Liquidators are commonly appointed to a company where, prior to liquidation the company was a trustee of a trust. Often when the liquidators are appointed, the company has ceased to be the trustee and a replacement trustee has not been appointed.

In these circumstances, the company in liquidation is a bare trustee in relation to the trust assets and the liquidator will assume this role until a replacement trustee is appointed. Often a replacement trustee is not appointed.

Does the liquidator as bare trustee have a power to sell trust assets?

When a Bank appoints a receiver under a charge, section 433 of theCorporations Act 2001 (Act) requires the proceeds of certain chargedassets to be used by the Receiver to satisfy certain employee entitlementsin priority to the Bank. Section 561 of the Act has a similar effect where acompany is in liquidation, but only if there are insufficient uncharged assets available.

In our September 2013 Insolvency Update ‘The Early Bird Gets the Worm: Tax Office Recovers Debt Before Foreign Creditors’, we highlighted the decision of De Ackers (as joint foreign representative) v Saad Investments Company Limited; In the matter of Saad Investments Company Limited (in official liquidation) [2013] FCA 738 (Saad case).

The decision in White & Anor v Spiers Earthworks Pty Ltd (SE) & Anor has examined the vesting provisions contained within the Personal Property Securities Act 2009 (Cth) (PPSA) and confirmed their effect where one party asserts to have an unperfected Security Interest at the time of an event of insolvency according to section 267 (2) of the PPSA.

Background

In the recent decision of First Strategic Development Corporation Limited (in liq) and Anor v Chan and Ors [2014] QSC 60, the Supreme Court of Queensland considered the solvency of a company with no assets or formalised line of credit, but with a director who claimed to be willing to fund the $2.5 million that the company had committed to spending.

FACTS

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

In Re John Pettit Pty Limited (Subject to a Deed of Company Arrangement) [2014] NSWSC 728, the Supreme Court of NSW considered an application by the deed administrators of John Pettit Pty Ltd (John Pettit) seeking directions to sell property potentially owned by third parties and orders which limited the Deed Administrators’ personal liability in relation to the sale.

BACKGROUND

The Supreme Court of Western Australia has recently held that a creditor’s claim against a guarantor was extinguished some years earlier, under the guarantor’s deed of company arrangement (DOCA).

The reasoning behind Le Miere J’s decision in Australian Gypsum Industries Pty Ltd v Dalesun Holding Pty Ltd is that a DOCA extinguishes future liabilities arising under an agreement made prior to the execution of the DOCA. This includes those arising under pre-existing guarantees.

​It has become our recent practice to dust off the crystal ball and look ahead to what we expect will be the ‘big five’ insolvency issues.   

Below is a retrospective assessment of how we did last time and our best guess as to what will dominate the next 12 months.

The big issues for 2013

Our ‘top five’ picks for last year were:

Stewart v ATCO Controls Pty Ltd (in Liq) [2014] HCA 15

The High Court has unanimously confirmed the position originally set out in In re Universal Distributing Co Ltd (In Liq) (1933) 48 CLR 171, finding that a secured creditor may not have the benefit of a fund created by a liquidator without the liquidator's costs and expenses of creating that fund first being met.