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High Court’s pool-proof orders: Lessons from Morgan v McMillan

By Stephen Mullette, a Principal, Rebecca Georges and Amelia Fearnside, Law Clerks of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

In the recent decision of Morgan v McMillan Investment Holdings Pty Ltd [2024] HCA 33 (“Morgan v McMillan”), the High Court provided specific guidance regarding the role and requirements of pooling orders.

What is a “pooling order”

“Pooling” is the process of combining the winding up of multiple companies in a corporate group as one large liquidation, for the benefit of unsecured creditors of all of the entities in the group. [...]  READ MORE →

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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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From Big to Small and Out of Luck: How the new Closing Loopholes Legislation stops Insolvent Employers seeking to dodge Redundancy payments

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

New legislation closes a loophole which previously prejudiced loyal employees who stayed to help during an insolvency administration. Where once large businesses became small due to restructuring or run-down of a business during an insolvency administration, those employees who remained missed out on their entitlements because by the time they were terminated the business had shrunk to a size which fit within the small business redundancy exemption under s 121 of the Fair Work Act 2009 (Cth). This exemption applies to exempts small businesses with less than 15 employees from the requirement to make redundancy payments to employees. [...]  READ MORE →

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Significant Increased Insolvency Activity In Australia

Australia is now seeing a surge in business insolvencies since the COVID-19 pandemic, indicating significant economic distress. Accordingly, Matthews Folbigg Lawyers are increasingly acting for insolvency practitioners, creditors, and debtors involved in insolvency administration.

Not all of this is doom and gloom however, and it is important to understand the context in which this increased insolvency activity is taking place.

COVID-19 Safeguards

COVID-19 created a challenging economic environment for businesses due to a limited ability to operate, fluctuations in demand, supply disruptions, and labour shortages. In recognising this, the Australian government introduced significant measures to alleviate the potential for economic catastrophe. The ATO effectively ceased debt recovery and gave significant concessions in amounts payable and time for payment. In addition, the government introduced small business restructuring, a new form of external restructuring that allows directors to maintain control over their business, reduce costs and shorten turnaround times, whilst developing a plan to restructure the businesses affairs. [...]  READ MORE →

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ATO aggressively pursuing tax debts owed by small business

What’s Mine is Yours: When Company Tax Debts Become Your Liability

In a stark contrast to the relaxed approach taken during COVID-19, the Australian Taxation Office (“ATO”) are now aggressively pursuing the collection of billions of dollars in tax debt owed by small and large companies. One of the main methods being deployed by the ATO to collect company taxes is the issuing of director penalty notices (“DPN”).

What is a DPN?

As a director of a company, you are personally liable for a penalty equal to certain of your company’s unpaid taxes, including:

  • Pay as you go withholding (“PAYGW”);
  • Goods and services tax (“GST”); and
  • Super guarantee charge (“SGC”).

A director’s liability in relation to unpaid company taxes is referred to as a director penalty. When the ATO is attempting to recover company taxes from a director personally, they will give the director a DPN that outlines the penalty amount and how the penalty can be remitted. If the director does not take action to cause the company to pay its debt within 21 days, the ATO can sue the director to recover the penalty amount directly from the director’s personal assets. [...]  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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Getting the Appointment of an Insolvency Practitioner Right

By Jacob Reardon, an Associate in our Insolvency, Restructuring and Debt Recovery Group

There are certain circumstances in which the appointment of an insolvency practitioner can become exceptionally difficult, even where everyone is agreed that an appointment is essential and should proceed as soon as possible. This is a reminder to pay careful attention to corporate governance and the need to make sure businesses can function, even in the vagaries and vicissitudes of life.

Kahlefeldt[1] concerned the validity of the respective resolutions of two company directors to appoint a Voluntary Administrator under section 436A of the Corporations Act 2001 (Cth) (“the Act”). [...]  READ MORE →

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Like a Sitting Duck…or not – New Laws aimed at Closing Loopholes

By Valentina Campos Villarreal and Keely Wunsch, Law Clerks at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Recent law reform within the Fair Work Act 2009 (Cth) has sought to protect worker’s rights while simultaneously closing the loopholes previously accessible to employers. This protection seeks to address the power imbalance inherently underlying every working relationship and ensures that workers are no longer ‘sitting ducks’. Two significant changes are of particular importance to insolvency practitioners, these are as follows: [...]  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 →