Welcome to the October 2022 edition of the HFW Commodities bulletin.
In this extended edition, a number of our partners from across the globe have taken time to reflect on the profound impact of the Russian invasion of Ukraine on the commodities sector. It includes contributions from our offices in Australia, Geneva, London and Singapore, with articles on energy and food security, sanctions, insolvency, regulation, the energy transition and force majeure.
On the back page, you will find details of the latest news and where you can meet the team next.
A comprehensive review has begun into the effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy. Undertaken by the Federal Government’s Parliamentary Joint Committee on Corporations and Financial Services, the review is seeking submissions by 30 November 2022.
The Australian Federal Court has clarified the limitations for foreign entities and their office holders in pursuing action in Australia to access the voidable transaction provisions of the Australian Corporations Act.
WHITE PAPER An Update on Insolvency in the Australian Construction Industry The construction sector in Australia has long been affected by insolvency and broader liquidity issues. In the last year, construction companies accounted for 26% of businesses that entered into insolvency, and insolvencies in the construction sector more than doubled. This year, contractors have been further squeezed by inflation, supply chain issues and labour market shortages. As the federal government has wound back its COVID-19 economic stimulus packages, further collapses seem inevitable.
General corporate
ASIC reports on corporate insolvencies 2012–2013
Case Note: Re Cardinia Nominees Pty Ltd [2013] NSWSC 32
Facts of the case
Cardinia Nominees Pty Ltd (Cardinia) agreed to lend Inika Pty Ltd (Inika) the sum of $750,000, in exchange for the issue of convertible bonds to Cardinia. The loan was secured by a charge in favour of Cardinia over the whole of Inika’s assets.
The boundary between work life and private life is becoming less clear. In last month's Workplace View, we reported on a FIFO worker who successfully claimed workers' compensation for an injury he sustained while sleeping in employer-provided accommodation. This month, the Federal Court has upheld a workers' compensation claim by a Commonwealth worker whose 'private activities' with a 'male friend' in a motel room caused a glass light fitting above the bed to fall and strike her on the nose and mouth leaving her with physical and psychological injuries.
In December 2015, as part of its National Innovation and Science Agenda, the Federal Government announced a proposal to introduce a ‘safe harbour’ for directors from personal liability for insolvent trading.
Taxpayers in Western Australia have been left to foot the bill after Jirsch Sutherland, liquidator for the Kimberley Diamond Company Pty Ltd (“KDC”), used a legal loophole to handball expensive mining leases back to the Department of Mines and Petroleum (“DMP”).
Care and maintenance costs for KDC’s Ellendale diamond mine amount to $100,000 (AUD) a month and environmental rehabilitation obligations are estimated to be $40 million (AUD). The DMP has been servicing these costs since KDC went into liquidation.
The Need for Reform
Insolvency figures bring into stark light the reality of business in the construction industry. In the last financial year, 13% of companies entering external administration in the Northern Territory were from the construction sector.
Significant causes of contractor failure include inadequate cash flow, poor strategic management of the business, inadequate contract administration skills and a lack of working capital to see a project or a dispute through.