This week, the Federal Court published judgments in three unfair preference claims brought by the liquidators of the Gunns Group. We acted for the liquidators in each proceeding.

Virgin Australia Airlines operated a fleet of 144 aircraft of which 142 were leased to approximately 73 lessors and financiers when the Board resolved to appoint Administrators on 20 April 2020 because of concerns as to solvency. Virgin Australia Airlines Pty Ltd is the second largest airline operating in Australia. 

Hogan Lovells Publications | 29 May 2020

Implications of COVID-19 on the Australian Mining Industry

The Federal Court, in the second significant case arising out of the Virgin collapse, has made extraordinary limited recourse and limited liability orders on application by the Administrators.

The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (Omnibus Act) amended the Corporations Act 2001 (Cth) (Act) and the Corporations Regulations 2001 (Cth) (Regulations) with effect from 25 March 2020 to create a “safety net” for Australian businesses facing COVID-19 related financial distress.

Liquidators have a limited time in which to bring proceedings in respect of voidable transactions, generally three years from the relation back day (Limitation Period).[1] However, a Court may grant liquidators a longer period to bring a voidable transaction claim provided the liquidator makes an application for this extension within the Limitation Period itself.

In KSK Holdings (Australia) Pty Ltd (in liquidation) [2019] NSWSC 1463 a liquidator sought directions from the Supreme Court of New South Wales under section 90-15(1) of the Insolvency Practice Schedule (Corporations) at Schedule 2 of the Corporations Act 2001 (Cth).

The recent decision of the Federal Court in Strawbridge, in the matter ofVirgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571 provides an example of the Court granting flexibility to administrators performing their functions through the challenges presented by the COVID-19 pandemic.

In ACN 093 117 232 Pty Ltd (In Liq) v Intelara Engineering Consultants Pty Ltd (In Liq) [2019] FCA 1489, the court considered whether a “legal phoenix” arrangement entered into after receiving professional advice was in fact a voidable transaction.

The facts

Intelara Pty Ltd (OldCo) operated an engineering consultancy business and after experiencing financial difficulties in 2014 sought professional advice concerning the potential restructure of the company.

A company in liquidation served a creditor’s statutory demand for debt where there was a genuine dispute about the existence of the alleged debt. The statutory demand was set aside by the Court and the liquidators were ordered to personally pay costs on an indemnity basis.

What happened

In SJG Developments Pty Limited v NT Two Nominees Pty Limited (in liquidation) [2020] QSC 104: