Success in insolvency case leads to precedent at law

Success in insolvency case leads to precedent at law


The recent decision of Ashala Model Agency Pty Ltd & Anor v Featherstone & Anor [2016] QSC 121 resulted in a thrilling success for Irish Bentley Lawyers (“IBL”). The significance of the matter is two-fold, as follows:

  1. Ashala is the first judicial interpretation of the defence available under section 588FG(1) of the Corporations Act 2001 (Cth).
  2. The case expands the range and scope of what the Court will consider to be an uncommercial transaction as defined in section 588FE of the Corporations Act 2001 (Cth).

The matter involved the Plaintiff, who was the liquidator of Ashala Model Agency (“Liquidator”) bringing an action against the Defendant, Darrell Morgan Featherstone. The Liquidator claimed that Mr Featherstone’s purchase of a residential property in North Quay was voidable under section 588FE of the Corporations Act 2001 (Cth) and was required to be liquidated.

Ashala Model agency failed to pay any rental or tax contributions. Two years later, Mr Featherstone used Ashala Model Agency’s surplus income to purchase a residential property in North Quay, in partial lieu of the outstanding rental payments. The payments for the property purchase rendered Ashala Model Agency insolvent, with limited funds and large outstanding rental arrears and debt to the ATO. The property purchase therefore became an insolvent transaction of the company and contravened section 588FE of the Corporations Act 2001 (Cth).

Mr Featherstone attempted a defence under section 588FG(1) of the Corporations Act 2001 (Cth), alleging he received no material benefit from the transaction, as it was transferred to a third party. IBL argued he was still a party to the transaction, he received the benefit of rental payments from the property, and Mr Featherstone’s daughter was a beneficiary.

The Supreme Court ordered that the North Quay property had to be transferred to the Liquidator.

IBL have a significant level of experience in civil litigation across various Courts and Tribunals, and this case is one of many precedents we have established in insolvency law. We provide most of our services on a fixed price basis (rather than a time basis).

If you have a taxation or insolvency issue, then please do not hesitate to contact the team at Irish Bentley Lawyers – there is no substitute for proper legal advice based on your individual and unique circumstances.

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