In the matter of O’Keeffe Heneghan Pty Ltd (in liquidation); Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation); AND IN THE MATTER OF: O’Keeffe Heneghan Pty Ltd (in liquidation); Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation) trading as KNF Group (a firm) [2018] NSWSC 1885

In the matter of O’Keeffe Heneghan Pty Ltd (in liquidation); Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation); AND IN THE MATTER OF: O’Keeffe Heneghan Pty Ltd (in liquidation); Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation) trading as KNF Group (a firm) [2018] NSWSC 1885

Section 561 of the Corporations Act 2001 (Cth) does not apply to the payment of the debts of the Partnership from the Partnership assets, even where all partners are companies in liquidation; the distribution of partnership assets to partnership creditors is governed by the Partnership Act, and such creditors share pari passu. The priority provisions in the Corporations Act apply only to each company’s own assets in its winding up, not to partnership assets as joint estate.

Parties
First and Second Plaintiff: Andrew Spring and Amanda Young (in their capacity as Receivers and Managers O'Keeffe Heneghan Pty Ltd (in liquidation), Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation) trading as KNF Group (a partnership); Third Plaintiff: IFG Network Australia Pty Ltd; First Defendant: Andrew Sallway (in his capacity as joint and several liquidator of O'Keeffe Heneghan Pty Ltd (in liquidation), Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation)); Second Defendant: James White (in his capacity as joint and several liquidator of O'Keeffe Heneghan Pty Ltd (in liquidation), Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation)); Third Defendant: O'Keeffe Heneghan Pty Ltd (in liquidation); Fourth Defendant: Aus Life Pty Ltd (in liquidation); Fifth Defendant: Rocky Neill Construction Pty Ltd (in liquidation); Sixth Defendant: Commonwealth of Australia represented by the Department of Employment
Jurisdiction
Australia
Judgment Date
07 December 2018
Procedural Posture
Application for Directions/declaratory Relief / Final Judgment
Outcome
The priority regime prescribed by s 561 of the Corporations Act 2001 (Cth) does not apply to the payment of debts of the Partnership from the Partnership assets.
Legal Topics
Priority in Liquidation, Application of Corporations Act to Partnerships, Distribution of Partnership Assets, Employee Entitlements, Partnership Creditors Vs Company Creditors
Corporations Law Insolvency Partnerships Equity Priority in Liquidation Application of Corporations Act to Partnerships Distribution of Partnership Assets Employee Entitlements +1 more

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Parties

Andrew Spring and Amanda Young (in their capacity as Receivers and Managers O'Keeffe Heneghan Pty Ltd (in liquidation), Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation) trading as KNF Group (a partnership)

First and Second Plaintiff

IFG Network Australia Pty Ltd

Third Plaintiff

Andrew Sallway (in his capacity as joint and several liquidator of O'Keeffe Heneghan Pty Ltd (in liquidation), Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation))

First Defendant

James White (in his capacity as joint and several liquidator of O'Keeffe Heneghan Pty Ltd (in liquidation), Aus Life Pty Ltd (in liquidation) and Rocky Neill Construction Pty Ltd (in liquidation))

Second Defendant

O'Keeffe Heneghan Pty Ltd (in liquidation)

Third Defendant

Aus Life Pty Ltd (in liquidation)

Fourth Defendant

Rocky Neill Construction Pty Ltd (in liquidation)

Fifth Defendant

Commonwealth of Australia represented by the Department of Employment

Sixth Defendant

Procedural Posture

Application for Directions/declaratory Relief / Final Judgment

Legal Issues

  1. 1 Does the priority regime prescribed by s 561 of the Corporations Act 2001 (Cth) apply to the payment of the debts of a partnership from partnership assets when the partners are companies in liquidation?
  2. 2 Are partnership assets the 'property' of the partner companies for the purposes of the Corporations Act (relevant to s 433, s 556, s 561)?
  3. 3 Should the priority regime in the Corporations Act be applied by analogy in equity to partnership assets?

Ratio Decidendi

Section 561 of the Corporations Act 2001 (Cth) does not apply to the payment of the debts of the Partnership from the Partnership assets, even where all partners are companies in liquidation; the distribution of partnership assets to partnership creditors is governed by the Partnership Act, and such creditors share pari passu. The priority provisions in the Corporations Act apply only to each company’s own assets in its winding up, not to partnership assets as joint estate.

Court Disposition

The priority regime prescribed by s 561 of the Corporations Act 2001 (Cth) does not apply to the payment of debts of the Partnership from the Partnership assets.

Orders

  • Declaration that s 561 of the Corporations Act does not apply to debts of the Partnership paid out of Partnership assets.
  • Parties to bring in agreed short minutes of order, including as to costs, within 14 days.