Insolvency Matter

In 2021 when the pandemic was beginning, we took instructions to act for an insolvency practitioner appointed to a large accounting practice in Sydney. The accounting practice acted for high net worth and high-profile individuals.

We successfully applied for a warrant pursuant to s 530C of the Corporations Act 2001 and travelled to Sydney in May of that year to execute the warrant.

Two Principals travelled with the liquidator and one of his staff. Coordinating with the 3 officers from Australian Federal Police, an IT technician and a locksmith, we successfully executed the warrant. We seized the books and records of the practice under difficult circumstances. This included the director attempting to block the execution of the warrant, and engaging with her legal representative, who was not familiar with the provisions of the legislation.

While executing the warrant, a luxury vehicle was located which was eventually seized. On the spot, we formulated 2 critical legal arguments:

1. That the security interest registered on the Personal Properties Securities Register (PPSR) by a large finance company was invalid (and that the security interest had vested in the insolvent company), and
2. The disclaimer was ineffective despite the liquidator having disclaimed the vehicle for technical reasons.

Each of those legal propositions were eventually tested in the Federal Court, which upheld each of those arguments over opposition.

The warrant was also executed (informally) with respect to a law firm that had purportedly prepared a variation deed to the trading trust, where the company in liquidation was the trustee. Evidence suggested that such documents had been prepared and executed after the company was placed into voluntary administration in the first instance.

The team then successfully applied to have the liquidator appointed as Receiver and manager over a trust which operated the business, which again was opposed.

• A public examination in the Federal Court of Australia where it is proposed to examine the director and another person who is alleged to have taken over the business formally conducted by the company.
• A proceeding against the director for insolvent trading, uncommercial transactions and unfair preferences (which were paid to her related entities).
• Several unfair preference claims have been issued in the Magistrates’ Court and the County Court of Victoria.

This particular insolvency matter has involved the team dealing with various legal issues, including matters arising under the Personal Property Securities Act, trust law and the law of subrogation. It has also resulted in 12 months of negotiations (mainly between the insolvency practitioner, but with the firm advising in the background) concerning whether the former director would be in a position to put a proposal that would see the winding up terminate.