This case serves as an important reminder that board appointments should not be taken lightly - even as a “personal favour”. Directors should ensure that they are sufficiently abreast of the affairs of their companies and actively involved in their management. An argument that a director was “not really involved” in management is unlikely to find favour when the company finds itself in strife.
On 21 February 2014, the Federal Court handed down its decision inAustralian Building Systems Pty Limited v Commissioner of Taxation [2014] FCA 116 (Australian Building Systems). The Court found that a liquidator was not legally required to retain an amount out of the proceeds on disposal of assets as part of the winding up of a company to pay tax which is or will become due in respect of a capital gain.
The Victorian Court of Appeal recently held that a payment, disposition or grant of security by a company to a person on behalf of, or for the benefit of a director of the company, extends to a mortgage of land given by the company to a creditor of the director in consideration of a covenant by the creditor not to sue the director.
As a result, insolvency practitioners now have stronger judicial guidance as to what constitutes a 'benefit' for the purposes of setting aside or varying voidable transactions, which should assist in recovering proceeds for unsecured creditors.
It is common for liquidators (and all of us working in the insolvency industry) to work with a few firms or individuals and for referrals to predominantly be distributed amongst those. In the recent decision in Re Walton Construction Pty Ltd (In Liq); ASIC V Franklin [2014] FCA 68, the Federal Court considered when that relationship might amount to a conflict.
The High Court has recently confirmed in Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) that a liquidator of a landlord company has power to disclaim a lease, thereby terminating the landlord’s liabilities and the tenant’s rights under the lease.
Following such a disclaimer, the tenant would then be left to prove its loss as an unsecured creditor in the winding up of the landlord company.
In the case of Bosi Security Services Ltd v Wright [2013] WASC 431, in which the court granted an interlocutory injunction preventing the sale of land by receivers despite acknowledging that the applicants’ case under the Trade Practices Act and Australian Consumer Law was not a strong one and had obvious deficiencies.
Facts
Introduction
Early in his or her appointment a liquidator in a creditors' voluntary liquidation (CVL) should consider applying to the Court to convert the CVL to a Court ordered winding up in insolvency. Conversion may benefit the unsecured creditors, in whose interests the liquidator acts, by enabling the liquidator to pursue claims and make recoveries not available in a CVL.
The reasons liquidators have applied for conversion include:
In brief - Your actions will depend on whether you acknowledge or dispute the debt
If you are contacted by a debt collector, you should be frank about what you plan to do. If you dispute the debt, you should get legal advice as quickly as possible.
Debt collectors don't go away if you ignore them
The recent case of Australian Securities and Investment Commission v Glenn Franklin and Ors VID1359/2013 has raised some interesting issues in respect of disclosure and the acceptance of referrals. The proceeding was ultimately unsuccessful and ASIC were ordered to pay the Defendants' costs.
Background
The case centred around the collapse of a large construction company which operated along the east coast. Walton Construction Pty Ltd headed operations in Victoria and New South Wales and Walton Construction (QLD) Pty Ltd headed operations in Queensland.