This week’s TGIF takes a look at the recent case of Mills Oakley (a partnership) v Asset HQ Australia Pty Ltd [2019] VSC 98, where the Supreme Court of Victoria found the statutory presumption of insolvency did not arise as there had not been effective service of a statutory demand due to a typographical error in the postal address.

What happened?

This week’s TGIF considers a recent decision of the Victorian Court of Appeal where a company’s creditors successfully opposed an application by the company’s liquidators to compromise proceedings commenced on the company’s behalf.

Introduction

We recently acted for the Commonwealth (Represented by the Australian Government Department of Jobs and Small Business) in Re Stay in Bed Milk and Bread Pty Ltd  [2019] VSC 181, in which the Supreme Court of Victoria determined that a franchisor’s marketing fund was not subject to a trust (express or Quistclose) in favour of franchisees and therefore was available for distribution to the franchisor’s priority creditors, including the Commonwealth.

New laws under consideration could expose company directors to jail terms of up to ten years for engaging in ‘Phoenix activity’ – the practice of closing down an enterprise, shifting its assets then re-starting it to avoid creditors.

It has been widely reported that, post Banking Royal Commission, the Australian Securities Investigation Commission (ASIC) will take a "why not litigate?" approach. As we foreshadowed in an article last month, this scrutiny will not be confined to the banking sector but is likely to extend to anyone subject to ASIC oversight.

Former One Nation Senator Rod Culleton has been referred to police over allegations he made a false declaration in his candidacy nomination for the upcoming federal election.

Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

There are two main types of security:

The federal government has recently introduced reforms to Australia’s insolvency and restructuring laws to provide companies under financial stress an opportunity to trade out of their difficulty. A key part of the reform package is the introduction of a new “ipso facto” regime, which restricts the ability of a party to terminate a contract and exercise other contractual rights in certain cases of insolvency or restructuring of the other party.

What are ipso facto clauses?

This week’s TGIF considers a recent decision of the Victorian Court of Appeal where a company’s creditors successfully opposed an application by the company’s liquidators to compromise proceedings commenced on the company’s behalf.

ASIC’s record with land banking schemes has been the story of shutting the stable door after the horse has bolted. It has wound up insolvent schemes long after the investor’s cash has well and truly dissipated.

For example: