Vol 14 (2017) - Issue 6

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Insolvency Set-Off and the Impact of Security Interests in Australia

The question of whether contractual, statutory or equitable set-off applies in a liquidation scenario and whether a security interest can upset the application of set-off has recently been answered by the Supreme Court of Western Australia in Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] WASC 152. This decision is particularly relevant to principals and financers doing business in Australia, having regard to the risk of contractor insolvency. It is also the first case to determine the nature and effect of a security interest in personal property in Australia, since the introduction of the Personal Property Securities Act 2009 (Cth), following similar legislation in Canada, the USA and New Zealand.