Due process needed in insolvent transaction recovery

Liquidators must seek a court order to recover an insolvent transaction – even where the creditor has not objected in time to a notice under section 294 of the Companies Act.

The importance of following the prescribed procedure was recently reinforced by the High Court.¹

We look at the decision and the conclusions to be drawn from it.

The case

Liquidators appointed to Quantum Grow Limited (Quantum) wrote to Lotus Gardens Limited (Lotus) in May, July and September 2012 about payments worth $25,576.88 made to Lotus between March and July 2010. Lotus did not reply.

In October 2012, the liquidators served a notice under section 294 of the Companies Act 1993 (the Act) on Lotus. Lotus did not object to the notice.