Insolvent Trusts The Same As Companies, High Court Rules

The High Court has declared it would be "perverse" not to give worker entitlements priority in any collapse, whether a company trades in its own right or as a trustee, the Australian Financial Review reported. The court's decision in the Carter Holt Harvey Woodproducts case means the same rules apply for the payment of creditors and is an important win for workers. This has been welcomed by leading insolvency practitioners, who say the status of workers employed by trading trusts has been so uncertain that they faced being pushed to the back of the queue with other unsecured creditors. When Carter Holt went bust in 2014, the Commonwealth advanced nearly $4 million for wages and entitlements under the Fair Entitlements Guarantee Scheme. The receivers traded on and generated a surplus of around $1.6 million, but then sought directions on whether they had to comply with the statutory priority regime in section 433 of the Corporations Act. If they didn’t have to, the trust creditors would share equally – meaning that the employees and the Commonwealth would often be left out of pocket. Read more

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