The decision of the High Court of Australia in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132 (Ramsay) clarified the limits of a Bankruptcy Court's discretion to "go behind" a judgment, that is, to investigate whether the underlying debt relied upon for the making of a sequestration order is, in truth and reality, owing to the petitioning creditor. Recently, the Ramsay decision was applied by the Federal Court of Australia in Dunkerley v Comcare [2019] FCA 1002 (Dunkerley).

It is well known that a company served with a statutory demand has 21 days to comply. If the recipient fails to pay the amount of the demand (or obtain a court order extending the period for compliance) within the period of 21 days after the demand is served, the creditor may rely on the failure as a basis to apply for the company to be wound up in insolvency. But what if the company pays, or seeks to pay, the amount of the statutory demand after the 21 day period has expired?

Like many areas of insolvency law, statutory demands have strict procedural requirements as to the timing by which documents must be served. But how is the passage of time calculated? If something is required to be done "21 days after" a document is served, is this intended to be inclusive or exclusive of the day the document was served? The Supreme Court of NSW recently grappled with this issue in Verimark Pty Ltd v Passiontree Velvet Pty Ltd [2019] NSWSC 455 and has provided clarity for lawyers and insolvency practitioners alike.

This week’s TGIF article considers the case of Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 5) [2019] FCA 1341, in which liquidators of two linked investment companies in Australia and New Zealand sought to hold concurrent hearings in the Federal Court and in the High Court of New Zealand.

What happened?

What are Court ordered inquiries into liquidator conduct?

Courts have a range of powers in relation to liquidators, including the power to order an inquiry into the external administration of a company and thus, the conduct of liquidators under sections 90-5 to 90-20 of Schedule 2 to the Corporations Act 2001 (Cth), previously, section 536 of the Corporations Act 2001.

An important decision[1] has been handed down by the High Court of Australia which relates to the order of payment of statutorily preferred debts out of trust property held by an insolvent corporate trustee.

Payment of priority creditors under section 561 of the Corporations Act 2001 (Cth) is an activity conventionally performed by liquidators, albeit the section is silent as to the holder of the relevant payment obligation. The Federal Court of Australia has recently confirmed that distributions to priority (employee) creditors are not the exclusive purview of liquidators (where receivers are appointed contemporaneously); receivers may exercise the powers contained in section 561 to distribute certain funds to such priority creditors.

This week’s TGIF considers a recent application for injunctive relief by a bankrupt to restrain liquidators who initiated his examination from continuing to retain their lawyers, given the firm had previously represented the examinee.

What happened?

On 8 August 2016, Richard Nash became bankrupt, on his own petition, and was later served with a summons for examination and orders for the production of books and records.

Forum bias, along with some technical issues, are still challenges in cross-border insolvencies in Australia

Just over ten years ago, Lehman Brothers filed for bankruptcy in the US, which turned out to be one of the largest cross-border insolvency cases in history.

Last year also marks:

It is inevitable that companies will face periods of financial distress during their corporate lives. During these times, it is incumbent on the directors and management to seek to maximise the company's chances of survival and preserve value for stakeholders. Certainly it has not been uncommon for directors to use the threat of voluntary administration as a part of their stakeholder management strategy during these times.