The Victorian Court of Appeal recently held that a payment, disposition or grant of security by a company to a person on behalf of, or for the benefit of a director of the company, extends to a mortgage of land given by the company to a creditor of the director in consideration of a covenant by the creditor not to sue the director.
As a result, insolvency practitioners now have stronger judicial guidance as to what constitutes a 'benefit' for the purposes of setting aside or varying voidable transactions, which should assist in recovering proceeds for unsecured creditors.
It is common for liquidators (and all of us working in the insolvency industry) to work with a few firms or individuals and for referrals to predominantly be distributed amongst those. In the recent decision in Re Walton Construction Pty Ltd (In Liq); ASIC V Franklin [2014] FCA 68, the Federal Court considered when that relationship might amount to a conflict.
First Equilibrium Pty Limited v Bluestone Property Services Pty Limited (in liq) [2013] FC AFC 108
An appeal from the decision of Bluestone Property Services Pty Ltd (in liq) v First Equilibrium Pty Ltd [2013] FCA 876.
On 21 February 2014 the Federal Court handed down its decision in Australian Building Systems Pty Ltd (in liq) v Commissioner of Taxation [2014] FCA 116 with the result that liquidators and receivers and managers cannot be held personally liable for any CGT liability subsequently assessed as due (where funds are remitted in the ordinary course and to secured creditors before the Commissioner of Taxation issues the assessment).
The recent Federal Court decision of ASIC & Franklin & Ors [2014] FCA 68 represents, respectfully, a noteworthy exercise by the Court in applying the law in a commercial common sense manner.
Justice Davies was asked to consider ASIC’s application for disqualification of the Liquidators of Walton Construction Pty Ltd (in liq) and Walton Construction (Qld) Pty Ltd (in liq) (the Companies). The Liquidators were appointed the Administrators of the company having been referred to the directors of the Companies by Mawson Group.
In summary
The recent case of Australian Securities and Investment Commission (ASIC) v Franklin (liquidator), in the matter of Walton Construction Pty Ltd (in liq) [2014] FCA 68 involved an action brought by the ASIC in order to remove the liquidators from the companies based upon a lack of independence and a breach of the Corporations Act 2001 (Cth) (Act) through an alleged deficient Declaration of Relevant Relationships (DIRRI).
It goes without saying that it is important for an insolvency practitioner to be independent and to be seen to be independent when accepting an appointment or continuing to act in an existing appointment. The recent Federal Court decision of ASIC v Franklin [2014] FCA 68 provides some welcome guidance on what this means in practice and also on the contents of a declaration of independence, relevant relationships and indemnities (commonly known as a “DIRRI”).
FACTS
The High Court has recently confirmed in Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) that a liquidator of a landlord company has power to disclaim a lease, thereby terminating the landlord’s liabilities and the tenant’s rights under the lease.
Following such a disclaimer, the tenant would then be left to prove its loss as an unsecured creditor in the winding up of the landlord company.
In the case of Bosi Security Services Ltd v Wright [2013] WASC 431, in which the court granted an interlocutory injunction preventing the sale of land by receivers despite acknowledging that the applicants’ case under the Trade Practices Act and Australian Consumer Law was not a strong one and had obvious deficiencies.
Facts