This week's TGIF considers In the matter of Intellicomms Pty Ltd (in liq) [2022] VSC 228, in which Associate Justice Gardiner found that a Sale Agreement disposing of key assets to a related entity on the day of appointment of liquidators constituted a creditor-defeating disposition and therefore able to be set aside.

Key takeaways

640 Elizabeth Street Pty Ltd (in liq) & Ors v Maxcon Pty Ltd [2015] VSC 22 confirms that the granting of security by a company to avoid a proceeding against a related company will not necessarily constitute an “uncommercial transaction”.

BACKGROUND

This week’s TGIF examines a decision of the Supreme Court of Victoria in which an unfair preference claim was defended on the basis that the liquidators had been invalidly appointed and lacked standing to continue the proceeding.

Key takeaways

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

The first case has been decided under Australia’s statutory powers to set aside “creditor defeating dispositions”.

Executive summary

On 11 February 2016 the High Court delivered a unanimous judgment¹ which clears the path for liquidators and others to join insurers of defendants to proceedings, enabling the determination at the same trial as to whether an insurer has an obligation to indemnify defendants in respect of any liability that may be found against those defendants.

Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (In Liquidation) [2013] HCA 51

Overview

Section 568 of the Corporations Act 2001 (Cth) (Act) gives liquidators broad powers to disclaim onerous property.

Until the High Court’s decision, it was unclear whether this power entitled a liquidator of an insolvent landlord to disclaim a lease, such that the solvent tenant no longer has any proprietary interest in the land.

In Short

The Situation: In February 2020, amendments to the Corporations Act 2001 (Cth) expanded the kinds of transactions that may be voidable if a company is being wound up to include asset disposals undertaken as part of illegal phoenixing schemes. Such disposals are termed as "creditor-defeating dispositions" in the legislation.