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Beware: Construction contracts and ipso facto insolvency reforms

Posted on 25 June 2018

Where a contractor, such as a builder or sub-contractor, suffers from an event of insolvency or is actually insolvent, most standard building contracts currently grant a principal, such as an owner or head-contractor, “ipso facto” rights, such as the rights to suspend building works, call upon and enforce any security given by the contractor, and terminate the building contract.

Insolvency reforms to take effect on 1 July 2018 will instead prevent the enforcement of ipso facto rights, to provide opportunities for insolvent companies to restructure.

The reforms will affect a range of commercial contracts, not just construction contracts.

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What is a “Harman undertaking” and why is it important?

Posted on 11 June 2018

There is an “implied undertaking” – which often times eludes even the most seasoned of lawyers – that material produced under compulsion cannot be used for an ulterior or collateral purpose and only for the purpose for which it was produced.

If you’re a legal practitioner in the midst of advising or assisting your client make a complaint to, (for example), a government body, about an opposing litigant, using material derived from a compulsory process (such as through disclosure under the rules of Court) your client (or you) could be exposed to a finding of contempt of Court.

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The enforceability of loan documents where a director’s signature is alleged to have been forged

Posted on 11 June 2018

A decision of the NSW Supreme Court is a reminder that an assumption is available entitling a lender to rely on a document containing the forged signature of a company director, where it has no knowledge of suspicion of any forgery.

Background facts

Andrew Hodgson (Hodgson) and Kim Woollard (Woollard) were the directors of Adventure Quest Paintball-Skirmish Pty Ltd (Adventure Quest).

In April 1996, the ANZ Bank made an overdraft available to Adventure Quest, for which Hodgson and Woollard gave guarantees to pay “… at any time all money which … [Adventure Quest] owes ANZ at that time for any reason…”.

ANZ entered into loan agreements with Adventure Quest in 2004 and 2009.

The 2009 loan subsumed the debt under the 2004 loan and made additional funds available to Adventure Quest.

A letter of offer prepared by ANZ was accepted by Adventure Quest in 2009, which appeared to contain the signatures of both Hodgson and Woollard, and which contained a “guarantor acknowledgement” that referred to each of Woollard and Hodgson’s guarantees previously given as also providing security for the 2009 loan.

In March 2014, following a default to make good its liability, ANZ commenced proceedings against Adventure Quest, and also against Hodgson and Woollard pursuant to their securities.

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