In its recent decision in the ongoing Solar Shop litigation,[1] the Full Federal Court established two key principles which will have significant ongoing implications for the conduct of unfair preference claims:

ASIC is becoming more serious and more active and will take action against directors if there is su cient reason to, so insolvency practitioners should consider all possible actions/recoveries fully in any report to ASIC. 

A company's financial distress presents a challenge for its directors and officers of large and complex financial services companies and can raise a range of difficult issues, including potential liability for insolvent trading, which potentially exposes directors both to civil and criminal consequences under the Corporations Act 2001(Cth).

The changes create new civil and criminal offences for the transfer of assets which are “creditor-defeating dispositions”, and also give ASIC, the ATO and liquidators additional powers in a bid to increase successful enforcement of these new laws.

During the second half of 2019, it was generally accepted that the US/China trade war was the most likely macroeconomic event that would precipitate a global slowdown. Even then, given the enormous amount of ‘dry powder’ capital that was available in the market, the downturn, if any, was expected to be mild.

Introduction

Christmas came early last year for certain creditors of Glenfyne Farms International AU Pty Ltd (Glenfyne Farms), when the NSW Court of Appeal quashed the casting vote made by the outgoing voluntary administrator and gifted those creditors with the appointment of their preferred liquidators.

In Sergienko v AXL Financial Pty Ltd[1], a recent win for an insurer, the NSW Supreme Court confirmed the importance of precise and well-constructed pleadings when determining whether leave will be granted pursuant to Section 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the ‘Act’).

There is no doubt Australia has done well in its response to the COVID-19 pandemic. Many companies and individuals have been able to obtain some economic relief through a range of Government policies and initiatives, and some generous concessions in relation to financing arrangements, which may have otherwise crippled some businesses.

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was passed by both houses of Parliament on 5 February 2020, with an amendment made by the Senate to review the operation and effectiveness of the legislation after five years accepted by the House of Representatives.

This week’s TGIF article considers the case of Re Watch Works Australia Pty Ltd (in liq) & Anor; Ex Parte Francis & Ors [2020] WASC 6, in which the Supreme Court of Western Australia determined two linked companies were to be a ‘pooled group’ in order to satisfy the external debts payable by both companies.

What happened?

Generally, once a company enters into liquidation, litigation against that company cannot be commenced or be continued without the leave of the Court (Corporations Act 2001, s 471B). However, occasionally a liquidator may cause a company to commence or defend litigation after the commencement of the winding up. What happens if the company in liquidation is unsuccessful in that litigation and is subject to an adverse cost order? How will such an adverse cost order rank amongst other competing creditors?

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