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When its better to get something than nothing, the use of Payment Arrangements in recovering your debt.

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

When looking to recover funds from a Debtor there are numerous ways in which it can be recovered. All of those options should be canvassed and considered carefully. One of those options is an agreed payment arrangement.

Benefits of entering into a payment arrangement include the ability to receive regular periodic payments of funds from the Debtor as well as the ability to monitor the Debtor for any changes in their financial situation. In setting a frequent payment schedule such as weekly or fortnightly, any sudden changes in the Debtor’s financial situation such as the Debtor going into Bankruptcy or the Debtor Company going into external administration can be found out and acted upon quickly. An obvious disadvantage of entering into a payment arrangement is that depending on the amount of the debt owing, it can take some time for the outstanding debt to be paid in full.
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Credit Repair Schemes – A Magic Wand?

The Australian Securities & Investments Commission (ASIC) has just issued a press release warning consumers about the aggressive and misleading sales techniques of companies promising to wipe clean bad credit reports.

As the press release makes clear, many of these companies are making promises they cannot keep and at the same time are seeking large upfront payments. See a copy of the press release here.

Despite what you might hear in certain advertisements, there is no “magic wand” for a debtor to improve their credit rating. The only ways that a credit report can be amended or updated is if the default listing is incorrect or the debt is paid.

The popularity of these credit repair schemes serves as a reminder that reporting a payment default remains an effective way to manage delinquent debt.

At Matthews Folbigg Lawyers we utilise default listing with reporting agencies as part of our multi-faceted approach to debt collection.

If you would like to discuss how Matthews Folbigg Lawyers can improve your credit collection performance, we would love to speak with you.

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Calderbank Offers – What You Need to Know

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

 

In our earlier post about settlement negotiations “Agreement in principle” – is it binding?“, we discussed the an offer that was agreed to “in principle” and what that means.  The offer that we talked about was a Calderbank offer.

What is it?

A Calderbank offer is a type of settlement offer designed to put the offeror in a position to ask the court to make an indemnity costs order, if the offerer succeeds in the litigation beyond the amount offered. An indemnity costs order is an order that the less successful party pay a larger portion of the other party’s costs. Normally ‘costs follow the event’ – which means that an unsuccessful party  will be ordered to pay the successful party’s costs of litigation. However normally, because of the way the costs assessment process works, only a portion of the successful party’s actual costs will be recoverable. However by making a Calderbank offer, a party to litigation can improve the chances of recovering a significantly higher proportion of those costs. These offers are based on the principles outlined in the English case of Calderbank v Calderbank [1975] 3 All ER 333.
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“Agreement in principle” – is it binding?

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

When you’re negotiating the terms of a contract, settlement or payment arrangement, you might hear the term “agreement in principle”.  The obvious questions are:

  1. What does it mean?
  2. If you agree “in principle” to a person’s offer, or that person agrees “in principle” to your offer, can the agreement be enforced?

These are questions that are considered in numerous cases and various situations. The Courts have historically considered such cases in the context of different categories of agreement based on the decision in Masters v. Cameron. Recently the Supreme Court of New South Wales looked at these questions again in the matter of P J Leahy & Ors v A R Hill & Anor [2018] NSWSC 6. In this matter, Mr Leahy (and his related parties) commenced proceedings against Mr and Mrs Hill to recover an amount he claimed was due for repairs to a shed and arrears under a licence agreement.
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PRIORITY PAID?

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

The Australian legal system has of late become a confusing morass of conflicting judgments on the order of priority of payment of creditors of insolvent trustees from trust assets. This has a significant impact on creditors, particularly employees, whose priority payment is no longer assured, by quirk of the structuring advice given to an employer without their knowledge or consent. Well the landscape was twisted again recently with a decision today by a five member panel of the Victorian Court of Appeal.

A number of States in the Commonwealth of Australia have issued judgments that differ in how to apply trust assets for trust creditors. In New South Wales, the 2016 decision of Brereton J in Re Independent Contractor Services (Aust) Pty Ltd (in liq) (No 2) held that the property of the trust was (perhaps unsurprisingly on one view) trust property. More surprisingly, his Honour found it was NOT company property distributable in the priorities provided for under section 556 of the Corporations Act 2001. His Honour relied upon the on the 1983 South Australian Supreme Court decision by then Chief Justice King in Re Suco Gold who held that trust assets are to be applied in accordance with the terms of the trust.
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DEBT COLLECTION IN A SAFE HARBOUR

Debt collection commentary by Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.

Credit Managers should be aware of the reforms made to the Corporations Act 2001 (“the Act”) that attempt to create a shield for directors of companies that believe their company is in financial stress and how it affects their debt collection strategies.

Changes in September 2017 to the Act created section 588GA and deal with specific actions taken by directors in relation to debts incurred after 19 September 2017. These reforms are commonly referred to as the “Safe Harbour Reforms”.

It idea behind the reforms is to assist directors by not penalising them should they recognise their company is in financial distress and seek professional advice from an “appropriately qualified entity” to get out of that situation.

If when a debt has been incurred the director has a suspicion that their company is, or may become, insolvent, and they are attempting to trade out of that position with advice from the appropriately qualified entity, then the director may be protected from the insolvent trading provisions under the Act.
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AFSA Offence Referral Update

Recent updates to the Alleged Offence Referral to AFSA template now provide for the inclusion of details of any person (individual or corporate) acting on behalf of, or assisting, a bankrupt or debtor. This can include a spouse, child, friend, accountant or lawyer assisting a bankrupt in an informal capacity, as is often the case.

As trustees are aware, they have a duty under section 19(1)(i) of the Bankruptcy Act 1966 to refer to AFSA any evidence of an offence committed by a bankrupt. However, there are often circumstances where it is unclear whether there is sufficient evidence to support an offence referral. AFSA has available a Pre Referral Enquiry (“PRE”) program that is a convenient and efficient way to deal with such matters. PREs can be as simple as emailing AFSA with a summary of the circumstances and suspected offence/s and are particularly useful:

  1. for suspected trivial offences (e.g. failure to advise the trustee within 21 days of new employment) that do not impact on an administration;

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CREDITORS AND THE INSOLVENCY LAW REFORM ACT 2016

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

As the 2017 year draws to a close, creditors would be aware that both instalments of the Insolvency Law Reform Act 2016 (“the ILRA”) have come to pass.

What should creditors be aware of under the new regime?

The ILRA is an attempt to reform the insolvency law but also to provide an improvement in the confidence of the public in the overall performance of the trustees and liquidators appointed to the various estates and administrations that are commenced every day.

Under the Corporations Act 2001 only the liquidator of the company can commence an action for preference payments or voidable transactions. The ILRA allows a liquidator to assign a voidable transaction to a third party (including creditors!). This may result in claims being commenced which the liquidator thought were not commercial to pursue.

Under the ILRA creditors are given significant additional powers to call meetings, request information, and documentation regarding the administration of a bankrupt or corporate insolvency administration. This gives control, upon the passing of a resolution, to give certain directions to the trustee or liquidator and in addition, to remove the trustee or liquidator, although the practitioner has a right to apply to the Court to avert removal.
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