find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Insolvency firm sues biggest customers

Insolvency firm sues biggest customers

The liquidator for the now-defunct ABC Learning has launched a $250 million action against the Big Four banks on behalf of small unsecured creditors – a brave move for an insolvency firm and its lawyers, who rely on banks for most of their revenue, litigation funder IMF has claimed.

A banking syndicate, which includes Commonwealth Bank, Westpac, National Australia Bank and ANZ, has been accused of jumping the creditor queue in the lead up to the collapse of ABC Learning. Once the world’s largest publicly-listed childcare operator, ABC Learning closed its doors in 2008, owing creditors $1.6 billion.

ABC Learning’s liquidator Ferrier Hodgson, which is being represented by Sydney firm Addisons Lawyers, is now trying to recoup losses for small unsecured creditors by disputing the validity of the banks’ fixed and floating charge, which secured interest over ABC Learning assets in June 2008 to the tune of $800 million.

John Walker (pictured), IMF’s executive director, told Lawyers Weekly that IMF will refer to Section 588FJ of the Corporations Act or, as it is more commonly known, the ‘six-month rule’. The rule states that a charge is invalid if a company collapses within six months. ABC Learning fell into receivership in November 2008 – just five months before administrators were appointed.

“The onus is now on the banks to prove that ABC Learning was solvent at the time they took the charge,” Walker explained; while IMF has to prove the banks received money after the charge was taken.

The action by Ferrier Hodgson is unusual and should be commended, he continued, pointing out that bank charges are rarely challenged because “insolvency practitioners and their lawyers rely on banks for the bulk of their work”.

The case outcome will be significant for insolvency lawyers, according to Walker, with the decision providing clarity on whether book debts (money owed by customers) are part of a fixed charge or a floating charge.

“A ruling on this area is important for the law going forward ... it assists insolvency lawyers in the future by making Australian law more certain,” he added.

Lawyers Weekly contacted Philip Stern, a partner at Addisons Lawyers, but he was not in a position to comment on the case at the time of publication.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Insolvency firm sues biggest customers
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...