With Commonwealth funding to Medicare Locals ceasing on 30 June 2015, now is the time for Boards of Medicare Locals to ensure that they are, and remain, solvent, now that a substantial part of their revenue flow is being terminated.

A recent decision of the Federal Court of Australia demonstrates the importance of professional insolvency service providers reviewing their work processes to ensure efficiency and cost-effectiveness, and of being diligent in the recording and claiming of costs.

In February 2014, we issued an alert concerning our clients' successful outcome in Australian Building Systems v Commissioner of Taxation [2014] FCA 116.  That matter concerned important considerations around a liquidator's liability for a capital gain made during the liquidation.  Today, the Full Federal Court unanimously dismissed an appeal brought by theCommissioner of Taxation (Commissioner of Taxation v Australian Building Systems Pty Ltd (in Iiq) [2014] FCAFC 133).

On 8 October 2014 the Full Court of the Federal Court delivered judgment in favour of the liquidators in the much anticipated Australian Building Systems appeal¹ (Appeal).

Barring the Commission of Taxation seeking special leave to appeal to the High Court, liquidators (and other trustees, including receivers and managers) can now take comfort that they are not personally liable for failing to hold sufficient funds for any anticipated CGT liability, in the absence of a notice of assessment.

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.

In Rathner in his capacity as Official Liquidator of Kalimand Pty Ltd (in liq) v Hawthorn [2014] FCA 1067, the Federal Court considered the elements of voidable transactions under Pt 5.7B of the Corporations Act, and the meaning of becoming insolvent “because of” entering into a transaction.

The decision of the Full Court of the Federal Court handed down this week in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) [2014] FCAFC 133 offers welcome certainty to administrators, receivers and liquidators in relation to their obligations with respect to post-appointment tax liabilities.

Significance

Introduction

In the decision of Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310 the court considered:

• the application of the Personal Property Securities Act 2009 (Cth) (PPSA) to goods being held on a bailment or consignment basis by a company in receivership and liquidation; and
• the receivers’ rights to be indemnified for costs and expenses related to investigating and protecting the property of third parties.

What is the significance?

On 11 September 2014, the Supreme Court of New South Wales delivered judgment in Allco Funds Management Limited (Receivers and Managers Appointed) (In Liquidation) v Trust Company (RE Services) Limited (in its capacity as responsible entity and trustee of the Australian Wholesale Property Fund) [2014] NSWSC 1251.

The decision reminds directors of the risks associated with their involvement in transactions where they are in a position of conflict.

BACKGROUND