Statutory Demands pursuant to the Corporations Act are a mechanism available to creditors for the payment of debt. Upon the expiry of a Statutory Demand, the Corporations Act presumes that the company is insolvent and allows the entity making the demand to apply to the court for their winding up on grounds of insolvency.
Key Points: The fact that you're a very big company doesn't mean you needn't follow the legal rules for the execution of documents.
Background
A large insurance company claimed to be a creditor of Ungul, a property developer. Ungul was in voluntary administration.
A meeting of Ungul's creditors was called for 11 June. The insurance company's solicitors contacted the administrator and said that:
Introduction
The New South Wales Supreme Court has found a solicitor liable for facilitating unlawful ‘phoenix’ activity.1 Phoenix activity consists of transferring business assets out of an old debt-laden company (which subsequently goes into liquidation) to a new debt free company. The new company carries on the business of the old company; but the assets are put beyond the reach of the creditors of the old company.
The High Court’s recent decision in Bofinger v Kingsway involves the law respecting sureties, their obligation to indemnify the creditor and right to indemnity by the principal debtor, and the operation of the doctrine of equity associated with the term “subrogation”.
The decision in Re Forge Group Construction Pty Ltd (in liq) (Receivers and Managers appointed); ex parte Jones [No 2] [2016] WASC 87 confirms that while some communications between liquidators, receivers and their respective solicitors can be privileged, it is not necessarily always the case. Critical factors include the purpose of the communication in question and whether there is a sufficient commonality of interest between liquidators and receivers in relation to the communication’s subject matter.
Facts
Failure to comply with a statutory demand can have serious consequences for a company. Failure to properly advise on a statutory demand can also have serious consequences for a solicitor. Dixon J, in Dual Homes Pty Ltd v Moores Legal Pty Ltd and Anor, provides a timely reminder of the consequences that can flow from a failure to take proper action in response to a statutory demand.
Just what is an account receivable has been the subject of much debate, because it determines what assets are used to satisfy preferential claims, i.e. who gets paid first in a receivership or liquidation. In 2008, the High Court judgment in Commissioner of Inland Revenue v Northshore Taverns (in liq) confined “accounts receivable” to “book debts”. Although since criticised, that judgment was the only judicial authority on the point.
Managh v Morrison and Ors involved an application by a liquidator to set aside a transaction pursuant to section 292 of the Companies Act 1993. Approximately one year before liquidation the company assigned causes of action against a firm of solicitors and a real estate agent to a trust associated with the company's director.
A lien is the right to hold on to goods, and in some cases sell them, in order to ensure payment. Often the debt will be connected with services related to the goods.
A lien can be obtained by contract, or in certain specific situations the law creates it automatically. The difference can be significant.
Under the Personal Property Securities Act (PPSA), the holder of a common law or statutory lien may in some cases have special priority over a company’s secured creditors.
Types of lien
- INTRODUCTION
S4 of the PPSA, provides that "except as otherwise provided" in the PPSA, the PPSA does not apply to a number of enumerated liens, charges or other interests, including as set out in s4(a) "a lien, charge or other interest given by an Act or rule of law in force in Alberta".