Forge Group Limited (“Forge”) collapsed in February 2014 due to losses on two power station construction projects. Creditors were owed an estimated $800 million and more than 1,500 employees were left jobless.
The collapse has generated legal actions that have produced noteworthy decisions.
The most recent is the Federal Court’s ruling on 1 March 2017 that the proceeds of a tax refund for Forge of approximately $53 million were available for the three secured creditors (ANZ Bank, Assetinsure and QBE), who were owed approximately $300 million. In a contest between the secured creditors and the priority creditors (in particular the Department of Employment, which sought up to $10 million as reimbursement for paying Forge’s former employees their entitlements under the FEG government safety net), the ruling found the tax return was a non-circulating asset and therefore not claimable for priority employee creditors. The decision may be appealed.
In February 2016, the NSW Supreme Court delivered a $50 million win to Forge’s Receivers regarding a dispute over the ownership of four gas turbines supplied for a Pilbara power station.
Forge rented the turbines for a 60 megawatt station it was constructing in South Hedland for Horizon Power. The turbines had been installed shortly before Forge collapsed.
The ruling in favour of Forge, and against General Electric and APR Energy, was the biggest award since the new personal property laws were introduced in 2012.
The four turbines under lease had not been registered according to the PPS laws. Those laws specify that in the case of insolvency a party’s right to recover property depends on registration. Failure to register results in the interest in the property vesting in the company receiving the property.
One of the two principal issues argued, namely whether the turbines could be considered ‘fixtures’ and therefore excluded from the operation of the PPSA, was appealed. The NSW Court of Appeal in February 2017 unanimously dismissed all grounds of appeal and upheld the first instance decision.
In addition to the above two legal actions, the Receivers and Rio Tinto are awaiting a Supreme Court judgement on Forge-related claims against each other involving hundreds of millions of dollars.
No doubt further legal skirmishes will ensue.
March 2017