An England and Wales High Court decision ruled in favour of the creditor when considering the use of the equitable doctrine of marshalling debt. However, on appeal to the Supreme Court, the decision was overturned.
The doctrine of marshalling operates in the same way in Australia, therefore lenders should be aware of the recent rulings.
The Supreme Court of New South Wales dismisses an application by a creditor to remove the liquidators of a company. The liquidators had refused to conduct a public examination of the company’s director.
The Court held that they had reasonably formed the view that they should not conduct the examination.
Shadow Directors – lenders and mortgagees cautioned about the pitfalls of working too closely with defaulting borrowers to achieve a return of capital and interest.
Given the post GFC economic climate, many creditors are pursuing recovery procedures outside the standard legal process after an event of default has arisen. So called “workouts” are one example, where creditors exercise considerable control over the debtor company in default. This gives rise to the possibility of the creditors involved in a “workout” or restructure of a defaulting company being held liable if the workout fails and the company is liquidated. The case of Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd  NSWCA 109 dealt with this issue.
The Supreme Court of Victoria considers the elements required to set aside a statutory demand where the company asserts an off-setting claim.
In the matter of Innovision Developments Pty Ltd v Martorella & Anor  VSC 390, the Supreme Court of Victoria set aside a creditor’s statutory demand for payment of a debt even though the debt was a money judgment entered by that court in favour of the creditor.
Service of Statutory Demands on a company at its registered office held invalid.
Recent Federal Court decisions highlight the dangers in serving creditors statutory demands on the registered office of corporate debtors.