On February 3, 2022, as part of a series of recent decisions addressing third-party releases, Bankruptcy Judge John T.

Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufacturers Pty Limited [2021] FCAFC 228.

In a resounding judgment delivered last week, the Full Federal Court has confirmed that a statutory set-off under section 533C is not available to a defendant in unfair preference proceedings.

Key Takeaways

The Australian Sawmilling Co Pty Ltd (in liq) v Environment Protection Authority [2021] VSCA 294

The Victorian Court of Appeal’s decision in The Australian Sawmilling Co Pty Ltd (in liq) v Environment Protection Authority [2021] VSCA 294 casts significant doubt on liquidators’ capacity to rely upon section 568 of the Corporations Act to disclaim environmental liabilities, despite the absence of any involvement of the liquidator in the creation of those liabilities.

In a substantial recent decision arising from the Arrium liquidation[1], the Supreme Court of New South Wales considered the materiality of significant future liabilities in assessing the company’s solvency.

A hotly anticipated decision in the ongoing saga of the Babcock & Brown liquidation was handed down last week, resulting in another win for the liquidator (represented by Johnson Winter & Slattery) and further highlighting the challenges facing liquidators when they are thrust into a quasi-judicial function when assessing proofs of debt.

Introduction

In the wake of the Victorian Court of Appeal’s decision in Cant v Mad Brothers Earthmoving [2020] VSCA 198 (‘Cant’), the Supreme Court of New South Wales’ recent decision in Re Western Port Holdings provides further encouragement for liquidators to pursue unfair preference claims with respect to third party payments and payments made during the operation of a deed of company arrangement (DOCA).

Key takeaways

It was only a matter of time. On January 12, 2021, the Department of Justice (“DOJ”) announced that it had reached its first civil settlement regarding allegations of fraud related to the Paycheck Protection Program (“PPP”).¹ DOJ settled a $4.2 million claim against a bankrupt internet retailer and its president for $100,000. Although unique to the case’s specific allegations, the settlement reveals activities that may be alleged as PPP fraud, statutes at DOJ’s disposal to pursue civil enforcement, and terms by which DOJ will resolve PPP fraud allegations.

It is common for E&P companies in chapter 11 to seek to reject burdensome midstream contracts under Bankruptcy Code § 365. Rejection has not been permitted by bankruptcy courts where such agreements create enforceable covenants running with the land (“CRWL”) because a CRWL is a real property interest of the midstream gatherer, not just a contract right. Accordingly, before a debtor can seek to reject midstream agreements, the bankruptcy court must first determine whether an enforceable CRWL exists.

The Treasurer has announced major proposed reforms to Australia’s insolvency framework aimed at facilitating the restructuring of small to medium businesses (MSMEs) and streamlining their liquidation if rescue is not achievable (Reforms). The Reforms are intended to come into effect from 1 January 2021, after the suite of current insolvency protections introduced to address the economic impact of COVID-19, expire on 31 December 2020.