No Comments

One year bankruptcy – debt collection is about to get even harder!

By Jeff Brown a Principal of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Proposed amendments to the Bankruptcy Act 1966 which would reduce the duration of a typical bankruptcy from three years to one year have been drafted, and it is a matter of when – not if – the amendments will become law throughout Australia.

The reduction is partly to ensure that bankruptcy does not act as too much of a handbrake on the entrepreneurial spirit.  Business owners should be able to fail once, twice or even more, before succeeding.

That is all well and good, unless of course you are one of the unpaid creditors left in the wake of a failed business venture.

As all of us in business (including me) know, debt collection is difficult enough at present.  When a customer goes bad, one of the few methods to get yourself at the front of the creditors queue is to show that you would be willing to make the debtor bankrupt  if they will not pay.  In future, bankruptcy will be less of a practical burden on debtors, and there will probably be less stigma attached to having been a bankrupt person.
Continue reading…

No Comments

The Clock is Ticking….

By Renee Smith a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

The time that is available to recover a debt from a debtor is not infinite. Each State and Territory in Australia has set limitation periods that restrict the time available to a creditor to recover a debt.

In relation to simple contract debts (which can include unsecured personal loans, personal guarantee claims, and credit card debts) all States and Territories (except the Northern Territory, where the period is 3 years), have a limitation period of 6 years from the date on which the ‘right of action’ accrued.  For Court judgments, all States and Territories (except Victoria, where the period is 15 years), have a limitation period of 12 years from the date of judgment to enforce that judgment.

After the limitation period expires, the debts are known as ‘statute-barred debts’. In all States and Territories, except New South Wales, ‘statute-barred debts’ will still be owing to the creditor, however legislation limits the enforcement options that are available. In New South Wales, once the limitation period has expired, the legislation (s63 of the Limitation Act 1969 (NSW)) specifically extinguishes the cause of action, in a sense erasing the debt, therefore giving no further options to creditors of enforcement.
Continue reading…

No Comments

Paper, who needs paper?

By Renee Smith a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

In today’s society of evolving technology, contracts between parties can be whipped up in no time. However, what happens when an agreement between two parties is not formalised in writing and a debt is claimed by one party to another. Can the creditor still enforce the payment of the debt? If so, on what terms?

In the recent decision of Saravinovski v Duncombe [2017] NSWSC 1521, the Supreme Court was asked to overturn the decision of a local court magistrate who granted Mr Duncombe, a private investigator, judgment in respect of a debt for unpaid surveillance fees owed to him by Mr Saravinovski. While there was no formal contract signed, the parties had had many discussions regarding particular aspects of the services Mr Duncombe was to provide and which he subsequently delivered.

In particular, the Court was asked to find that it was a term of the contract that the costs would be capped at $10,000 (and not $20,000 as the creditor alleged) and that the results of the surveillance would be completed by 6 March 2015. The creditor argued there was no deadline on providing his results, although it was understood that his work was required to obtain evidence for a hearing commencing on 16 March 2015.
Continue reading…

No Comments

Double Whammy! When cost orders become a further debt

By Hayley Hitch a Solicitor of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

In one of our recent matters, proceedings were commenced against a debtor, and the relevant guarantor, in the Local Court of NSW for recovery of a debt, being non-payment of services rendered by our client to the debtor.

Local Court proceedings

The defendants were at all times self-represented in those proceedings and took steps to file defences, out of time (and without leave) and also failed to appear in Court on several occasions. This ultimately led to:

  1. the defences being struck out;
  2. cost orders being made against the defendants; and
  3. Judgment being entered in favour of our client in the vicinity of $40,000.

Multiple attempts were then made by one of the defendants to set aside the default judgment and the various cost orders.

The last of these applications was held by the Local Court to be an abuse of process and the Court strongly urged the defendant to obtain legal advice before taking any further action.
Continue reading…

No Comments

Can you serve legal documents by Facebook?

By Andrew Behman, an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

Yes, it is possible to serve documents via Facebook. In an earlier blog “Serving debtors that don’t want to be found“, we discussed how legal documents can be served by substituted service. Service via Facebook, LinkedIn and Instagram are some of the many methods legal documents can be served by substituted service.

In possibly a world first in 2008, the ACT Supreme Court granted orders for substituted service for the police to serve legal documents via a private message on Facebook. Since then, there have been many occasions in which the courts have allowed legal documents to be served via Facebook. You might even remember that in 2012, the District Court of NSW allowed for legal documents to be served on the rapper Flo Rida via his official Facebook page. Those orders for service via Facebook were ultimately overturned on appeal because, among other reasons, the evidence did not show that Facebook page through which the documents were served was actually the Facebook page of Flo Rida.
Continue reading…

No Comments

Serving debtors who don’t want to be found

By Andrew Behman, an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In an earlier blog “When is an old debt too old to collect“, we discussed how some of the more difficult to collect debts are often placed in the ‘too hard basket’. An all too common reason that these debts are in the ‘too hard basket’ is because you can’t find the debtor. They’ve moved address and you can’t find them to be able to serve them with legal documents. However, this is not the end!

Yes, the law usually requires that legal documents be served personally. This is to make sure the defendant actually receives the legal documents and knows about the legal proceedings against them.

However, the court rules allow for you to serve legal documents in other ways. This is known as “substituted service”. Legal documents served by substituted service are deemed to be served and will allow you to continue proceedings to recover your debt. Some examples include serving legal documents by email, or even by leaving them at the last known address of the debtor and sending them a text to let them know where the documents have been left. In the social media era the courts are also becoming more prepared to make substituted service orders involving use of social media such as Facebook.

Continue reading…

No Comments

I only have the business name of the debtor, can I still sue them?

By Renee Smith a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

When looking to commence proceedings against a debtor, one of the first steps to take is to identify exactly who (or what) it is that you have contracted with. Usually this will be the party that is listed as your customer in the written contract.  This may be an individual, company or trustee of some form of trust. Sometimes of course, the relevant paperwork is either missing, or was never created in the first place.

In some cases the identification process is not straightforward and can potentially lead to a delay in recovering the debt, or worse still, make it impossible to commence debt recovery.

The registered name of a business may, or may not, also be the correct legal entity to sue.  It is important to investigate beyond the business name that you know the debtor by, to see who, or what, owns the name and whether the name has been registered.
Continue reading…

No Comments

Debt Recovery from a Company that has ‘Ceased to Be’…

By Renee Smith a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

What sort of debt recovery procedure exists for companies that have been deregistered? From time to time Matthews Folbigg are asked to advise clients in relation to debt recovery and enforcement of debts against debtor companies who have been deregistered.

So what can be done for debt recovery against a deregistered company?

Under section 601AD the Corporations Act 2001 (Cth) (“the Act”), once a company is deregistered it ceases to exist as a legal entity. As Monty Python would put it, the company, far from pining for the Norwegian fjords, ‘is no more’, and ‘has ceased to be’. As a result, all of the company’s property vests in ASIC (or in the Commonwealth if held on trust – a not uncommon situation for trading trusts) and any legal proceedings cannot be commenced or continued.

Unlike the Norwegian Blue, however, it is possible to resurrect a company that has been deregistered, for the purpose of enforcing a claim. This is under section 601AH(2) of the Act by making an application to the Federal Court or the Supreme Court of NSW as “a person aggrieved” by the deregistration. It is also possible for ASIC to reinstate the company if satisfied the company should not have been deregistered however ASIC’s preference appears to be to leave these matters for the Court if possible.
Continue reading…