Re: Joe & Joe Developments Pty Ltd (subject to a Deed of Company Arrangement) [2014] NSWSC 1444

Recently, Courts have increased focus on the appropriateness of expenditure (including legal fees) incurred by insolvency practitioners and the steps they should undertake to determine if the costs and expenses are reasonable. Warren Jiear, Partner and Tim Logan, Associate look at a case handed down on 22 October 2014 that considered these issues and the implications for practitioners.

Introduction

Achieving sales growth is a significant challenge for many Australian businesses. Even if new customers can be found, an inability to collect and hold onto payments can pose another obstacle to growth.

To survive and prosper businesses must plan, and implement, strategies for sustained profitability. It is not enough to simply achieve fantastic sales results and get the money in, businesses must also anticipate, and protect against, the risk that payments received from customers may be clawed back if a liquidator is later appointed to the customer.

Senior Associate, Sarah Drinkwater, Associate, Tim Logan and Paralegal, Erin Donald discuss the recent case of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 [2014] NSWSC 1004.

The facts

The applicants were the Liquidators of AAA Financial Intelligence Ltd (in liquidation) (the Company).

In Akers (as a joint foreign representative of Saad Investments Company Ltd) (in official liquidation) (a company registered in the Cayman Islands) v DCT [2014]FCAFC 57 the Federal Court of Australia recently upheld an earlier landmarkdecision concerning the proper construction and interpretation of the Model Lawon Cross Border Insolvency on the United Nations Commission on InternationalTrade Law, made part of Aust

The approach of the courts to public examinations conducted by liquidators has in recent times arguably tended towards granting increasing liberty to liquidators in the scope of their examinations.

In Stewart v Atco Controls Pty Ltd (In Liquidation) [2014] HCA 15, the High Court of Australia recently delivered a decision which has confirmed the priority of a Liquidator’s lien over the interests of a secured creditor.

The facts

In Australian Building Systems Pty Ltd v Commissioner of Taxation [2014] FCA 116, the Federal Court held that liquidators do not have an obligation to retain an amount for the payment of tax of a portion of the proceeds from the sale of property owned by the company before liquidation when no tax assessment has been issued. However, Justice Logan made clear that a prudent liquidator would be entitiled to retain the gain until an advice or assessment from the Commissioner, was issued.

Background

The recent case of Young, Jr, in the matter of Buccaneer Energy Limited v Buccaneer Energy Limited [2014] FCA 711 considered the concept of “the centre of main interests”, described in the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (United Nations General Assembly Resolution A/RES/52/158 (1997)). Senior Associate, Sarah Drinkwater and Associate, Tim Logan discuss.

Application

The recent decision of the Federal Court in the matter of Divitkos, in the matter of ExDVD Pty Ltd (In Liquidation) [2014] FCA 696 confirms that where a receiver is required to make a payment under Section 433 of the Corporations Act 2001 (Cth) (Act) to a priority creditor (such as employee entitlements), the secured creditor (who appointed the receiver) may be entitled to be subrogated to the rights of that priority creditor in the winding up of the company.

The Law