Statutory demands are a quick and convenient way to prove a debtor company’s insolvency. But they’re sensitive creatures. There seems to be an endless list of potential defects to make the demand challenge-worthy.

Luckily for creditors, a recent decision of the WA Court of Appeal means there is one less way for a demand to fail.

The loan and the demand

Garuda Aviation is a small WA operator that borrowed $27 million from CBA to buy a plane. The loan was secured by a mortgage over the plane.

The Full Court of the Federal Court of Australia recently affirmed the decision of Justice Barker in disallowing Mr Oswal, the director of Burrup Holdings Limited (BHL) and Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) (BFPL) access to certain books and records of the companies.

In the recent decision of Re Sports Alive Pty Ltd (in liquidation) [2013] VSC 69, the Supreme Court of Victoria dealt with questions referred to it by a liquidator in respect of segregated bank accounts which might either be available for costs and the general body of creditors or alternatively only for beneficiaries on whose behalf the trustee should have held funds.  It was accepted that the determination was essentially a question of fact, and in the face of ambiguous facts, the Court determined that the onus was on the beneficiaries and not the liquidator. 

Generally speaking, other than in limited prescribed situations, an insolvency practitioner can only be removed by Court order. Often applications are made for the removal because of a perceived bias, however these are not always successful, as was seen in Cote v Devine [2013] WASC 79, handed down last week. New reforms allowing creditors to resolve to remove insolvency practitioners without recourse to the Court have the potential to significantly affect this.

The recent New South Wales Supreme Court decision In re MF Global Australia Ltd (in liq) No 2 [2012] NSWSC 1426 confirmed that the remuneration, costs and expenses incurred by liquidators in preserving, recovering and realising trust assets should be paid out of the trust property generally, rather than being restricted to assets held on trust for the benefit of the company itself.

The recent Federal Court of Australia (Court) decision in CBA Corporate Services (NSW) Pty Ltd, in the matter of ZYX Learning Centres Ltd (receivers and managers appointed) (in liq) v Walker [2013] FCA 243 confirms that liquidators owe a heavy duty of disclosure to the court and that the materiality of facts to be disclosed is to be assessed on a case by case basis.

In brief - Bill implements reforms proposed in options paper

Introduction

On 29 January 2013, the Federal Court of Australia made orders approving the creditors’ scheme of arrangement between Nine Entertainment Group Pty Limited (NEG) and its senior and mezzanine lenders (Nine Scheme).

The Nine Scheme, made under Part 5.1 of the Corporations Act, follows Alinta and Centro as the third debt for equity restructuring of a major Australian company in as many years.

The recent Supreme Court of New South Wales decision in Re V & M Davidovic Pty Limited [2012] NSWSC 1598 clarifies where the directors of a company in receivership will be authorised to defend a winding up application and confirms that Courts will be reluctant to adjourn such applications in order to allow the directors to gather evidence of solvency.

The Facts

Part 1 of a two-part analysis of the recommendations of the NSW Construction Industry Insolvency Inquiry.