The High Court of Australia in Metal Manufactures Pty Limited v Morton [2023] HCA 1 has confirmed the view of the Full Court of the Federal Court of Australia that the "set off" defence under section 553C of the Corporations Act 2001 (Cth) (Act) is no longer available to claims by liquidators for an unfair preference claim made under section 588FA of the Act.
This decision brings finality to claims brought by Creditor Defendants to such claims and no doubt brings much joy to liquidators across Australia.
The first High Court decisions in 2023; Metal Manufactures Pty Limited v Morton Metal Manufactures Pty Limited v Morton [2023] HCA 1 (‘Metal Manufactures’) and Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 (‘Bryant’) have provided the final word on preference claims, establishing once and for all that:
1. set-off under s 553C of the Corporations Act 2001 (Cth) (‘the Act’) does not apply to unfair transactions; and
2. the peak indebtedness rule does not apply.
Our Restructuring & Insolvency Team reflects on the year, the industry trends and significant matters of 2022. The Team also looks forward as to what the next 12 months may have in store.
When a borrowing company goes into administration, lenders will want to enforce their security immediately. However, administration risk delays lenders from enforcing their security during the moratorium period without leave from the court or consent from the administrator.
This article provides an insight into administration risk, explains ways to mitigate administration risk and how featherweight securities can be effectively used.
Background
Delaware has seen a significant uptick in the number of assignment for the benefit of creditors (ABC) filings. Through recent decisions, the Court of Chancery has sent a strong message that it expects parties pursuing this bankruptcy alternative to do a better job of justifying the relief they seek. This will require significantly more frequent and robust disclosures to the court and public.
From 15 February 2022, the UK Insolvency Service is granted new powers to investigate and disqualify or prosecute directors of dissolved UK companies. The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act (the Act) extends the Insolvency Service’s powers, on behalf of the UK Business Secretary, to deal with company directors who abuse the company dissolution process.
Introduction
For some time, the reliance on section 553C of the Corporations Act 2001 (Cth) (Act) as a "set-off" defence to an unfair preference claim, under section 588FA of the Act, has caused much controversy in the insolvency profession. Defendants of preference claims loved it, liquidators disliked it and the courts did not provide clear direction about its applicability – until now.
For some time, the reliance on section 553C of the Corporations Act 2001 (Cth) (Act) as a "set-off" defence to an unfair preference claim, under section 588FA of the Act, has caused much controversy in the insolvency profession. Defendants of preference claims loved it, liquidators disliked it and the courts did not provide clear direction about its applicability – until now.
In her recent keynote speech, delivered at the 25th IBA Competition Conference on 10 September 2021, European Commission (the Commission) Executive Vice President Margrethe Vestager called for a green revolution—the replacement of a linear economy with a circular one, coupled with investments in infrastructure.