Originally published 5 May 2019. Updated 12 June 2020.
Subcontractor: "I got a letter from a liquidator of a company I did work for and it says I have to pay back what I was paid. Do I have to pay?"
When a liquidator gets appointed, one of the first things the liquidator does is send out letters to all of the people that have received money from the insolvent company in the 6 months leading up to the liquidation. The letter will be made in reliance on the unfair preferential payments sections of the Corporations Act 2001 (Cth).
Although the liquidator is required to send out the letter, it does not mean you have to pay back all of the money and that is because the Corporations Act has a number of defences available, including:
you entered into the contract in good faith; and
you had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent.[1]
We have helped a number of clients in the same situation as you. In all of those situations, we have sent a letter to the liquidator explaining the defences and how they are applicable to our client’s situation and neither we nor our clients have heard from the liquidator again.
Find the same information set out on our Subcontractor FAQ page, search for "letter from a liquidator" here: https://www.subcontractors.arbuildinglaw.com.au/faq-subcontractors
Check out how we help subbies and tradies just like you on our website www.subcontractors.arbuildinglaw.com.au
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[1] Please note that this is not the complete list of defences.
