The High Court delivered two judgments on 8 February 2023 to bring about the most significant development to the unfair preference laws and ended many years of uncertainty in relation to the defence of set-off and the application of the running account principle.

For many years, there has been heated debate as to whether:

1. 1. set-off is available as a defence to an unfair preference claim; and
   2. the “peak-indebtedness rule” is part of the law in Australia.

The High Court decisions of Metal Manufactures Pty Limited v Morton [2023] HCA 1 (Morton) and Bryant v Badenoch Integrated Logging

As a proud sponsor of Women in Credit (WINC), we invite you to the first WINC Webinar for 2023, celebrating International Women’s Day on Wednesday, 8th March.

Join speaker Rowena Millward – global business leader and best-selling author of “Uncomfortable Growth – Own Your Reinvention” as she shares four questions to move you from stuck to significance.

If you’re not a member of AICM, we invite you to register and attend as our guest using the code: ResultsWeb at checkout to receive complimentary registration.

Four Questions to Move from Stuck to Significance

Join speaker Rowena Millward – global business leader

The Treasury has provided further insight this month into the operation of the proposed reforms that will see the most significant changes to the Australian insolvency framework in almost 30 years.

With a wave of insolvencies expected in 2021 as the measures introduced by the Government to combat the economic effects of COVID-19 come to an end, it is important that businesses, creditors and advisors are aware of the impact of the small business insolvency reforms.

The recent Victorian Court of Appeal judgment in Cant v Mad Brothers Earthmoving Pty Ltd [2020] VSCA 198 clarifies the circumstances in which a payment from a third party may constitute an unfair preference. The decision is important to any creditors with potential exposure to unfair preference claims and for insolvency practitioners seeking to pursue such claims.

The voluntary administration regime is intended to maximise the chance of a company continuing or to provide a better return to creditors than an immediate winding up of the company. The regime offers great flexibility. This leaves it open to abuse by directors and related entities seeking to avoid legitimate debts, scrutiny of their conduct or to obtain a direct benefit for themselves.

Litigation funding is a little used tool that can yield big benefits for unsecured creditors.

If employed strategically by creditors, litigation funding can enable the creditor to seek a priority payment, which may result in a significant recovery.

Illegal phoenix activity has become an increasingly common problem for trade creditors. Well advised directors are regularly walking away from company liabilities, only to recommence trading under a new company name.

If you would like to view the slideshow from Karl Hill’s Insolvency Law Reform presentation at the AICM National Conference 2017 please click the ‘read more’ link…

Electronic transactions are now an everyday part of business life.

The benefits to business of embracing electronic transactions such as online credit applications and the electronic exchange of credit agreements are obvious. What is not so obvious is the new categories of risk which electronic transactions create.

No matter how good a business’s systems and processes are, from time to time disputed claims are likely to arise.

Disputed claims are high risk. In addition to the principal debt being in jeopardy, potential legal costs need to be closely managed so as not to undermine the net return achieved. There are three major factors which have the greatest impact on the net outcome creditors achieve on disputed claims: determining prospects early, developing an effective strategy and considering cost/ benefit.

Disputed money claims can be a real source of pain for credit providers – whether trade creditors or financiers.

Not only do they result in a higher chance of write off, they usually carry with them the prospect of legal costs, which, if not effectively managed, can diminish at the amount of net return on the claim.

The Results Legal team was recently engaged to assist one of our banking clients seize and sell land subject to first registered mortgage security.

A shipping container filled with specialised mining and drilling equipment was located on the secured property.

After taking possession of the property, our client was contacted by a third party who claimed ownership of the mining and drilling equipment.

After pursuing a long and hard fought Supreme Court claim, our client obtained judgment for an amount of $1.64 million. Shortly thereafter, the defendant company was placed into voluntary administration by its director.

Following the first meeting of creditors, it became apparent that related parties had sufficient voting power in both number and value to successfully put up a deed of company arrangement.

Secured recovery actions can often involve complex and contentious situations which require attention a focus on risk management.

This was evidenced in one particular matter where our client was the mortgagee of a deceased estate.

Our client, a large heavy equipment supplier, sold several used items of mining equipment for use at a mine site which required commissioning.  A separate contract was also entered into between the parties for the ongoing maintenance of the equipment.

In 2014, Results Legal was instructed by the trustee in Bankruptcy of former horse racing and breeding magnate, Lee James Fleming, who had previously run a horse stud in southern Victoria that was home to Bel Esprit – the sire of undefeated mare Black Caviar.

Large financial exposure is not uncommon in the mining and resources sector.

Providing specialist representation for an equipment finance company, we were approached to recover a $2.7-million debt from operator of a Western Australian coal mine.

Having worked with a range of insurance companies, government agencies and large corporate partners, Results Legal has have developed systems and procedures to process large volumes of legal recovery work within a short space of time.

Our team regularly acts on behalf of a large prestige motor dealer group in a broad range of dispute resolution matters.

We have enforced contracts of sale for luxury high end motor vehicles and opposed claims from customers pertaining to the delivery and standard of delivered vehicle.

The voluntary administration regime offers great flexibility. This leaves it open to abuse by directors and related entities seeking to avoid legitimate debts, scrutiny of their conduct or to obtain a direct benefit for themselves.