Voluntary conveyance to defraud creditors: applying s228 PLA

Even if a dodgy transaction has occurred, sometimes Liquidators cannot rely upon the voidable transaction provisions in the Corporations Act.

This could be because of an inability to prove insolvency, the relevant transaction falls outside the relation-back period (or “voidable period”), or the three year expiry period has lapsed, etc.

An alternative option is to commence proceedings under the QLD equivalent s228 Property Law Act for “voluntary conveyances to defraud creditors.”

Three key points to note about this provision:

1. at least in QLD, a Liquidator (on their own) doesn’t have standing to bring the claim (see Re Jot Property [2015] QSC 249). Instead, the claim must be commenced in the name of the Company in Liquidation;

2. the claim requires a “causative link”, or in other words the person has at least an interest which had the potential of being prejudiced by the conveyance. For example, see if any debts owed to creditors existed at the time of the conveyance, and continue to be unpaid; and

3. s228 has no voidable period, meaning that the Liquidator can look at any transactions back to the registration of the Company, even if that was 100 years ago.

If you forget point 1, you may face cost consequences and your claim struck out like in Re Jot:  https://jade.io/j/#!/article/405575?at.hl=%5B2015%5D+qsc+249.


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