The decision Akers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57 demonstrates that Australian Courts may be willing to depart from the philosophical basis for cross border insolvency in order to protect the interests of Australian based creditors.

Background

When the liquidator of a company comes knocking on a creditor’s door, it is to echoes of "Queue jumper!" reverberating in the background. 

Essentially, one of a liquidator's first tasks when appointed is to identify whether any creditors have been given 'preferential  treatment' - that is, whether they have been paid some or all of their debt just prior to the company's liquidation and at the expense of other creditors.

Stewart v Atco Controls Pty Ltd (in Liquidation) [2014] HCA 15

The High Court this week reinforced the significance and standing of a Liquidator's equitable lien for his or her costs and expenses incurred in realising assets of a company in liquidation, as first clearly espoused by Justice Dixon in the 1933 case of Universal Distributing. Gadens acted for the successful Liquidator/Appellant in the unanimous judgment of the five High Court Justices.

The Principle

In Stewart v Atco Controls Pty Limited (in liquidation) [2014] HCA 15, the High Court confirmed the Universal Distributing principle that a liquidator is entitled to be paid his or her remuneration and expenses in realising assets in priority to a secured creditor.

BACKGROUND

Stewart v Atco Controls Pty Ltd (in liquidation) [2014] HCA 15

The High Court has held unanimously that a liquidator is entitled to an equitable lien over settlement monies for litigation expenses which the liquidator incurred for the purpose of impugning a secured creditor’s charge, applying and confirming the principle in Universal Distributing in the process. 

04 December 2013
[2013] HCA 51
High Court of Australia (French CJ, Hayne J, Kiefel J and Gageler J; Keane J dissenting)

The High Court of Australia held that liquidators of an insolvent lessor could disclaim a lease, and that this would terminate the lessee’s proprietary interest.

Akers as a joint representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57

The Full Federal Court has confirmed a “modified universalism” approach to cross-border insolvencies, and provided guidance on what is required for the “adequate protection” of rights of local creditors under the Model Law on Cross-Border Insolvency (‘Model Law’), as enacted in Australia by the Cross-Border Insolvency Act 2008 (Cth).

Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61.

Appeal from liquidators’ decision to reject claim for the return of cleaning equipment subject to retention of title. Consideration of retention of title clauses and the application of the transitional security agreements under Personal Property Securities Act 2009 (Cth).

As a business owner or company director, there are many elements you need to consider on a day to day basis to ensure your business runs smoothly. If you lease your premises it is important to understand your rights and what risks you face as a tenant.

The UNCITRAL Model Law on Cross-Border Insolvency is designed to supplement States' insolvency laws with a framework to address cross-border insolvency proceedings.