In a recent case, the Victorian Supreme Court said that an accountant ‘would know well that a statutory demand involves strict time frames for response and potentially very significant consequences for a company’. The accountant failed to take appropriate steps to inform the company of the statutory demand.

The statutory demand process

If a company does not comply with a statutory demand within 21 days of service, it is deemed to be insolvent and the creditor may proceed to wind up the company.

A recent court decision considers the legal principles and sufficiency of evidence when a court-appointed receiver seeks approval of their remuneration.

A court-appointed receiver needs court approval for the payment of their remuneration. The receiver has the onus of establishing the reasonableness of the work performed and of the remuneration sought.

Crypto investors were dealt another blow on November 11 when FTX, the world’s second-largest cryptocurrency exchange, filed for chapter 11 bankruptcy relief in the District of Delaware, along with more than 130 related companies and affiliates. The bankruptcy was spawned by liquidity issues brought on by the sudden collapse in value of FTX’s crypto assets. Starting on November 6, customers simultaneously attempted to withdraw their funds and assets from the exchange, causing a situation akin to a classic bank run that led to an estimated $32 billion in value quickly evaporating.

Asbestos litigation continues to rage on in the tort system with no likelihood of receding in the immediate future. In addition to the inherent costs associated with having to defend and settle asbestos claims, managing asbestos litigation can be a significant distraction for corporate officers and directors from running their businesses. The overhang of asbestos litigation can also severely dampen the value of an otherwise successful and profitable company.

A Supreme Court in Australia has dismissed an application by a UK company’s moratorium restructuring practitioners for recognition of a UK moratorium and ordered that the company be wound up under Australian law.

The decision provides insights into the interaction between cross-border insolvencies and the winding up in Australia of foreign companies under Australian law.

Introduction

In the matter of Hydrodec Group Plc [2021] NSWSC 755, delivered 24 June 2021, the New South Wales Supreme Court:

It is possible for a trustee in bankruptcy to make a claim to property held by a bankrupt on trust. For example, by lodging a caveat over a home that is held on trust.

A trustee in bankruptcy may be able to make a claim, relying on the bankrupt’s right of indemnity as trustee of the trust. This is because the bankrupt’s right of indemnity, as trustee, is itself property that vests in the trustee in bankruptcy under the Bankruptcy Act 1966.

Explaining a trustee’s right of indemnity

A 139ZQ notice issued by the Official Receiver is a powerful tool for trustees in bankruptcy seeking to recover a benefit received by a third party from an alleged void transaction. These include transactions such as an unfair preference, an undervalued transaction, or a transaction to defeat creditors.

Given the adverse consequences for noncompliance, a recipient of a 139ZQ notice should take it seriously and obtain legal advice without delay.

Section 139ZQ notices

Section 561 of the Corporations Act 2001 (Cth) provides that accrued employee entitlements must be paid in priority to the holder of a circulating security interest in a winding up.

Until recently, it was unresolved whether the property subject to a circulating security interest should be determined as at the date the liquidation began, on a continuous basis, or at some other unidentified date.

It is unresolved whether a creditor can rely upon a section 553C set-off under the Corporations Act 2001 (Cth) to reduce an unfair preference claim. Until the controversy is resolved by a binding court decision, liquidators and creditors will continue to adopt opposing positions.

A company in liquidation served a creditor’s statutory demand for debt where there was a genuine dispute about the existence of the alleged debt. The statutory demand was set aside by the Court and the liquidators were ordered to personally pay costs on an indemnity basis.

What happened

In SJG Developments Pty Limited v NT Two Nominees Pty Limited (in liquidation) [2020] QSC 104: