Category: Insolvency & Reconstruction

The last 12 months has seen an escalation in debt collection activities instigated by the Australian Taxation Office (ATO) with respect to businesses, resulting in a subsequent increase in the rate of insolvencies. Where the ATO is unable to recover a tax debt directly from a company due to liquidity issues, it can seek to recover those debts personally from directors, via the director penalty regime.

Rigby Cooke Lawyers is delighted to announce the recent appointment of Julie Callea-Smyth, Partner in our Litigation & Dispute Resolution and Insolvency & Reconstruction practices.

A version of this article was first published by AMTIL in August 2023.

The Personal Property Security Act 2009 (PPSA) came into effect in 2012 and created a uniform regime for parties to register security interests. It replaced over seventy pieces of individual legislation around Australia and aimed to give certainty with respect to the priority of security interests where a grantor enters external administration.

Rigby Cooke Lawyers is delighted to announce the promotions of Angela Foudoulis and Séamus Ryan to Special Counsel, effective 1 July 2022.

The Australian Tax Office (ATO) is ramping up its collection of overdue tax payments, including by serving Director Penalty Notices (DPNs) which were largely held in abeyance during the COVID-19 pandemic.

On Monday 23 March 2020, the federal parliament passed the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) implementing a range of urgent measures announced by the government on Sunday 22 March 2020.

Key Points:

• In a recent decision of the Supreme Court of Victoria, the Court held that an appeal under the new Insolvency Practice Rules against an insolvency practitioner’s determination on a proof of debt at a meeting of creditors is a hearing de novo (ie a fresh hearing) without any need for the appellant to identify error by the original decision-maker.

Key points:

• When contracting with administrators or liquidators, counterparties need to be careful to ensure such contracts will give them enforceable rights.
• An administrator can enter into almost any contract and is personally liable for numerous categories of debts they may incur.
• A liquidator has only limited powers to enter into contracts on behalf of a company, and generally has no personal liability under such contacts.

Key points:

• A liquidator is unable to apply for a judgment under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOPA).
• Where judgment under the SOPA was obtained by the contractor before it went into liquidation, and the principal asserts an offsetting claim, the Court will stay enforcement of the judgment pending a taking of accounts pursuant to section 553C of the Corporations Act.
• Ultimately, a liquidator will only be able to enforce payment of an amount actually shown to be owed under the construction contract, after a final reconciliation has occurred.

Key points:

• Liquidators have the power to sell causes of action belonging to the company, or conferred on the liquidator by the Corporations Act 2001 (Cth) (Act).
• Selling instead of litigating causes of action can be a safer, surer and quicker path for a liquidator to realise value for creditors.
• However, there are certain important limitations on a liquidator’s power to sell causes of action.

Important insolvency reforms recently passed into law as a result of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth) (TLA Act).