How do you prove insolvency without a presumption of insolvency arising out of an expired statutory demand? The recent decision of Queensland Phosphate Pty Ltd v Korda [No 2] [2019] VSCA 215 provides some useful guidance

This case involved an appeal of a decision of the Victorian Supreme Court and centers around whether an asset is readily saleable or realisable in the context of determining the solvency (or insolvency) of a company. It provides useful guidance for practitioners, lawyers and the Court when assessing whether a company is solvent in the context of the saleability or realisability of its assets:

  • By focusing one’s attention to whether an asset is necessary for the continuation of a business or whether it can be sold in excess;
  • Whether an asset can be sold at all or otherwise realised without harm to the rest of the business;
  • Whether steps can and were taken to realise the asset; and
  • What the time frame for realisation in fact is.

The Facts

Legend was a mining company which transferred its mining tenements to a subsidiary, Paradise, at a time when they had a book value of $2.7 million. Queensland Phosphate entered into transactions for a loan (of $400,000 by way of convertible note) to Legend and Paradise and in turn took security. Eventually, Queensland Phosphate appointed receivers and managers to Paradise (including appointing a receiver over Legend’s shares in Paradise) and sold the shares for $1, effectively giving control over $2.7 million in tenements (per book value) for much less than commercial value.

The Court Process

At first instance, the Court attended to an analysis of solvency of the relevant entities and found that the transaction was a voidable transaction and that Paradise was insolvent. On appeal, despite valiant opposition, the Court, following dispute by Paradise and Queensland Phosphates, found again that Legend was insolvent and the transaction was voidable.

Relevance Today

As we are seeing both supply- and demand-side factors plummet in Australia due to COVID-19, we are seeing the relevance of whether an asset is realisable becoming more and more relevant to restructuring activities and the insolvency industry.

This case is a great read for liquidators, voluntary administrators, accountants, lawyers and anyone in particular, who want to find out more about what makes an asset realisable and how that effects insolvency.


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