Jack and Jill are directors of Northern Constructions Pty Limited, a Darwin based company that has operated
Question:
Jack and Jill are directors of Northern Constructions Pty Limited, a Darwin based company that has operated a successful property development business since 2013. In recent months, however, because of the slowing property market and the rising costs of building, the company has been experiencing liquidity problems. Creditors are making demands for outstanding payments and some suppliers have stopped credit to the company. In addition to the building equipment, the company’s owns an apartment on Smith Street, Darwin and a block of land in the industrial area at Winnellie. In December 2016 Jill’s wealthy real estate sister, Raine Hooker, loaned the company $500,000 dollars on a short term basis to help tie them over their liquidity problems over the December break. In February 2017 Raine realised that Jack and Jill were experiencing serious financial and relationship problems and had concerns about recovering her cash. She asked Jill for security over the company’s assets. Using the company’s seal, Jill arranged for a mortgage over the city apartment in favour of Raine which was duly registered. On the 1 April 2017, on an application by an unsecured creditor, the Court ordered the winding up of the company and appointed a liquidator. In preliminary discussions between the liquidator and the directors as to the quickest way to realise the assets of the company, Jill offers to purchase the unencumbered land at Winnellie from the liquidator for $300,000, which is slightly below the market price. She argues this would avoid the selling costs and allow for a quick return to creditors. Jack complains that Jill, being a director, should not be allowed to purchase the land and that the security to her sister is voidable. Jill retorts that the company is in the financial mess because of Jack’s extravagant spending including the recent purchase of a Ferrari sports car for $800,000 when the company could least afford it.
REQUIRED: You are asked to advise the liquidator in respect of each of the above issues.
Expert Answer:
The liquidator cant be concerned within the purchase of land as a result of the duties provided to h... View the full answer
