Insolvency litigation is what happens when a company is wound up, or a person is made bankrupt, and money and assets have to be recovered for creditors. It covers preference demands, insolvent trading claims, voidable transactions, applications to sell property and public examinations, and it can involve directors, business owners, family members, suppliers, creditors and the practitioners running the recovery.
Insolvency Litigation Lawyers Melbourne
What is Insolvency Litigation?
Insolvency litigation is what happens when a company is wound up, or a person is made bankrupt, and money and assets have to be recovered for creditors. It covers preference demands, insolvent trading claims, voidable transactions, applications to sell property and public examinations, and it can involve directors, business owners, family members, suppliers, creditors and the practitioners running the recovery.
We act on every side of these disputes. We run claims for liquidators and trustees, and we defend the parties they pursue, so whichever side you are on, we can tell you how the case is built and where it is likely to end.
How We Help Solve It
Insolvency litigation is best handled by a team that understands it from both sides. We act for liquidators and bankruptcy trustees pursuing recovery, and for the directors and other parties defending against those same claims. That dual experience is what lets us assess any position clearly, explain how a claim has been built, and advise honestly on where it is likely to end.
If a Claim Has Been Made Against You
When a liquidator, a bankruptcy trustee or the ATO takes action against you, the situation can feel daunting, particularly when a deadline is already running, and the other side has spent months preparing its claim. These matters are complex, and the outcome often turns on how you respond in the first few days.
We tell you what has actually arrived, the real deadline, and whether there is a defence worth running.
Because we build these claims for practitioners ourselves, we can explain how yours was put together, where it is vulnerable, and what it is realistically likely to settle for.
Our goal is to protect your interests at every stage and resolve the matter as efficiently as possible.
If You Are Recovering for Creditors
When you are a liquidator, trustee or creditor seeking to recover money or assets, you need claims run properly and commercially. We never act against a client, and never in a matter where we have acted for the practitioner on the other side, so there is no conflict in briefing us. We advise on the strength of a claim before you commit to it, prepare and pursue recovery actions, and push for outcomes that maximise the return to creditors.
Because we also defend these claims, we know how the other side will respond, which arguments they will raise, and where a matter is likely to resolve. That insight helps us build recovery actions that hold up and settle on the best available terms.
Areas of Expertise
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Insolvency Advisory Services
Liquidators and Voluntary Administrators: We act on behalf of liquidators and voluntary administrators, ensuring compliance with legal requirements and efficient administration.
Restructuring Options: When businesses face financial challenges, we guide them through various restructuring options, including voluntary administration and other alternatives.
Creditors’ Rights: We advocate for creditors’ rights, addressing issues related to unfair preference claims, uncommercial transactions, and more.
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Formal Insolvency Administration
Insolvent Trading Claims: Our team advises on the complexities of insolvent trading claims, helping directors navigate legal challenges.
Investigatory Process: We assist with investigations related to insolvency administrations, ensuring due diligence and compliance.
Personal Property Securities Register (PPSR): We provide insights into PPSR matters, safeguarding clients’ interests.
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Regulatory Compliance and Court Actions
ASIC and Regulatory Examinations: We have experience dealing with ASIC and investigatory examinations. Our team assists with regulatory examinations under the Corporations Act 2001, ASIC Act 2001, and the Bankruptcy Act 1966.
Court Representation: We represent clients in court actions related to insolvency, protecting their rights and interests.
Defending a Claim?
Check your deadlines below, locate your claim type, and talk to our team before responding.
Critical Deadlines: Check Yours First
Missing a statutory deadline in insolvency litigation can permanently lock you out of a defence; make sure you know your timeframe.
Director Penalty Notice(DPN), 21 days: Runs from the date printed on the notice, not when you opened the mail.
Statutory Demand, 21 days: Strictly 21 days under s 459G to apply to set it aside. Courts cannot grant extensions.
Public Examination Summons, by the return date: Must be reviewed by a legal team before preparing written responses or testifying.
Unfair Preference Demands, 21 days (letter): The letter deadline is set by the liquidator; their statutory limitation is 3 years from the relation-back day.
Insolvent Trading Claims, 6 years: Liquidators have 6 years from the commencement of the winding up to file court proceedings.
Uncommercial & Unreasonable Director Transactions, 2 to 4 years: Uncommercial transactions reach back 2 years (4 for related entities, 10 if intended to defeat creditors). Unreasonable director-related transactions under s 588FDA reach back 4 years.
Clawback of Property (Bankruptcy), 5+ years: 5 years under s 120 (undervalue). No time limit under s 121 (intent to defeat creditors).
If you have 21 days, use Day 1 to get professional advice. Do not write a self-prepared response as that could compromise your defence later on.
Defending Liquidator Claims
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DescriptiUnfair preference demands generally target trade creditors and suppliers paid in the 6 months prior to the relation-back day (and related entities paid within 4 years).
To succeed, the liquidator must prove you had an unsecured debt, that the payment was an insolvent transaction, and that you received more than you would have in a formal winding up.
Most cases turn on two key issues:
Whether the payments form a single continuing business relationship under section 588FA(3) (the running account defence).
Whether you can establish a good faith defence under section 588FG(2).
Learn more from our specialist liquidation lawyers in Melbourne.
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Purchasers of assets, counterparties, and related entities are the usual targets here. The window is 2 years (extended to 4 years for related parties, or 10 years if intended to defeat creditors).
What the liquidator must prove: A reasonable person in the company’s position would not have entered the transaction, weighing detriment against benefit.
What decides these claims: Contemporaneous evidence of value. Independent valuations, sales data, and the recorded commercial logic from the time of the transaction.
Phoenix Activity: Liquidators and ASIC pay close attention to assets moved into a new or related company that leaves the old company’s creditors and employees behind. A transaction that fits this pattern strengthens a related-entity uncommercial transaction claim, and can expose both the company and the individuals who arranged it to separate action.
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Targets directors and close associates who received payments, loan repayments, bonuses, or property transfers within a 4-year window.
Crucial Distinction: The liquidator does not need to prove the company was insolvent at the time. A solvency defence will not protect you here.
What decides these claims: Documented proof that the benefit was reasonable: commercial remuneration structures, genuine loan accounts, and contemporaneous board approvals.
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Targets current, former, shadow, or de facto directors, as well as holding companies. Liquidators have 6 years from winding up to file.
What the liquidator must prove: You were a director when the debt was incurred, the company was insolvent (or became insolvent by incurring it), and a reasonable director would have suspected insolvency.
What decides these claims: Defences under section 588H, Safe Harbour protection under section 588GA (directors who take genuine, timely steps to restructure while insolvent can be shielded from personal liability), and the exact date of insolvency. Directors who sought early advice or restructured are in a vastly better position.
The ATO Indemnity Trap: If a liquidator recovers a preference from the ATO (e.g., PAYG or Super), section 588FGA lets the ATO recover that exact amount from directors personally.
Explore business restructuring, voluntary administration, or speak with our director penalty notice defence team.
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Targets directors, officers, employees, and accountants. An examination is compulsory, on oath, and transcribed. Liquidators now have broader scope to run them than many directors expect, following a recent High Court ruling on who can use this power and why.
Public Examinations: You cannot refuse to answer to avoid self-incrimination. However, a formal objection under section 597(12A) keeps your answers out of most subsequent criminal or penalty proceedings.
Books and Records (s 530A): Officers must hand over records. Failing to keep adequate books grants the liquidator a legal presumption of insolvency (section 588E(4)).
What decides these matters: Thorough preparation before testifying. Never walk into an examination cold.
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Targets directors and officers under formal ASIC scrutiny, separate from a liquidator’s own examination powers. ASIC can investigate directly under the Corporations Act 2001, the ASIC Act 2001, and the Bankruptcy Act 1966.
What ASIC Can Do: Compel production of books and records, conduct formal examinations, and refer conduct for prosecution or director disqualification.
Books and Records: The same duty to keep and produce adequate records applies here as it does with a liquidator, and gaps can be used against you.
What decides these matters: Getting legal representation before you respond to a notice, understanding what is and isn’t privileged, and managing what gets produced and said from the first request onward.
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These claims target directors and officers (often paired alongside insolvent trading claims), alleging a failure of care, improper use of position, or misuse of information that cost the company money.
What decides these claims: The business judgment rule under section 180(2) and board records. Victory depends on proving the decision was rational when made, rather than judged through hindsight.
Often overlaps with broader shareholder disputes in Melbourne.
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Targets secured lenders and related-party financiers.
Circulating Security Interests (s 588FJ): Created within 6 months of the relation-back day are void against a liquidator, except for value genuinely advanced.
PPSR Registration Limits (s 588FL): Security interests not registered on the PPSR within strict statutory timeframes vest in the company, meaning your security is gone.
What decides these claims: Registration timelines and clear financial evidence showing exactly what funds were advanced and when.
Understand Your Options Before You Respond
Unsure of where you stand? Call (03) 7071 0425or email solveit@insolvit.com.aufor an initial assessment. We’ll help solve it for you.
Defending Bankruptcy Trustee Claims
If it’s not a liquidator but a bankruptcy trustee chasing you, the claims look different. Here’s how they’re built, and how they’re often beaten.
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Targets anyone who received property or assets from the bankrupt for less than market value, in the 5 years before bankruptcy.
What the trustee must prove: Property was transferred for no money or for less than it was worth.
The Overlooked Defence: If the transfer happened more than 2 years before bankruptcy (or 4 years for a related party), proving the transferor (the bankrupt) was solvent at the time protects the transfer.
What decides these claims: Clear financial proof showing the transferor was solvent and evidence of what was actually paid, including non-cash contributions and taken-over debts.
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Targets property transfers made at any point in the past, as Section 121 has no look-back limit.
What the trustee must prove: The main reason for the transfer was to keep property away from creditors.
Your Main Defence (Section 121(4)): Proving you paid market value in good faith and had no reason to suspect the transfer was meant to hide assets.
What decides these claims: Evidence showing what you knew (or could reasonably have known) about the transferor’s financial situation at the time.
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Targets spouses, partners, and family members who hold legal ownership of property that the trustee claims belongs to the bankrupt.
The trustee only gets what the bankrupt actually owns. Two straightforward arguments carry most of the weight:
You paid for it (Constructive Trust): If you paid the deposit, covered mortgage repayments, or funded major improvements, the law recognises that share of ownership as yours, meaning the trustee cannot touch it.
The debt was theirs, not yours (Equity of Exoneration): If a home loan was used solely to finance the bankrupt’s business or personal debts, that debt comes out of their share of equity first, not yours.
What decides these claims: The paper trail: who paid the deposit, who paid the mortgage, and who used the borrowed funds.
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Co-owners of a property are the ones targeted when the other owner becomes bankrupt. Bankruptcy splits joint ownership and hands the bankrupt’s share to the trustee, who can apply to the court to force a sale of the whole property.
The Real Question: How much money does the trustee actually get from a sale?
What decides these claims: Proving how much of the property is genuinely yours before the trustee goes to court. This can reduce the trustee’s payout to very little, or occasionally nothing.
Learn more from our specialist bankruptcy lawyers in Melbourne.
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Targets bankrupts who receive an inheritance, legal payout, redundancy, or windfall, or whose income goes up.
New Asets (Section 58): Money or property received during bankruptcy usually goes to the trustee, unless it falls under specific protected exemptions.
Higher Income (Division 4B): Earning above the set threshold means paying compulsory contributions to the trustee, but these calculations can be formally disputed if incorrect.
What decides these claims: Checking whether an asset is legally protected and making sure the trustee used accurate financial figures.
Explore more details in ourbankruptcy FAQ.
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Targets bankrupts who receive a notice extending their bankruptcy, or people who say the bankruptcy order should never have been made.
Extending Bankruptcy (Section 149D): A trustee can object to ending a bankruptcy after 3 years, extending it to 5 or 8 years. These objections can be formally challenged and overturned.
Cancelling Bankruptcy (Annulment): Bankruptcy can be cancelled if all debts are paid in full, if the court order was made by mistake, or through a formal payment plan accepted by creditors.
What decides these claims: Proof of what information was given to the trustee, and when.
We Know How Trustees Build These Claims, Because We Run Them Too.
From initial demand letters to forced sale applications, we’ve handled every stage of bankruptcy litigation. Get trusted advice from a team that knows how to defend your equity. Call (03) 7071 0425 to talk through a client’s position, or email solveit@insolvit.com.au.
Frequently Asked Questions
More in our corporate insolvency FAQ and bankruptcy FAQ.
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Often, yes. That is the good faith defence in section 588FG(2). You need to show you had no reasonable grounds to suspect insolvency, and that you gave value. Your emails and collection notes from the time usually decide it.
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No. The High Court settled this in 2023: statutory set-off is not available as a defence to a preference claim. Your unpaid invoices stay a claim in the liquidation, paying cents in the dollar. Older articles saying otherwise are out of date.
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If you kept supplying while being paid, the payments and supplies can form one continuing relationship. The court then looks at the net effect across the whole account, not single payments. Since a 2023 High Court ruling, the liquidator cannot start counting from peak debt, which often shrinks the claim.
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It looks at cash flow, not the balance sheet. Ageing creditors, ATO arrears, dishonoured payments, suppliers paid outside terms, and whether real financing was available. The date is usually settled by expert evidence and fought over in most of these claims.
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They cannot sell your share, but they can force a sale of the whole property to get at your partner’s share. The better question is what they would actually collect. A constructive trust or an equity of exoneration can cut that down sharply.
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It is a right between co-owners. Where a jointly owned property secures a debt that was really only one owner’s, the debt is charged against that owner’s share first. In bankruptcy that cuts what the trustee can realise, sometimes to nothing.
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We never act against a client, and never in a matter where we have acted for the practitioner on the other side. Beyond that, acting on both sides is why you brief us. We know how these claims get built and settled, because we build them.
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Twenty-one days from the date on the notice, not from when you received it. If your BAS and super lodgements were on time, an appointment inside that window can still remit the penalty. If those amounts were lodged late or left unreported, the notice is a lockdown DPN and paying is generally the only option. Check those dates first.
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We act as your specialist litigation arm. Since we do not take liquidator or trustee appointments, we never compete with your practice or displace your services.
We handle the court strategy, statutory deadlines, and liquidator negotiations, while working alongside you to gather the financial evidence needed to resolve the dispute.
We Know How Trustees Build These Claims, Because We Run Them Too.
From initial demand letters to forced sale applications, we’ve handled every stage of bankruptcy litigation. Get trusted advice from a team that knows how to defend your equity. Call (03) 7071 0425 to talk through a client’s position, or email solveit@insolvit.com.au.
Talk to a Melbourne insolvency litigation lawyer
If a liquidator, a trustee or the ATO has written to you, the clock is running. The sooner we see the letter, the more options you have.
Phone: (03) 7071 0425 Email: solveit@insolvit.com.au