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Sorry, the feeling’s not mutual! – Set-off no longer available for unfair preference claims

By Arian Bahmiyari, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.

In the past, set-off has been used as a defence against unfair preference (and other insolvency) claims with some uncertain and inconsistent outcomes. This ends now in relation to unfair preferences with a major win in favour of liquidators and will most likely lead to a similar outcome with other insolvency proceedings.

In Metal Manufactures Pty Limited v Morton [2023] HCA 1 (“Metal Manufacturers v Morton”), the High Court held that set-off is not available as a defence to a creditor being sued for an unfair preference by a liquidator. The High Court found that the debt owing by the company in liquidation had no mutuality with the unfair preference claim by the Liquidator in the winding up. [...]  READ MORE →

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Standing to Stay?

By Aritree Barua, Solicitor at Matthews Folbigg Lawyers

Once a company has been wound up, it can be very difficult (but by no means impossible) to undo or even temporarily halt the winding up process. Only those with proper standing may even attempt such a feat.

In Sebie v ENA Development Pty Ltd (in liquidation) (Receiver Appointed), in the matter of ENA Development Pty Ltd [2023] FCA 2, the Federal Court of Australia (“the FC”) rejected an application made by Mr Robert Sebie (“Mr Sebie”) for a stay of the winding up of ENA Development Pty Ltd (“ENA”). [...]  READ MORE →

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My Bankruptcy (That Never Was)

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

A bankrupt may apply to the Court under section 153B of the Bankruptcy Act 1966 (Cth) (“the Act”) to have the bankruptcy annulled. With some exceptions, the effect of an annulment is to place the bankrupt back in the position as if there had been no bankruptcy. Most annulments occur following a sequestration order obtained by a creditor – for instance where the debtor was simply unaware of the petitioning creditor’s debt, can pay the debt and is otherwise solvent (an expensive process but perfectly achievable with good advice). [...]  READ MORE →

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Fighting the Wolf at the Door

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Under section 467(1) of the Corporations Act 2001 (Cth) (“the Act”) the Court has discretion in a winding up application to:

  • Dismiss the application with or without costs, even if a ground on which the Court may order a company to be wound up is proved; or
  • Adjourn the winding up application hearing conditionally or unconditionally; or
  • Make any interim order it thinks fit.

In exercising its discretion, the Court’s attention will be directed to the public interest which usually dictates, in the absence of special circumstances, that an insolvent company be wound up to prevent it from incurring further debts.

In Reform Projects Pty Ltd v Macarthur Projects Pty Ltd [2022] NSWSC 672, Parker J (“Macarthur Projects”) considered an application to have the defendant company (“Macarthur”) wound up in insolvency after it had failed to comply with a statutory demand served by the plaintiff company (“Reform”). [...]  READ MORE →

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HOW MUCH DID THAT COST?

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

With any debt collection service, such as a debt collection agency or a debt collection lawyer, the costs of debt collection can be significant. So the question we are always asked is ‘Can the debtor be held liable for my debt collection costs?’

As we tell our valued debt collection clients, there are at least a couple of different answers to this question. But critically, debt collection clients can take steps to get a better outcome in relation to their debt collection costs! [...]  READ MORE →

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Creditor Bankruptcy Notices: What do I do if I receive one?

Creditor Bankruptcy Notices: What do I do if I receive one?

By Tiani Kasbarian, a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

What is a Bankruptcy Notice?

The Bankruptcy Act 1966 (Cth) refers to a bankruptcy notice as a formal warning that is issued to a debtor who owes a creditor a minimum of $10,000 or more. This amount was permanently raised from $5,000 in January 2021.

The Notice requires a debtor to pay an amount within 21 days from the date it has been served. If they do not resolve the debt, the subject of the Notice within that 21 day period, the debtor has committed an ‘act of bankruptcy’, which the applicant creditor may rely upon in order to apply to the court for a sequestration order to be made against the debtor’s estate. [...]  READ MORE →

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CAN’T WE STILL BE FRIENDS? CUSTOMER RELATIONSHIPS AND DEBT COLLECTION

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

An effective debt collection system is critical to businesses who provide goods or services “on credit”. But how to go about debt collection whilst still trying to maintain good customer relationships?

In our experience, nothing poisons a business relationship like bad debt collection. At the risk of sounding heretical, sometimes the customer is not right, when they simply refuse to pay for no reason. The value of such customer relationship might be doubted, and the method debt collection may not matter. But in other cases, the customer just needs a gentle (or possibly less gentle!) debt collection technique. In all cases, the question is this: How does a business continue to manage a customer relationship whilst ensuring that their account is paid on time? [...]  READ MORE →

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OFFER UP!

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Calderbank offers are based on the principles outlined in the English case of Calderbank v Calderbank [1975] 3 All ER 333. Whether you are the offeror or the offeree, it is important to understand the effect of these offers.

Calderbank Offer: What is it?

A Calderbank offer is designed to put the offeror in a position to apply to the court for an indemnity costs order, in circumstances when the offeror receives a better outcome than the amount that was offered. Should an indemnity costs order be granted, the unsuccessful party will pay a higher proportion of the successful party’s costs. Emphasis is placed on the word “higher”. In many civil jurisdictions (but by no means all), “costs follow the event,” and so the unsuccessful party might expect to have to pay some of the successful party’s costs. If ‘indemnity’ costs are awarded, the amount payable is higher. Somewhat  counterintuitively however, the amount is almost never “all” the successful party’s costs, for various reasons. However, in many cases the difference between recovering some costs, and recovering a much higher proportion of those costs, can make an enormous difference. And by making a Calderbank offer, a party will improve the chances of recovering a higher proportion of costs. [...]  READ MORE →

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Get out of (Liability) Gaol Free under section 447A

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Section 447A of the Corporations Act 2001 (Cth) (“the Act”) enables the Court to make such orders as it thinks appropriate as to the operation of Part 5.3A of the Act. Since its introduction, the Courts have adopted an expansive construction of the provision and have liberally applied the power in a variety of contexts. Accordingly, the provision has become something of a panacea for multiple ills in the context of voluntary administration and has been used in various instances among others to: [...]  READ MORE →

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Do you want to continue litigation against a party declared bankrupt? The Federal Court of Australia provides insight in Yan v Spyrakis as trustee in bankruptcy for Liu [2022] FCA 872

By Aritree Barua, Solicitor at Matthews Folbigg Lawyers.

In Yan v Spyrakis as trustee in bankruptcy for Liu [2022] FCA 872 (“Yan v Spyrakis”), the Federal Court of Australia (“FCA”) re-stated the principles to be applied when considering whether to continue litigation against a party that has been declared bankrupt.

Background

Mr Liu (“the Bankrupt”) was made bankrupt on 11 November 2011 on his own petition. At the time of his bankruptcy, there were proceedings pending in the Supreme Court of New South Wales (“the Supreme Court proceedings”) in which the Bankrupt and a number of related companies were the defendants and Mr Yan was the plaintiff. [...]  READ MORE →

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Replacing a Trustee of a Bankrupt Estate

By Aritree Barua, Solicitor at Matthews Folbigg Lawyers

If you are concerned about the appointment of a trustee of a bankrupt estate, or you have a disagreement with a trustee, or a trustee has decided to retire, you may be able to replace that trustee. This article explores various ways in which you can replace a trustee of a bankrupt estate.

Replacing a trustee by resolution at a creditors’ meeting

If you are a creditor, you can remove and replace a trustee of a bankrupt estate by way of a resolution at a creditors’ meeting (Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”), Schedule 2 (“the Insolvency Practice Schedule”), section 90-35(1)). Notice of the meeting must be provided to all persons who are entitled to receive notice at least 5 business days before the meeting (Insolvency Practice Schedule, section 90-35(2)). [...]  READ MORE →

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Judgment Debts – The Consequences for a Judgment Debtor

By Jamieson Naylor, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.

Becoming a judgment debtor, that is, having a judgment entered against you, can be quite an unsettling notion. However, judgment debtors should resist the urge to ignore a judgment creditor. There are a number of options open to a judgment debtor and it is important that judgment debtors should take steps to deal with a judgment debt as soon as possible. If a court or tribunal has entered judgment in favour of a judgment creditor, then the judgment creditor can enforce that judgment against a person known as a “judgment debtor”. The person with the benefit of the judgment is known as a “judgment creditor”. [...]  READ MORE →