Insolvency, Restructuring & Debt Recovery

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.
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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.
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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.
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