Edward works as the chief accountant for Ready To Go Pty Ltd (Ready), a Melbourne car company. It is in financial trouble. It is having difficulty paying creditors, and several large expenses are due in upcoming months including:

A payment of $50,000 to CBA Bank, a secured creditor with a registered security interest over all factory equipment created on 6 May 2014 and registered in the Personal Property Security Register (PPSR) on 10 May 2014;

A payment of $100,000 to car parts supplier Speedy Parts Ltd (Speedy), for car parts received under contract.Ready has not paid anything to Speedy, and under the supply agreement Speedy has a security interest in the car parts, but has given Ready the right to sell the parts on to its customers.This security interest was created and registered in the PPSR on 1 June 2014;

$50,000 in employee wages (already due and unpaid as of 1 August 2014); and

Several other unsecured creditors.

The directors are struggling to keep Ready solvent, and in order to continue operating, the directors arranged a new loan on behalf of the company from CBA Bank for AUD$100,000 which was secured by a security interest over all factory equipment (created and PPSR registered on 8 August 2013).

Edward is aware that the company owes $5.8m to three different suppliers for motor parts. Racer Pty Ltd (Racer) is one of the creditors owed $2.5M and they are threatening to wind up the company. Edward advises the directors to pay Racer first in preference to other creditors. The directors do so on 15 May 2014.

Despite the new loan, financial problems for the company continue. The total assets of the company are not sufficient to satisfy all of the company's outstanding debts and Speedy applies to the court for a compulsory winding up of Ready on 31 May 2014.

REQUIRED:

You are assisting the liquidator in winding up Ready. He wants you to tell him:

What is the order of priority of the debts owed and identify the different types of charges?

Can the company claw back the payment of $2.5M made to Racer Pty Ltd. Advise what needs to be done?

You estimate that there will be $3.5m of unsecured creditors in the company and only $1.8M available to distribute to them. Advise the liquidator how those funds will be allocated to the unsecured creditors.