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Sequestration Setbacks – Lessons from the case of Vlahos v Vlahos

By David Burley a Law Clerk of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group.

Roderick Group Pty Ltd (in liq), in the matter of Vlahos v Vlahos [2024] FedCFamC2G 1439 (“Vlahos v Vlahos”) is the latest case in which the court has reinforced the importance of paying close attention to detail when applying for a sequestration order. The case dealt with an application for the review of a sequestration order made against the estate of Mr Vlahos. The pivotal issue was whether Mr Vlahos had been properly served with a bankruptcy notice, an act required under the Bankruptcy Act 1966 (Cth). Mr Vlahos contended that he had not been properly served due to an incorrect postcode being used in the address (even though he himself had provided that same post code). The implications of this argument and the subsequent decision carry significant consequences for creditors in serving bankruptcy notices and proceeding with creditors petitions, and also for trustees in bankruptcy appointed under sequestration orders which might be liable to be set aside. [...]  READ MORE →

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Signed, Sealed….But Was it Really Delivered? The Perils of Serving Legal Documents by Prepaid Post

By David Burley a Law Clerk of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group.

In the recent case of Roderick Group Pty Ltd (in liq), in the matter of Vlahos v Vlahos [2024] FedCFamC2G 1439 (“Vlahos v Vlahos”), the Court was tasked with deciding whether a bankruptcy notice sent by post, but which included an incorrect postcode in the address, had nevertheless been validly served. The case highlights the risks associated with relying on non-personal service methods such as service by post, where minor errors can lead to substantial legal consequences. The judgment underscores the importance of accuracy in serving documents and the benefits for creditors who opt for personal service (especially insofar as time and costs are concerned). [...]  READ MORE →

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A Garnish on Top?

Recovering monies from debtors can be a lengthy, exhausting and costly exercise. Most people would think that once a garnishee order has been issued by the court then the debt would be quickly recovered, however it is not uncommon that once executed, funds in an account are no longer available. In circumstances such as this often clients will ask the question, what happens next in relation to my garnishee order?

What is a Garnishee Order?

A Garnishee Order is an order of the Court which allows a judgment creditor to recover or ‘garnish’ a third party in respect of an amount owing to the judgment debtor. The third party can include a bank, an employer, a purchaser of the debtor’s property, or any other entity/individual that holds money on behalf of, or owes money to the debtor. [...]  READ MORE →

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Rooster or Duck? Navigating the Feather-Ruffling Confusion of Employee vs. Independent Contractor

By Stephen Mullette, a Principal, and Keely Wunsch, a Law Clerk of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

The Australian Government has updated the Fair Work Act 2009 (FW Act) through the enactment of the Closing Loopholes Legislation. One element of these reforms specifically rejects two recent High Court decisions which sought to clarify the law on the employee/contractor distinction. The change is likely to exacerbate uncertainty in this area, especially for insolvency practitioners seeking to determine a creditor’s priority either as an employee or an ordinary unsecured creditor. [...]  READ MORE →

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Unpaid School Fees – How To Avoid And Handle Debt Collection In Relation To Tuition

When school fees go unpaid, it puts education providers in a tough position. On the one hand, there is a student relying on their institution for fundamental learning. On the other, without debt collection the financial viability of running the school is put at risk. It is therefore important to implement a plan so that debt collection procedures are avoided, or where absolutely necessary, are as painless as possible. This involves contemplating debt collection before students enrol, when tuition is overdue, and when debt collection proceedings become inevitable. [...]  READ MORE →

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When Will a Court Replace a Trustee of a Bankrupt Estate?

Recently, the Federal Court of Australia (Justice Perry) in Yan v Spyrakis (Trustee), in the matter of the bankrupt estate of Liu [2024] FCA 768 considered when a Court may make an order to replace a trustee of a bankrupt estate under section 90-15 of Schedule 2 to the Bankruptcy Act 1966 (Cth) (“the Schedule”).

Facts

In December 2017, Mr Yan loaned $10 million to Mr Liu and GR Capital. In November 2021, Mr Liu became bankrupt, and Mr Spyrakis (“the Trustee”) was appointed as his trustee in bankruptcy. In March 2022, the Trustee published a report to the creditors of the bankrupt estate of Mr Liu (“the Estate”) stating approximately $64 million was owed to creditors and that Mr Yan, Ruifa Wang, and Yuqing Liu and Xingfeng Australia International Investment Pty Ltd (“Xingfeng”), were the unsecured creditors owed the largest debts. [...]  READ MORE →

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How to Take Someone To Court Once they have been declared bankrupt

How to Take Someone To Court Once they have been declared bankrupt – Lessons from Tse v Evans as Trustee in Bankruptcy for Ngo [2024] FCA 787

Many people understandably think that once someone has been declared a bankrupt, any unsecured money that the bankrupt owed them will be diminished significantly or disappear altogether. This is understandable, as the bankrupt loses control of their own assets and a third-party steps in to distribute those assets between all the people the bankrupt owed before they were declared bankrupt.

However, the Court does not entirely close the option of bringing or continuing legal proceedings against a bankrupt in person. The advantage of this is that if the proceedings are successful, the litigant will recover more of their money back than if they joined the queue of unsecured parties waiting for the Trustee in Bankruptcy to distribute whatever is left after their fees are paid. [...]  READ MORE →

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When will courts pull the plug? Understanding the termination of a Deed of Company Arrangement under section 445D(1)(g) of the Corporations Act 2001 (Cth)

When will a Court terminate a Deed of Company Arrangement (DOCA) for ‘some other reason’ under section 445D(1)(g) of the Corporations Act 2001 (Cth) (”the Act”)? In two recent cases, two separate courts have shed light on whether, and when, ‘public interest’ serves as a compelling reason to terminate a DOCA.

Yan v The Won Capital Pty Ltd [2024] NSWSC 758

Facts

In December 2017, Mr Yan loaned $10 million to GR Capital. In October 2018, GR Capital appointed administrators who reported to creditors the preliminary view that GR Capital had been insolvent since at least December 2017. Despite the administrators’ recommendations against the DOCA, creditors resolved on 30 January 2019 that GR Capital execute a holding DOCA allowing time to complete a property development before creditors could take action against GR Capital. Mr Yan commenced proceedings seeking termination of the DOCA under section 445D(1) of the Act to allow a liquidator to investigate insolvent trading claims. Mr Yan offered to provide funding to the liquidator for the investigations. As the limitation period on any insolvent trading claim was about to expire, it became urgent whether the DOCA was to be terminated and a liquidator appointed. [...]  READ MORE →

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Costs: Are they actually recoverable in the Local Court?

Successful claims in the Local Court may allow parties to be entitled to an order for costs in their favour.

Generally, at the end of a hearing, the Court will hear arguments from parties in relation to costs. As is customary, the Court will usually award successful parties their costs – although the proportion of costs to be awarded depends on many factors. However, a successful party can be awarded no costs for various reasons. For civil claims, there are certain quantitative thresholds that are recoverable within the Local Court. [...]  READ MORE →

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Payment of a Judgment Debt by Instalments: Moving a Mountain starts by carrying away small Stones

By Eleanor Campbell-Rogers, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Payment of a Judgment Debt

Debt recovery which ends up in an order of a Court or Tribunal requiring payment of a specific amount of money is a ‘judgment debt’. This type of debt recovery usually results from the Court/Tribunal accepting the creditor’s debt recovery attempts and awarding damages, costs, interest, repayment of a loan, restitution, lump sum child support, or a certified money order (amongst others). [...]  READ MORE →

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Letters of Demand: Why they are beneficial, and why they should never be ignored!

Letters of Demand

A letter of demand may be sent to debtor who owes money to a creditor. It is a formal notice of debt collection that is required to be paid and can often include a caution that if the money is not paid to the creditor by a certain date, legal action will be taken.

What should be included in a Letter of Demand?

  1. How much money is owed;
  2. Who is liable to pay the debt;
  3. Who the debt is to be paid to;
  4. How the debt was incurred and what the debt relates to;
  5. A date and approximate timeframe in which the debt should be paid/resolved (which should be reasonable in relation to the debt and history of the debt);
  6. Contact details of the debtor; and
  7. What will occur should the debt not be paid within the stipulated timeframe.

There are additional features of a demand which can make the demand more effective and more reliable as a genuine attempt to resolve the debt should the debt proceed to court.

Should it be important that the relationship between the creditor and the debtor remain intact, there are additional techniques that can be utilised to recover a debt without damaging the relationship. As such, letters of demand should be considered carefully before being issued to a debtor. [...]  READ MORE →

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PPS – What can it really do for you

By Hayley Hitch, Principal at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

PPSR…What is it? What does it stand for? How can it benefit you?

PPSR stands for Personal Property Securities Register. It is a register that records security interests granted to certain entities or individuals, and attaches a level of priority to each of the interests of those secured creditors.

A security interest is granted predominantly through a security agreement executed by 2 parties – a grantor and a secured party. A grantor is the party granting the security interest in an asset (whether existing, such as plant and equipment, or anticipated, such as proceeds of sale). The secured party receives the security interest in exchange for providing a service or promise of some form (such as advancing funds, providing goods on credit, etc.). [...]  READ MORE →