Recovery of rental payments as voidable transactions

The Queensland Court of Appeal has handed down a decision dealing with an appeal by a liquidator in respect of a claim that rent payments made by a company were voidable transactions.

The Court of Appeal in Andrew Fielding as Liquidator of Lyngray Developments Pty Ltd v Dushas [2013] QCA 55 held that while the payments in question were voidable transactions, the voidability didn't extend to the full amount and discounted recovery by 25 per cent as only 25 per cent of the rental was attributable to the company's use.

This decision provides an illustration of the ability of a liquidator to recover certain rent payments as voidable transactions. It also illustrates that in such circumstances a liquidator should attend court prepared to illustrate as to what percentage of the rent in question was a reasonable amount to ensure that any discount ordered by the court is appropriate.

Not a creditor where assignment absolute

The Court of Appeal of New South Wales has handed down a decision dealing with the question of whether a party who had assigned its relevant rights to a third party under a deed was a creditor of a company under voluntary administration.

The Court of Appeal in Austino Wentworthville Pty Limited v Metroland Australia Limited [2013] NSWCA 59 dismissed the appeal and confirmed that the company was not a creditor.

The case highlights that a company will not be admitted as a creditor to a company under voluntary administration where it has assigned its relevant rights to a third party under a deed of assignment and the assignment is characterised as absolute rather than by way of charge only.

ASIC data on corporate insolvencies: March 2013

The latest released ASIC data shows that the number of appointments nationally has slightly increased to 1379 appointments from 1287 in February 2013. This is still around the average number of appointments seen in previous months.

At a state and territory level, insolvency appointments increased in all states and territories except Queensland, Western Australia and the Australian Capital Territory. In particular, the number of appointments in South Australia has doubled the average number of appointments since July 2012.

Termination of a winding up

The Supreme Court of NSW has delivered a decision dealing with an application to terminate the winding up of a company pursuant to section 482(1) of the Corporations Act 2001 (Cth).

In the matter of Plaza West Pty Ltd (in liq) (subject to a Deed of Company Arrangement) [2013] NSWSC 168, Justice Black held that the winding up of Plaza West Pty Ltd (in liquidation) should be terminated indefinitely to enable Plaza's Deed of Company Arrangement to be facilitated.

This case demonstrates that a court will rely on the detailed reports prepared by administrators, liquidators and experts when determining an application to terminate the winding up of a company.

Setting aside orders for extension of time for voidable transactions

The Supreme Court of New South Wales has delivered a decision dealing with an application to set aside an order made pursuant to r36.16 of Uniform Civil Procedure Rules 2005 (NSW), which had the effect of varying an order to extend time under s588FF(3)(b) of the Corporations Act 2001 (Cth) in respect of voidable transactions under s 588FF.

Justice Black, in In the matter of Octaviar Limited (receivers and managers appointed) (in liquidation) and Octaviar Administration Pty Limited (in liquidation) [2013] NSWSC 62 held that that an order made in accordance with s588FF(3)(b) of the Act, and subsequently varied by r36.16 of the Rules is one which still complies with the requirements of s588FF(3)(a), since it was made on an application within the period. This effectively allowed for a further extension of time for the making of applications in respect of voidable transactions.

The case provides guidance on an avenue by which a court can make an order to further extend the time period in which the liquidator may bring an application in respect of a voidable transaction of a company in liquidation.

Extension of time for PPSR registration

The New South Wales Supreme Court has delivered a decision dealing with an application for orders under section 588FM(1) of the Corporations Act 2001 (Cth) to fix the registration time for security interests granted in certain collateral registered on the Personal Property Securities Register.

In the matter of Cardinia Nominees Pty Ltd [2013] NSWSC 32, Justice Black granted the orders sought, and held that it would be a proper exercise of the court's discretion to make an order under s588FM fixing a later time for registration of the security interests, subject to specified terms which:

1. preserved the position of secured parties who had previously perfected their security; and
2. reserved the ability of a liquidator, administrator, deed administrator or other unsecured creditor to apply to discharge or vary the order within a six-month period from the date of registration of the security interest in the collateral.

This case serves as a clear example to practitioners of the importance of having procedures in place that ensure security interests are lodged within 20 business days after the relevant security agreement comes into force. It is anticipated that as the PPSA regime becomes more familiar, the courts may not be so forthcoming in granting orders that were sought to overcome 'inadvertent' delays to registration of security interests.

'Special rate' payments may be uncommercial transactions

The New South Wales Supreme Court has delivered a decision dealing with an application by liquidators for orders under section 588FF of the Corporations Act 2001 (Cth) relating to voidable transactions.

In the matter of Employ (No 96) Pty Limited (in liquidation) [2013] NSWSC 61, Justice Black held that certain payments made by the insolvent company constituted unfair preferences whilst others were uncommercial transactions.

This case reinforces that payments made by a company in financial distress in accordance with 'special' or higher rates may be set aside as an uncommercial transaction if there is no commercial sense for such an increase in the cost of the goods or services provided.