In the matter of Force Corp Pty Ltd (in liq) [2020] NSWSC 1842
Hearing dates:
24 November 2020
Date of orders:
17 December 2020
Decision date:
17 December 2020
Jurisdiction:
Equity - Corporations List
Before:
Gleeson J
Decision:
Directions given to liquidators in relation to proposed distributions to priority creditors in the liquidation of Force Corp Pty Ltd (in liq): see [136]
Catchwords:
CORPORATIONS – winding up – where company in liquidation – where assets available in liquidation sufficient to declare dividend to priority creditors – application by liquidators for directions concerning proposed distributions to priority creditors – Insolvency Practice Schedule (Corporations), Corporations Act 2001 (Cth), Sch 2 – Corporations Act s 556(1)
CORPORATIONS – where secured creditor advanced moneys to administrators – whether administrators entitled to indemnity for monies borrowed – Corporations Act ss 443A(1) and 443D – whether administrators liability to the secured creditor is a priority claim – Corporations Act s 556(1)(c)
CORPORATIONS – where receivers made payments to former employees after commencement of winding up – whether secured creditor entitled to be subrogated to priority position of employee creditors – Corporations Act s 556(1)(e) – where receivers failed to pay amounts owing to other employees under s 556(1)(e) – Corporations Act, s 433(3) – where secured creditor acknowledged liability to company for amounts not paid by receivers to other employee creditors – whether insolvency set-off available – Corporations Act, s 553C(1) – whether secured creditor had notice of fact of insolvency at time of receiving credit from the company – Corporations Act, s 553C(2) – whether equitable set-off available as alternative to insolvency set-off
EQUITY – whether rule in Cherry v Boultbee available as alternative to insolvency set-off
CORPORATIONS – where creditor made payment on account of employees’ wages at the direction of the company – whether creditor entitled to priority for payment – Corporations Act s 560 and s 556(1)(e)
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
In the matter of Force Corp Pty Ltd (in liq) [2020] NSWSC 1842
Case
[2020] NSWSC 1842
Decision Date
CaseChat Overview and Summary
The case of Re Force Corp Pty Ltd (in liq) involved the liquidators of the company seeking directions from the court regarding proposed distributions to priority creditors. The court was asked to determine various issues arising from the winding up of the company, including whether the administrators were entitled to an indemnity for monies borrowed and if the secured creditor was entitled to be subrogated to the priority position of employee creditors. The secured creditor had acknowledged liability to the company for amounts not paid by the receivers to other employee creditors and the liquidators sought to set off the amounts owing against the secured creditor's debt. The court had to determine whether the secured creditor had notice of the company's insolvency at the time of receiving credit from the company and if insolvency set-off was available. Additionally, the court had to determine whether equitable set-off was available as an alternative to insolvency set-off and whether the rule in Cherry v Boultbee was available as an alternative to insolvency set-off.
The court considered the provisions of the Corporations Act and found that the administrators were not entitled to an indemnity for monies borrowed as they were not acting as voluntary administrators. The court also found that the secured creditor was not entitled to be subrogated to the priority position of employee creditors as the receivers had failed to pay amounts owing to other employees under section 556(1)(e) of the Act. The court found that insolvency set-off was available to the liquidators and that the secured creditor had notice of the company's insolvency at the time of receiving credit from the company. The court also found that equitable set-off was not available as an alternative to insolvency set-off and that the rule in Cherry v Boultbee was not available as an alternative to insolvency set-off.
The court ordered that the liquidators could set off the amounts owing to employee creditors against the secured creditor's debt and that the secured creditor was not entitled to priority for payment. The court also ordered that the liquidators could distribute the remaining available assets in the winding up to the priority creditors in accordance with section 556 of the Corporations Act.
In conclusion, the court found that the liquidators could set off the amounts owing to employee creditors against the secured creditor's debt and that the secured creditor was not entitled to priority for payment. The court also found that the administrators were not entitled to an indemnity for monies borrowed and that the rule in Cherry v Boultbee was not available as an alternative to insolvency set-off. The court's decision provides important guidance for liquidators and creditors in winding up a company and the priority of payments.