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Precedent-setting insolvency cases and their impact on the profession
Johnson Winter Slattery (JWS) has launched the newest edition of its insolvency and restructuring Case Summaries publication, providing commentary on the most high-profile and precedent-setting cases in the insolvency and restructuring space.
Lauren Croft
The publication features 45 case summaries, highlighting the key takeaways and the practical implications for insolvency practitioners and barristers alike.
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In the foreword of the publication, barrister and senior counsel at Eleven Wentworth Michael Izzo said that the High Court’s “increased forays” into the insolvency and restructuring space are reason enough to delve into the cases – with four High Court decisions being particularly notable.
“The first two High Court decisions delivered in 2023 dealt with set off in insolvency and the peak indebtedness rule, respectively,” he stated.
“In the second half of 2023, the High Court granted special leave to appeal from the New South Wales Court of Appeal’s decision in Greylag Goose Leasing v PT Garuda Indonesia (concerning the availability of foreign state immunity in a winding up application) and the full court of the Federal Court’s decision in McMillan Investment Holdings Pty Ltd v Morgan (concerning pooling orders under the Corporations Act). All four decisions are carefully and helpfully digested in this year’s Case Summaries.”
The publication is now in its third year – and JWS partner and head of the firm’s restructuring and insolvency group Joseph Scarcella said it was produced in response to feedback from insolvency practitioner clients who were looking for “a valuable resource in their day-to-day practice”.
“We see it as an equally valuable resource for lawyers and barristers who wish to understand and follow important developments in the field of corporate insolvency, and the feedback that we have received from both barristers and our competitors has been extremely positive,” he said.
According to the publication, the courts handed down several landmark insolvency decisions during 2023, and a number of key judgments have impacted the legal landscape – and will continue to do so.
Echoing Izzo’s comments, JWS restructuring and insolvency partner Sam Johnson said there were a variety of judgments that lawyers and barristers should be aware of.
“Most notable were the High Court decisions in Bryant v Badenoch Integrated Logging Pty Ltd and Morton as Liquidator of Woodman Electrical Contractors (in Liq), which provided some long sought-after clarity on the application of the peak indebtedness rule and the set off defence in preference claims,” he explained.
“The Case Summaries also deal with many other decisions of considerable complexity and importance, such as the appellate decisions in Commonwealth of Australia v Tonks (resolving the uncertainty created by the interplay between the priority regimes under ss556 and 561 of the Corporations Act when resolving a contest between a liquidator’s claim for remuneration and the entitlements of former employees to be paid out of circulating assets); and Anchorage Capital Master Offshore v Sparkes (addressing the circumstances in which a company is insolvent because of inability to pay future debts and the consequences of company officers making representations as to solvency).
“[The publication also notes], Resilient Investment Group v Barnet (clarifying the operation of central concepts in the Personal Property Securities Act 2009 in the context of a priorities dispute); and Sino Group International v Toddler Kindy Jamberoo (identifying circumstances when a DOCA may be terminated as misleading).”
The publication was written by 10 JWS restructuring and insolvency partners, including Johnson and Scarcella, and notes that moving forward, “an uptick in corporate insolvencies is likely to be accompanied by a commensurate increase in insolvency-related litigation during 2024”.
“The issues traversed in the Case Summaries are indicative of increased activity in the corporate insolvency space. The number of corporate insolvencies for the 2022–2023 financial year almost returned to pre-pandemic levels and were at their highest level since 2019,” Johnson added.
“A number of key indicators point to corporate insolvencies increasing further during 2024: the rise in interest rates since May 2022 is likely to be felt acutely in some sectors; continuing upward inflationary pressures impacting the cost of living; credit being more difficult to source and an increase in enforcement action by the ATO pursuing unpaid corporate tax. An uptick in corporate insolvencies is likely to be accompanied by a commensurate increase in insolvency-related litigation during 2024, which will mean more case summaries!”
