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Debt Recovery: Who Do I Sue?

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

A fundamental of any relationship is knowing who you are dealing with. This goes especially for business relationships where dealing with the correct customer may make the difference between getting paid, and missing out.

Your customer is not generally the purchasing clerk who rings up to order your goods or the foreman who requests your services on site. However, even more importantly, the customer is not a business name! Rather, this business name will normally be owned by, or used by, a legal entity. It is of the most fundamental importance in business that you properly understand the legal entity with whom you are dealing. This may be a corporation, partnership or sole trader. In addition, entities trading on behalf of others, for instance trustees, add another layer of complexity to business relationships, and to debt collection.

The foundation of the business relationship where the customer purchases goods or services on credit should be set out in your debt collection procedures and starts with a written request from the customer for credit. This request can be as set out on a pre-printed form, or credit application, setting out the details you will require to enable the credit request to be considered.
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When Should I Send A Letter of Demand?

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

The key to any business’ success is a strong relationship with its customers. But what happens when you supply the goods or services and the payment is not forthcoming? A relationship can quickly be eroded when the question of money is raised.

Internal Debt Recovery Process

Every business should have a clearly defined debt recovery process so that the debt collection team know when certain actions are to be taken against wayward customers who default on payment. This should ideally consist of two processes – an internal and an external process.

Internally your business’ debt recovery process should dictate when certain actions are to be taken. The debt recovery process should have been prepared with the input of many members of your business including sales who promote the business relationship, finance who know cash flow demands and the debt collection team who manage the collection process.
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Company Records? I could tell you, but I would have to go to gaol… ?

By Chloe Howard of Matthews Folbigg Lawyers, a lawyer in our Insolvency, Restructuring and Debt Recovery Group

A company is presumed to be insolvent if it fails to keep proper financial records (section 588E(4) of the Corporations Act 2001 (Cth)).

But what if you have the records, but providing them might send you to gaol?

This issue was recently discussed in the matter of Substance Technologies Pty Ltd [2019] NSWSC 612.

In this matter, the director refused to respond to a liquidator’s repeated requests for the company’s financial records because he said the records might contain incriminating material.  He couldn’t be certain but “would suspect there could well be.” (at [42])

Justice Rees drew attention to the similarities between Sections 77(1) of the Bankruptcy Act and Section 530A of the Corporations Act. Both sections require production of records to insolvency practitioners. Her Honour noted that in Griffin v Pantzer (as trustee of the bankrupt estate of Griffin) [2004] FCAFC 113 the Federal Court had held that a claim for privilege against self-incrimination did not override the obligation of a bankrupt to provide records to a trustee in bankruptcy.
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Creditor’s statutory demand issued pending negotiations is upheld

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

In a recent matter which we acted for the Defendant (In the matter of Precise Training Pty Ltd [2018] NSWSC 1383), we successfully defended an application to set aside a creditor’s statutory demand issued by the Chief Commissioner of State Revenue (“the Commissioner“) against Precise Training Pty Ltd, the Plaintiff.

Facts

The Commissioner issued a number of assessments for payroll tax to Precise Training in 2015 as a member of a larger tax group. Precise Training disputed the assessments and lodged an objection on 10 December 2015. The Commissioner disallowed the objection and proceeded to enter into negotiations for payment of the assessments.

Precise Training lodged a second objection on 18 July 2016 and requested that the Commissioner undertake not to commence recovery proceedings while the second objection was being decided and the parties were in negotiations.

On 10 November 2016, the Commissioner responded to the request for an undertaking advising that “recovery proceedings have been on hold” while the objection is being decided and the parties are in discussions to settle the disputed assessments.

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Not opening your emails? That is not an excuse to avoid valid service!

By Chloe Howard of Matthews Folbigg Lawyers, a lawyer in our Insolvency, Restructuring and Debt Recovery Group

A recent Supreme Court matter has determined that service of an application to set aside a statutory demand was validly served in time, even though the solicitor in question did not open the email serving the application until the expiration date for service had passed.

In March 2019, the plaintiff’s solicitor and the defendant’s solicitor commenced communicating in an attempt to facilitate a resolution of the dispute between their respective clients. The communications predominantly took place by email.

On 11 September 2019, the defendant issued on the plaintiff a statutory demand. The statutory demand was served on the plaintiff initially by email from the defendant’s solicitor.

On 27 September 2019, the defendant’s solicitor sent an email to the plaintiff’s solicitor enclosing a letter which advised that they held instructions to accept any application to set aside the statutory demand.
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DEBTOR’S PETITION OVERHAUL – JANUARY 2020

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

An individual overwhelmed by debt (“the Debtor”) may seek the protection of the Bankruptcy Act 1966 (Cth) (“the Act”) and file a Debtor’s Petition.

Section 55 of the Act provides that an individual may present to the Official Receiver a petition against himself/herself in the approved form and accompanied by a Statement of Affairs which provides details of the person and sets out the person’s financial affairs.

On 1 January 2020 the Official Receiver commenced a new online process for the lodgement of debtor’s petitions in an online portal. A new version of the approved form has been created which combines the petition and the Statement of Affairs.  A sample of the new approved form can be found here.  A Debtor is required to set up an online account to complete the form.  For online access to create an account see here.
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One Year Bankruptcies – Dead in the Water?

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

 

Legislation introduced to Federal Parliament prior to the 2019 election would have seen the introduction of a 12 month term for bankruptcy, replacing the current three year term.

 

The move prompted some interesting debate, and a fair degree of controversy.  Most people in the industry that we have spoken to were against it, for all sorts of different reasons.

 

In any event, the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 has lapsed.  It cannot be revived or reinstated.  Should there be any renewed interest in Canberra  to introduce one-year bankruptcy, a brand new bill will need to be introduced and moved through the various stages to become law.

 

We think this is most unlikely in the short to medium term.  Dealing with the arguments previously raised against one year bankruptcies, when there are few if any calls for the Bill to be re-introduced, is a task that I’m sure the Federal Government can do without.
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Preventing a Service Fail – A Tale of Email v. Snail Mail?

 

In one of our recent matters, a client instructed us to bring winding up proceedings against four companies with the same sole director. The total debt across the four companies was over $300,000.00. Whilst there were four applications before the Court, one common issue was whether the companies had been properly served with the statutory demands relating to the debt owed.

On 11 April 2019, statutory demands were sent to all four companies, with the demands posted to the registered offices of the defendants according to the records of ASIC. Unbeknownst to the creditor, the director had vacated the registered premises of two of the companies over a year earlier, but had failed to update ASIC’s records in respect of this change, and had not put in place a mail-forwarding system. The demands addressed to the other two companies were sent to the office of the director’s solicitor.

No application to set aside the statutory demands was filed by any of the 4 companies. Therefore winding up proceedings were filed against the companies on 28 May 2019. The Originating Processes in respect of the winding up applications were served at the same addresses that the statutory demands had been sent.
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