of In the matter of Bias Boating Pty Limited (receivers and managers appointed) (in liquidation) [2019] NSWSC 47, Black J ordered costs against a number of defendants to a preliminary question of insolvency even though they did not participate in the hearing of that question.

Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

There are two main types of security:

The federal government has recently introduced reforms to Australia’s insolvency and restructuring laws to provide companies under financial stress an opportunity to trade out of their difficulty. A key part of the reform package is the introduction of a new “ipso facto” regime, which restricts the ability of a party to terminate a contract and exercise other contractual rights in certain cases of insolvency or restructuring of the other party.

What are ipso facto clauses?

This week’s TGIF considers a recent decision of the Victorian Court of Appeal where a company’s creditors successfully opposed an application by the company’s liquidators to compromise proceedings commenced on the company’s behalf.

ASIC’s record with land banking schemes has been the story of shutting the stable door after the horse has bolted. It has wound up insolvent schemes long after the investor’s cash has well and truly dissipated.

For example:

In New South Wales (NSW), unlike in Victoria, claimants in liquidation have been able to make claims under Security of Payments Acts (SOPA). This has been recently reaffirmed in the case of Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In Liquidation) [2019] NSWCA 11 (Seymour), where the court doubled-down on this position and further explained why the NSW position differs from the position taken by the Victorian Court of Appeal in the infamous Faade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247 (Faade).

The Federal Court of Australia rules that receivers appointed to a company in liquidation are entitled to pay employee entitlements and fees.

In the recent case of 1st Fleet Pty Ltd (in liquidation), the Court clarified the information disclosure obligations of external administrators in the Insolvency Practice Schedule (Corporations) (IPSC) and Insolvency Practice Rules (Corporations) 2016 (Rules).

There is only a short time period for compliance, and there can be cost consequences for non compliance.

The recent decision of the Federal Court (Besanko J) in Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2) [2019] FCA 93 illustrates the critical importance for administrators and liquidators of complying with the requirements in relation to remuneration reports to creditors, and the severe adverse consequences which may flow if they fail to do so.

Background facts