Administrator liability when selling encumbered assets

Publisher:
LexisNexis Butterworths
Publication Type:
Journal Article
Citation:
Insolvency Law Bulletin, 2014, 15 (10), pp. 158 - 160
Issue Date:
2014-12-01
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The state of Australia’s insolvency laws is currently a matter of considerable public debate, with the recent Senate Economics Committee report into the Australian Securities and Investments Commission and the Financial System Inquiry interim report both touching on insolvency law and insolvency practitioners. One issue that is often glossed over in public debates about the cost of insolvency administrations and returns to creditors is the fact that insolvency practitioners take on considerable personal liability for their actions during the administration. Voluntary administrators, in particular, have extensive personal liabilities for debts arising during the administration and often face hostile creditors who oppose their conduct of the company’s affairs during the administration. A recent decision of the Supreme Court of New South Wales has raised the issue of administrator liability for consideration. Specifically, the case has examined the broad range of potential liabilities that administrators may be subjected to when selling encumbered assets during the administration. The case, THC Holding Pty Ltd v CMA Recycling Pty Ltd,1 reinforces the need for all administrators to take care when disposing of property not owned by the company. The prospect of the owner of the goods seeking damages against the administrators for loss caused, in addition to injunctive relief under s 1324(10) of the Corporations Act 2001 (Cth), is now more real than apparent as a consequence of a breach of s 442C of the Act, as occurred in this case.
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