The Commonwealth Parliamentary Joint Committee on Corporations and Financial Services Corporate insolvency in Australia was released on 12 July 2023.
The Report states that the construction industry is experiencing one of the highest rates of insolvencies compared to other sectors. The Report cited ASIC data which shows that the number of companies entering external administration has increased relative to the same month in the previous two financial years, with the construction industry being the most highly represented.
Liquidators accepting a new appointment will have to think carefully if there's a possibility of disclaiming onerous property as part of that appointment.
In Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Constructing Pty Ltd v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99, the NSW Supreme Court considered whether a company on the brink of liquidation can take action to enforce a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).
Where it appears that there has been concealment or removal of valuable assets and little to no co-operation from the directors in the course of a liquidation, the section 530C warrant procedure in the Corporations Act 2001 (Cth) has proven to be an effective means of obtaining information regarding company books and assets.
The abolition of the "peak indebtedness" rule will complicate liquidators' tasks, not least its adverse effect on pursuing preferences where it's unclear what forms the single transaction.
The Corporations Act 2001 sets out a regime for the order in which certain debts and claims are to be paid in priority to unsecured creditors.
That's straightforward enough for a liquidator, right?
Unfortunately, matters are not that straightforward. In effect, there are two priority regimes under the Act for the preferential payments of particular creditors, each of which applies to a different "fund", and we've observed this has led to some liquidators being unsure of how to proceed – or even worse, using funds they should not.
The equitable doctrine of marshalling can protect the security interests of subordinate secured creditors when a debtor becomes insolvent.
Marshalling is a neglected tool in the insolvency toolbox, but it can play an important role in protecting the security interests of subordinate secured creditors.
While the High Court has provided some clarity on the operation of the statutory priority regime, insolvency practitioners will still need to tread carefully when dealing with corporate trustees.
For insolvency practitioners who need clarity on how receivers and/or liquidators should pay, out of trust assets, priority employee claims arising from trust liabilities, the High Court's decision in Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth of Australia & Ors [2019] HCA 20 (Amerind) is a welcome result.
Get your 5 Minute Fix of major projects and construction news. This issue: significant security of payment reform on the agenda in WA, review of the BCIIP Act tabled, Infrastructure Victoria's report on the investment required to support automated and zero emissions vehicles, more on cladding and the High Court grants special leave to consider the availability of a quantum meruit claim as an alternative to contract damages upon repudiation of a building contract.
Review of security of payment reform for WA subcontractors released