Boensch v Pascoe [2019] HCA 49

The High Court has recently considered the question of whether, and in what circumstances, property held by a bankrupt on trust for a third party vests in the trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act 1966 (Cth): Boensch v Pascoe [2019] HCA 49. The decision was handed down late last year, providing further guidance for trustees following Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 93 ALJR 807.

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?

In recent years, unfortunately, illegal phoenix activity has become increasingly prevalent within Australia’s commercial landscape.

Despite its significant adverse effect on the nation’s economy, Australia’s statutory corporate insolvency laws have, to date, failed to adequately let alone comprehensively address, or even define, phoenix activity, or deter it.

Liquidating a company won’t necessarily avoid husbands and wives from back-paying employees out their own pockets.

In FWO v Sinpek Pty Ltd (In Liquidation) & Ors [2020] FCCA 88, the national workplace regulator secured orders against a director and spouse to personally reimburse two underpaid workers $52,722.48.

The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2019 (Cth) (Amending Act) passed into law on 17 February 2020, over a year after it was first introduced to Parliament.   

Placing phoenix activity firmly in its crosshairs, the Amending Act introduces long anticipated reforms to Australia’s efforts to curb phoenix activity.  

Background 

The appointment of special purpose liquidators (SPLs) has become increasingly common, with Courts now readily agreeing to appoint a liquidator who is nominated and funded by a creditor. Those appointments increasingly occur in circumstances where there is no direct conflict or criticism of the general purpose liquidator (GPL), and can be frustrating for the GPL.

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: