The High Court of Australia (being Australia’s highest court) refused special leave to appeal the Full Federal Court’s decision inCEG Direct Securities Pty Ltd v Cooper (as liquidator)[2025] FCAFC 47. The Court held that the Full Court’s decision turned on the application of the relevant provision to the particular facts of that case and did not raise any broader question of principle.
Introduction
Introduction
In this first instalment of our insights series on construction insolvency, Ironbridge Legal outlines key red flags to look for and practical steps to manage counterparty risk.
An Industry at Risk - With Contagion Potential
Introduction
In December 2024, Australian Securities and Investments Commission (ASIC) released an updated version of Regulatory Guide RG 217. The guidance is designed to assist directors in complying with their duty to prevent insolvent trading. It sets out four key principles for directors to avoid insolvent trading, explains the safe harbour defence (which offers protection from personal liability), and clarifies ASIC’s approach to assessing breaches of duty and the application of the safe harbour defence.
“[T]his Court finds that the exceptions to discharge under §523(a) only apply to individuals in Subchapter V.”
- Spring, et al. v. Davidson and Blok Industries, Inc. (In re Davidson; In re Blok Industries, Inc.; Jointly Administered), Adv. No. 23-3005, Doc. 87, at 15 (Bankr., N.D. Fla., decided February 14, 2025).
Facts
- “While the pre-petition Debtor may have consented to waiver of the automatic stay in favor of [secured creditor], . . . other creditors did not”; and
- “The automatic stay is designed to protect both debtors and creditors alike.”
In re DJK Enterprises, LLC, Case No. 24-60126, Doc. 196, at 13 (Bankr., S.D. Ill., February 13, 2025).
In re DJK Enterprises
“[T]he appellant would not have acquired priority over other creditors by the sheriff’s levy, for the obvious reason that the right of property in the goods seized under the execution had previously passed” to the assignee under Debtor’s ABC.
- Reed v McIntyre, 98 U.S. 507, 512 (1878).
Facts
The Debtor, in the U.S. Supreme Court’s Reed v. McIntyre opinion, is a merchant.
Before 1998, (i) all student loans from for-profit lenders were dischargeable in bankruptcy, but (ii) student loans backed by the federal government or from non-profits were dischargeable in only these circumstances:
The common law of assignments for benefit of creditors (“ABCs”) has been around for a very long time as an out-of-court process under the law of trusts: debtor is trustor, assignee is trustee, and debtor’s creditors are beneficiaries.
And the common law of ABCs had already been well-established, when the U.S. Constitution was ratified.
The intersection of state escrow laws and federal bankruptcy laws can create confusion and surprise for contracting parties.
The Problem & Four Examples
The problem creating such confusion and surprise is this. State escrow laws:
- are, typically, defined by the common law;
- lack precise details; and
- are often applied in bankruptcy to the detriment of the party who believes a valid escrow exists.
Here are four examples of the escrow / bankruptcy problem.