Power Demolitions Pty Ltd v Tosich Constructions Pty Ltd (in liq) [1998] FCA 14

Power Demolitions Pty Ltd v Tosich Constructions Pty Ltd (in liq) [1998] FCA 14

Because the funding creditors' contributions were vital to the recovery from NAB and, but for that recovery, there would have been nothing available for unsecured creditors, s 564 justified giving them an advantage. However, the contributions were only a small part of the total funding and the statutory priority for employee claims also had to be respected. A just distribution was therefore for each contributing creditor to receive three times its contribution, with the balance distributed according to the priorities established by the Corporations Law, and the liquidator's costs of the application treated as properly incurred expenses.

Jurisdiction
Australia
Judgment Date
21 January 1998
Procedural Posture
Application by Liquidator Under S 564 of the Corporations Law for Orders Concerning Distribution of Recovered Property in a Winding Up / Reasons for Judgment After Hearing; Applicant Directed to Bring in Short Minutes of Order
Outcome
Application allowed in part; short minutes of order to be brought in reflecting the reasons.
Legal Topics
['winding Up' 'liquidator Funding' 'priority of Funding Creditors' 'employee Entitlements' 'costs and Expenses of Liquidation' 'unfair Preferences']
['corporations' 'insolvency'] ['winding Up' 'liquidator Funding' 'priority of Funding Creditors' 'employee Entitlements' 'costs and Expenses of Liquidation' 'unfair Preferences']

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Procedural Posture

Application by Liquidator Under S 564 of the Corporations Law for Orders Concerning Distribution of Recovered Property in a Winding Up / Reasons for Judgment After Hearing; Applicant Directed to Bring in Short Minutes of Order

Legal Issues

  1. 1 ['Whether the circumstances fell within para (a) of s 564 of the Corporations Law where unsecured creditors provided money to enable the liquidator to recover funds in the liquidation.' 'Whether funding creditors should receive an advantage over other unsecured creditors in distribution of the recovered funds.' 'How any advantage to funding creditors should be balanced against the special claims of employees recognised by the Corporations Law.' 'Whether the costs of the application should be treated as an expense in the winding up.']

Ratio Decidendi

Because the funding creditors' contributions were vital to the recovery from NAB and, but for that recovery, there would have been nothing available for unsecured creditors, s 564 justified giving them an advantage. However, the contributions were only a small part of the total funding and the statutory priority for employee claims also had to be respected. A just distribution was therefore for each contributing creditor to receive three times its contribution, with the balance distributed according to the priorities established by the Corporations Law, and the liquidator's costs of the application treated as properly incurred expenses.

Court Disposition

Application allowed in part; short minutes of order to be brought in reflecting the reasons.

Orders

  • ['The applicant is to bring in short minutes of order consistent with these reasons.' 'Each contributing creditor is to receive a distribution in an amount equivalent to three times its contribution.' 'The whole of the remaining amount is to be paid in accordance with the priorities established by the Corporations...