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Bankruptcy reform: a vaccine for the economy?

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

Countries around the world have commenced their vaccine programs, with Australia’s vaccine is expected to commence imminently once the TGA completes its approval process. As to the economic impacts of COVID-19, the Australian Government has been testing its own form of vaccine through legislative changes to corporate insolvency and bankruptcy laws.

In March 2020, the Australian Government enacted a number of changes to corporate insolvency and bankruptcy laws, seeking to address the economic impact of the coronavirus. The significant changes to bankruptcy laws included:

  1. An increase in the cap on issuing bankruptcy notices from $5,000 to $20,000; and
  2. An increase in the period for compliance with a bankruptcy notice from 21 days to 6 months.

Both of these changes were made by providing definitions determined through Regulations, which means that they are able to be adjusted from time to time by the Executive. Previously those amounts were hard-coded in the Bankruptcy Act and could only be changed through Parliament.
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Is COVID-19 a reasonable excuse to withhold a child from a parent? A Family Law Lawyers Answer

A common question asked of family law lawyers is: “do I have to continue complying with parenting Orders during the pandemic?

There are very limited circumstances in which the Court will permit parents to fail to comply with Orders of the Court.

Parents will need to establish that there is a reasonable excuse for not complying. Whether the action or conduct is needed and necessary to protect the child from harm should be considered.

In a recent case of Pandell & Walburg (No 2) the Court considered the circumstances of  COVID-19 and how it relates to the consideration of whether a parent has a reasonable excuse not to comply.

In this matter, although interim parenting Orders provided for the father to spend time with the child, the mother had been withholding the child for approximately 3 months. The father’s family law lawyers filed an urgent application for time to resume and for make-up time. During the hearing, the mother claimed that she had received advice from the child’s GP that as a result of a pre-existing health condition, the child was at greater risk of suffering an adverse reaction to a possible COVID-19 infection and she should self-isolate with the child.
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The Move to an Online Family Court: How Covid-19 has Influenced the Way Divorce Lawyers Represent their Clients

The prevalence of Covid-19, the coronavirus, has catapulted the Family Courts into rapid digital transformation. At first, the Courts began to switch from face-to-face court events to telephone conferences on a dial in basis. By the beginning of April, the Courts began to conduct Hearings by Microsoft Teams, a program that allows video conferencing so that parties, their divorce lawyers and judicial officers may all see each other in a “virtual courtroom”.

Alongside the transition to online Court hearings was the introduction of the Digital Court File. Previously, parties and their divorce lawyers had the option to file court documents in hard copy, particularly if the matter was urgent. This system proved challenging during the pandemic particularly for Judges and Registrars operating from remote locations. To allow matters to be heard in any location during the pandemic, every new Court file is now completely electronic and able to be downloaded using the Court portal.
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Don’t Go Chasing Waterfalls – COVID-19 Safe Harbour is (still) not Safe

The temporary safe harbour protection from director liability for insolvent trading expires on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading .

The temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). There has been some recent debate about whether the words “before any appointment during that period” of an external administrator, mean what they appear to say, namely that any appointment must take place “during that period” of the temporary safe harbour expires.

Our Stephen Mullette has recently responded to the alternative view – that an appointment can be delayed until the new year. Unfortunately, the conclusion is that the better view is still that to take advantage of  the safe harbour defence, the directors must have appointed an external administrator before 1 January 2021. You can read the further consideration here, and make up your own mind.
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Overlapping responsibilities in Condition of consents for music festivals

The entertainment and live music industry has undoubtedly taken the biggest hit by the coronavirus pandemic. To grapple with the economic fallout, the Federal Government announced a $250 million targeted package to help restart the creative, entertainment, arts and screen sectors.

As event organisers slowly formulate management plans, local councils will undoubtedly play a significant role to consult with other agencies to ensure a COVID-safe environment. The following case of NSW Commissioner of Police v Rabbits Eat Lettuce Pty Ltd [2019] NSWCA 182 is relevant as it demonstrates the complexities of having a condition of consent that involves multiple local agencies.

Background

In 2015, the Richmond Valley Council granted the applicant, Rabbits Eats Lettuce Pty Ltd (REL), temporary development consent to hold music festivals in Koppenduff (the Consent).

One of the conditions, which the Court found was unusual, stated:

Condition 7

 An event must not proceed if either New South Wales Police, New South Wales Rural Fire Service or Richmond Valley Council advises it is unsafe to do so.
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Family Court Finds A Way to Get out of Binding Child Support Agreement during Covid-19

In the recent case of Martyn & Martyn [2020] FamCA 526 the Family Court considered a matter where the parents had entered into a binding child support agreement in 2012 which the father’s child support lawyers sought to set aside due to Covid-19.

The 2012 Agreement involved the father paying the mother a sum of $1,350 per month with a 2% increase each year.

The father currently owns and operates a business which supplies products to international businesses. Due to cross-border restrictions and social distancing measures, the father’s company was significantly impacted and he claimed that the business activity dropped by 90%. The father’s child support lawyers argued that as a result, his financial circumstances had been significantly worsened due to the limitations on international commerce during the Covid-19 pandemic.

According to Family Law, a Child Support Agreement may be set aside if exceptional circumstances have arisen that would cause hardship to the payer.

Ultimately, in this case, the Family Court was satisfied that the outbreak of the COVID-19 pandemic was an exceptional circumstance and that the father would suffer hardship. The Binding Child Support Agreement of 2012 was set aside and the father was not required to pay the child support amount in the Agreement.
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Danger – COVID-19 Safe Harbour STILL Requires Early External Administrator Appointment

The Government has recently extended COVID-19 business protection measures introduced in March, including the temporary safe harbour protection from director liability for insolvent trading. These protections will now expire on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading.

In March Parliament passed a raft of legislative reforms in an attempt to provide protections for businesses an ameliorate the economic effects of the coronavirus in Australia. One of these amendments was temporary legislation to protect directors from liability for insolvent trading during the global COVID-19 pandemic. This temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). This safe harbour protection from insolvent trading will mean that directors will not be personally liable for debts incurred in the ‘ordinary course of business’, provided those debts were incurred during the operation of the temporary legislation, presently which will now expire at the end of 31 December 2020.
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The handcuffs are on debt recovery, but for how long? What you can do in the meantime…

By Jeffrey Brown, Principal at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group


As part of the Federal Government’s response to the COVD-19 crisis, a handbrake has effectively been applied to court proceedings aimed at bankrupting individuals and placing companies into liquidation. This has been achieved by lengthening the time for debtors to respond to formal demands, from 21 days to 6 months, for both bankruptcy notices (in the case of individuals) and statutory demands (for payment of debts incurred by companies). As part of the same reforms, the minimum debt amount that can be the subject of bankruptcy or winding up proceedings has been increased to $20,000.00.

The Federal Government intends to keep these extended compliance periods and amounts in place until at least the end of 2020. While they remain in place, debtors will be well aware that creditors have limited options open to them to enforce their debts.

Anecdotal evidence would suggest that many of those debtors are choosing to trade on their businesses well beyond the point at which they have become insolvent (that is, unable to pay their debts as they fall due).
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