On Tuesday 24 March 2020 the Commonwealth Parliament passed emergency laws responding to the COVID 19 Pandemic. [1]

Critically the Government has enacted amendments to the Corporations Act 2001 (Act):

Statutory demands and bankruptcy notices are powerful tools used by businesses seeking payment. For 6 months they will be much weaker. What options remain?

The Government has announced proposed changes to personal and corporate insolvency laws to provide temporary relief to debtors in connection with compulsory insolvency processes.

Changes to statutory demands and bankruptcy notices

This week’s TGIF considers a recent application to the Federal Court by liquidators of the WDS Group for a pooling order.

What happened?

This case concerned the WDS Group of companies.

WDS Limited (WDS) was a publicly listed company on the ASX with 11 wholly owned subsidiaries (together, the WDS Group).

The severe restrictions imposed by State and Federal Governments on large gatherings due to the COVID-19 pandemic are inhibiting, and in some cases preventing, businesses from trading. Although the present circumstances may necessitate administration or lead to receivership for some businesses, many practitioners are wary of accepting an appointment where there is an inability to trade as a going concern, thereby preserving value and maximising sale prospects.

National Rugby League (NRL) was successful in setting aside a summons for public examination obtained by the liquidator of Newheadspace Pty Limited (Newheadspace). The Court also awarded NRL its costs. The Court found that the creditors’ voluntary winding-up of Newheadspace was an abuse of process, and that the summonses were obtained for an improper purpose.

This week’s TGIF examines In the matter of Bytecan Pty Limited (in liquidation) [2019] NSWSC 1910, in which the Supreme Court of New South Wales considered the scope of the advantage to an indemnifying creditor available under section 564.

The facts

What makes a contract an unprofitable contract which can be disclaimed by a trustee in bankruptcy without the leave of the Court under section 133(5A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)? Can a litigation funding agreement be considered an unprofitable contract when the agreement provides for a significant funder's premium or charge of 80% (85% in the case of an appeal)?

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.

On 4 February 2020, the Federal Court of Australia considered the circumstances in which it might be said that a provisional liquidator of a company ought not be appointed as the official liquidator because of an alleged "reasonable apprehension of bias". The issue was ventilated before the Court in the matter of  Frisken (as receiver of Avant Garde Investments Pty Ltd v Cheema [2020] FCA 98.

Appointing a provisional liquidator

Liquidators are often in a position where they have information which might be subject to the Australian Privacy Principles (APP) and may need to use or exchange that information in performing their duties. Under the Insolvency Law Reform Act 2016 (Cth), liquidators are also obliged to send initial reports to creditors within tight timeframes and potentially in circumstances where they may have limited contact details for creditors.