Every business needs to manage their cashflow. Overdue accounts can make this hard. This case study demonstrates how bringing in Streeterlaw Sydney Lawyers speeded up the process dramatically.
The Pain
Aged debt in excess of 18 months owed to a corporation.
Debt amount $10,000
The Debt Recovery Solution
Step 1
Rather than simply writing a letter to the last known address the Streeterlaw legal team went to work. A series of telephone calls and searches enabled the legal team to identify the correct contact telephone number for the director of the debtor company.
Step 2
A debt recovery letter of demand was dispatched informing them of the consequences of their failure to pay the debt within the prescribed time frame.
Step 3
An SMS was dispatched to the director's mobile phone number notifying him of the imminent arrival of the debt recovery letter and inviting him to contact our Sydney office to arrange payment.
Debt Recovery Result:
Full payment by cheque of the $10,000 debt was made within two days of dispatch of demand letter.
Debt Recovery Cost:
Debt recovery costs to the client were less than 1.2% of the value of the debt.
Client testimony:
“We don't know why we waited so long to get you involved - thanks for all your assistance and advice. We so rarely have any debtors that the commencement of legal action was outside of our comfort zone.
I have no hesitation in recommending Streeterlaw for the recovery of commercial debts - it certainly worked for us.”
Case forces unprofessional lawyers to lift their game
In a recent decision on 5 August 2009 the High Court significantly revised the guiding principles relating to case management of proceedings brought before the Courts in Australia. The decision overruled the previous authority of Queensland v J L Holdings Pty Ltd [1997] HCA 1
The Situation Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 (5 August 2009)
This case reached the High Court from a dispute between the Australian National University (ANU) against its insurance broker Aon Risk Services Australia Limited (Aon) and insurers in which it sought indemnity for losses by reason of the destruction and damage to buildings at their Mount Stromlo Complex in January 2003 fires. At the hearing before the trial judge in November 2006 the ANU settled with their insurers but then sought an adjournment of the trial to make substantial amendments to its statement of claim against AON.
The trial judge permitted the adjournment and ordered that ANU pay AON’s costs and had regard to the authority of J.L. Holdings in which the primary consideration for the rule in J.L. Holdings is as follows:
It is held to be authority that while case management are a relevant consideration the interest of justice must always be the paramount consideration [100] – [102].
The case progressed to the Court of Appeal of the Supreme Court of the Australian Capital Territory which on 25 August 2008 allowed the appeal but only so far as it modified the costs order to an indemnity basis and continued to permit the amendment to the pleadings.
On 5 August the High Court overturned these two lower Court decisions. The High Court noted that there was an increasing degree of case management in the Courts and this was reflected in legislation implemented after the J.L. Holdings decision. The Court considered the A.C.T. equivalent of section 56 – 59 and 61 (1) of the Civil Procedure Act 2005 (NSW) which has the stated intention that the purpose of the Rules of Court are to facilitate the just resolutions of the real issues in civil proceedings with the minimum delay and expense.
The Court acknowledged that having regard to the other “costs” incurred by a party in litigation – such as the opportunity cost of litigation, the strain of litigation upon the witnesses, employees and offices of corporate litigants that it is in the public interest that there be proper and efficient use of public resources.
This decision has been quickly applied in a recent decision in the Supreme Court of New South Wales. Justice Gzell in the Supreme Court of New South Wales on 14 September 2009 applied this case in refusing leave to a Plaintiff to amend its statement of claim on the first day of trial to expand the potential entities the subject of the alleged wrong doing from 65 to 196 and to split the case from liability into two parts and deal only with liability (leaving quantum for separate and subsequent assessment). Bastas v Hodes [2009] NSWSC 968
Justice Gzell declined this application on the above authority.
Comment from Mark Streeter Sydney Lawyer
Personally I see this decision as a very important one. It could have the impact of forcing lazy lawyers to modify the style of practice! The decision in AON provides very strong support for the case management practices of the State and Federal judges. It is expected that if parties do not comply with directions and properly prepare and present their cases then they will lose the opportunity to “fix it up” later.
If there is an "application to amend" then the side which wants it must provide an explanation for the delay. They must also demonstrate that this movement (or delay) is brought in good faith. They need to bring to the Court’s attention the circumstances that gave rise to amendment so it may be weighed against the effects of any delay and the objectives of the “just, quick and cheap requirement” of the Court Rules.
Macquarie Bank's sale of loan book creates problems for clients
The facts behind the case
Mr Goodridge (the Borrower) entered into a margin lending loan arrangement with Macquarie Bank in May 2003. On 8 January 2009 Macquarie Bank sold their “loan book” (which included Mr Goodridge’s margin lending account) to a subsidiary of Bendigo and Adelaide Banks – Leveraged Equities Ltd (the Second Defendant in these proceedings). Notices were issued on 19 January 2009 purporting to notify all customers of the Bank of the transfer and the new “ownership” of the Banking arrangements.
The Bank (either Macquarie Bank or Leveraged Equities) made a “calls and demands” under the loan on 5 February 2009 and 23 February 2009.
The evidence was accepted (form the Bank’s recording of a telephone conversation) that there was a negotiated arrangement between the Bank and the Borrower and the 5 February 2009 margin call was fully satisfied by the Borrower.
The enquiry then focused on whether or not a “call” under the margin loan by the Bank on 23 February 2009 expired unsatisfied which justifying the Bank selling the securities to pay down the margin loan.
The Borrower had purchased units in a listed units in Macquarie Country Wide Trust (MCW Trust). The market price of these units on 11 November 2008 was 31 cents. The discounted cashflow valuation that Macquarie Equities Ltd had placed on these Units was $1.15. The price of these Units came under a degree of stress and by 23 February 2009 the price had fallen to 14.5 cents per Unit and during the day had dropped to 13 cents. On the afternoon of 23 February 2009 an email was despatched from Leveraged Equities to the Borrower requiring payment of the margin call of $190,000. The Borrower was given 24 hours to pay this amount to maintain the Loan Valuation Ratio (LVR) at 70%. The “margin call” was not met within this timeframe and the Bank sold the Units for prices that went down to 10.5 cents per Unit. All 5.6 million units were sold and because of the depressed price (in part caused by the fact that the market could not absorb the sale of 5.6 million units in a 24 hour period!) There was still an amount outstanding to the Bank. It remained in debit of over $58,000.00.
What's the Story?
The relationship between a Lender and the Borrower under a margin loan facility is one of substantial interdependence. Unlike real estate which could take somewhere between three and six months for the Bank to take possession and sell, listed securities can be sold quite quickly.
The relevant clause of the margin lending loan required the Bank to give three business days notice for compliance with a margin call. Other clauses in the agreement provided for the ability, at the discretion of the Bank, to modify the terms of the agreement. However, His Honour Justice Rares found that this three days notice as an expressed term offered the Borrower a substantial contractual right and any alternative construction would lead to a very unreasonable and uncommercial result!
His Honour Justice Rares noted that the liability to meet a margin call remained contingent up until the time of the compliance and only matures into an actual liability if at the time of the application of the formula (to ascertain the LVR) the loan balance and the valuation of the securities is in breach of the required ratio. His Honour Justice Rares delivered a lengthy 57 page judgement which dealt with many legal and factual complexities in a rational and well reasoned judgment. The judgment will provide essential reading in construing any contracts relating to margin lending accounts.
His Honour found that the margin call was in breach of the terms of the margin loan agreement and accordingly invalid. There was no right on the part of the Bank (either of the two defendants) entitling them to sell. Accordingly the sale of the units was unlawful and damages were payable.
If that was not enough, the judge also found that in the event that it was validly assigned that the “shortening” of the time for meeting the margin call from 3 to 1 days was a breach of section 12CB of the ASIC Act. His Honour found that in all the factual circumstances, there had been a misuse of the power of sale and that the second defendant had required the Borrower to comply with conditions that were not reasonably necessary to protect his legitimate interest in breach of section 12CB(2)(b) ASIC Act in that it required him to pay money in accordance with a timetable and a series of demands that were not valid and secondly threatened, and then proceeded to, sell his property without a legitimate interest that it was entitled to protect.
Accordingly this misuse of the power of sale was unconscionable.
The Borrower sought relief and an order that 5,603,562 in the MCW Trust be restored to him.
Since 23 February 2009 these units have increased in price substantially. Additionally the units paid dividend (which also part of his damages claim) together with interest on the dividends. As at 26 February 2010 they are 56.5 cents / Unit. (That is his units would be worth over $3,000,000 plus dividend, plus interest on the lost dividend).
Another important issue - Invalid Assignment
Another significant legal issue to be determined was the question of whether or not a Bank can assign and “sell” a loan portfolio. In the second paragraph of the judgement His Honour notes that:
“It was common ground that contractual obligations are generally incapable of assignment and that these can only be transferred by novation of the original contract.”
His Honour found against the Banks on multiple counts. He found that they had not been a valid assignment of the entitlement under the loan to the second defendant which entitled them to make the call on the margin loan.
Comment from Mark Streeter - Sydney Lawyer
Inevitably this court decision will be appealed. Macquarie Bank sold a $1.5 billion loan portfolio to Leveraged Equities Ltd. They certainly would not want to see some sort of class action by other Borrowers seeking compensation for margin calls that were unlawfully made!
The saga will continue in the meantime - Happy investing!
The first margin loan in this particular case also involved the use of a phone recording as evidence. Read the full story on the blogsite
Higher minimum debt for Bankrupt will reduce Bankrupcty Notices
On 24 June 2010 the Federal Parliament passed amendments to the Bankruptcy Act 1966.
There were a number of technical “restructuring” type changes to the Bankruptcy Act which included a restructure of the organisation of the “Districts” for Bankruptcy, a streamlined process for remuneration of trustees and increase in penalties for non-complying individuals.
One of the changes was an increase of the minimum debt amount a creditor may issue a bankruptcy notice from $2,000.00 up to $5,000.00. Although the initial Bill proposed the amount to be increased to $10,000.00, following the Senate Legal and Constitutional Affairs Legislation Committee report in February 2010 it was agreed to amend the proposed amount to $5,000.00.
The amended provisions took effect from 11 August 2010.
Comment from Mark Streeter Sydney Lawyer
Bankruptcy Notices are often used as an enforcement mechanism by debt collection and debt recovery firms. Many more Bankruptcy Notices are issued than proceedings actually commenced (or sequestration orders made).
In the financial year 2008/2009 there were 1,953 sequestration (Bankruptcy) orders made across Australia. Many of these were for an amount less than $5,000.00. This means many orders would not have been made under the new proposed minimum of $5,000.00.
Mark Bouris raises Contempt of Court case against former directors
The Situation - Ignoring Interim Freezing Order
In June 2009, Mr Mark Bouris became the chairman of TZ Ltd. Mr Bouris is well known as the star of The Apprentice reality TV show and as founder of Wizard Home Loans.
TZ Ltd commenced action to recover monies from former directors of the company. One of the proceedings commenced was against an entity called ZMS Investments Pty Ltd (‘ZMS’). On 16 September 2009 the Supreme Court of New South Wales made interim freezing orders (also called Mareva orders) under Uniform Civil Procedure Rule (UCPR) 5.11. These orders restrained ZMS, by its directors, officers or agents, employees or others acting on its behalf, from:
“Selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of its assets whether located within Australia or outside of Australia.”
Assets were defined in the orders to include a number of specifically identified properties. It was alleged that after the making of the freezing orders, Mr Andrew John Sigalla (‘Sigalla’) caused ZMS to enter into a contract of sale for one of the properties that were subject of the Freezing Orders of September 2009. The properties were listed for auction on 3 December 2009 and one of the properties was exchanged on 10 November 2009. By Notice of Motion under Part 5 of the Supreme Court rules an application was made by TZ Ltd who also filed a Statement of Charge dated 13 November 2009, seeking orders that ZMS and Sigalla be found guilty of contempt for failing to comply with the orders of the court of 16 September 2009 and that they be convicted and made liable to such punishment as the court considers appropriate.
The Court Decision
Justice Austin, as Corporations Judge, heard the application in a hearing on 16 December 2009 and handed down a 12 page judgment on 23 December 2009. His Honour found the contempt proved and imposed a $5,000 fine by way of penalty on each of ZMS and Sigalla and that ZMS and Sigalla pay TZ Ltd’s costs on an indemnity basis jointly and severally.
Comment from Mark Streeter Sydney Lawyer
Compliance with court orders is critical for the continued proper administration of justice in New South Wales and public confidence in the judicial system. This case is a helpful reminder of the sharp edge of the judicial system and the application of force, in this case through $5,000 fines, for failing to comply with orders made by the Court.
The court extracted a helpful summary of principles applicable in an application for contempt. In short these principles are as follows:
(a) The order alleged to be breached must be clear and unambiguous.
(b) The proper construction of an order is not a matter of fact but a question of law.
(c) It is not necessary for an applicant to approve an alleged contemnor intended to disobey the order.
(d) Deliberate conduct which is in breach of the order will constitute wilful disobedience of the order and therefore civil contempt unless the conduct be casual, accidental, or unintentional.
(e) The facts in issue in a contempt charge must be proved beyond reasonable doubt.
Some corporate fraud by employees is not premeditated. it is opportunistic. Sometimes temptation overrides common sense. It is important that businesses have in place mechanisms to prevent fraud.
In this video it explains a simple scenario. A laid off employee didn’t have his corporate credit card canceled. So he took advantage of it and went shopping and paid for a family holiday. Clearly it is illegal but the recovery of the money can be a distraction and expense your business could do without.
This video has some simple tips for companies to help reduce employee fraud. Streeterlaw's Mark Streeter has extensive experience in fraud cases.
High Court of Australia asked to rule if a contract existed and was binding
Masters versus Cameron [1954] HCA 72 is a classic legal case that is still the leading authority on whether there is a binding contract or not. Even though this law case is over 50 years old the legal precedent it set is still used in Australian court cases today.
The Facts
This legal dispute arose in respect of a sale of land from the Plaintiff (in the original trial) to the Defendant. On 6 December 1951 Mr & Mrs Masters (the Defendants and proposed purchasers) agreed to buy from Mrs Cameron (the Plaintiff and Vendor) a farming property in Western Australia called “Bokhara”. The agreement was contained in a short written document. Both the vendor and the purchasers signed their signatures to the document. A deposit of £1,750 was paid by the proposed purchases to the Vendors agent shortly after signing the agreement. Final settlement of the property was scheduled to occur on 15 March 1952.
The written agreement included, at the request of the Vendor, a specific provision in the following form: “This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions.”
After signing the initial agrement on 6 December 1951 the Masters changed their minds and decided not to proceed with the purchase of the property and claimed a refund on the deposit. No ‘formal contact’ had been signed by the partys in reliance on the above term of the Contract.
The issue to be determined by the High Court was whether a binding contract had already been made.
High Court of Australia Decision
The High Court noted that there were 3 common circumstances where parties in the course of a negotation agree on terms of a contractural nature, namely::
(a) Parties reach ‘finality’ in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms but at the same time propose to have the terms restated in a fuller and more precise form but not different in effect.
(b) Parties have agreed on all the terms of their bargain and intend no departure or addition thereto but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.
(c) The intention of the parties is not to make a concluded bargain at all unless and until they have executed a formal contract.
In the first two instances a binding contract has been made. In the third instance no binding contract has come into being.
The Court noted that it was in deciding which of the classes a particular contract or agreement that a document fell, it was necessary to enquire as to the intention disclosed by the language the parties had employed. The High Court found that despite parties having taken steps consistent with and in anticipation of a formal contract being executed, signed and completed these further actions did not amount to a binding representation or a stop-all.
Accordingly, the proposed purchaser in this case entered into financial difficulties and decided to pull out of the agreement. The Court found that on the expressed intention in the signed document there was no formal contract entered into and as this had been subject to a “formal contract” and the parties were not bound.
The defendants were successful and obtained orders for the recovery of the deposit paid and an order for costs.
Comment from Mark Streeter Sydney Lawyer
Despite the case being decided over 50 years ago this decision is still the leading authority for interpreting agreements that are ‘subject to contract’.
The parties, the terms and the existence of an agreement between the parties are an essential element of the enquiry into the enforceability of every contract. Fundamental to this enquiry are the following:
(a) The identify of the parties to the agreement
(b) The subject of the agreement (for example to undertake work or provide specified goods or services)
(c) An acceptance of the offer to provide the Subject of the agreement on the terms offered
(d) Performed in accordance with the agreement
(e) Tax invoice being issued and demand for payment made
(f) Payment not being made
Often, deals are done on a hand-shake or on a telephone. Sometimes there are documents or emails - sometimes not.
The absence of a signed agreement which contain all the relevant terms usually makes it more expensive (both in terms of time and in legal costs) to compile the evidence to enforce the agreement by compiling the documents and statements that collectively give an account of the contract and the elements described above.
Protect your business from staff when they are leaving
The Australian Financial Review, on 15 October 2010, published a very helpful and insightful article called “Bosses’ Byte Back to Protect Secrets”. The article noted that the increased availability of USB memory sticks and mobile electronic storage devices (including IPODS, smart phones and portable hard drives) made it easier for employees to “steal” intellectual property, data and information and this is particularly more prevalent at or about the time that the worker resigns their employment.
One of the leading authorities quoted in the course of this article was Mr Warren Mallard, Managing Director of Lyonswood Investigations and Forensics. His firm provides Fraud investigation services that through the clever use of IT “data mining,” can forensically acquire the data from a computer hard disk and conclusively prove whether or not an employee has downloaded data from a computer or server.
The article also noted the use of Anton Piller and Mareva Orders now known as “Search” and “Freezing” orders where helpful in the process of finding and freezing the proceeds of these thefts.
Will you be able to recover debts? It depends on the contract - whether written or verbal
In a recent decision by Justice Barrett on 31 August 2010 in the Supreme Court of New South Wales, the Court gave a helpful re-statement of the law relating to the “normal conditions” pertaining to the implication of terms. (NASH v STEWART [2010] NSWSC 947). Justice Barrett quoted with authority, the case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 as setting out the test where a contract in writing is apparently complete.
For a term to be implied, the following conditions must be satisfied:
1) It must be reasonable and equitable.
2) It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it.
3) It must be so obvious that it “goes without saying”
4) It must be capable of clear expression.
5) It must not contradict any express term of the contract
The Court also noted that the test is somewhat different where the contract is not written and the contract is informal. The Court then referred to the decision of Hawkins v Clayton [1988] HCA 15 as setting out the test as follows:
“If, but only, it can be seen that the implication of a particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case.”
The Court also noted that this was subject to the implication by mercantile usage such as the usual custom in a particular industry, professional practice, or past course of dealings between the parties.
Comment from Mark Streeter Sydney Debt Recovery Lawyer
Ascertaining the precise terms, and extent of those terms, is fundamental in the appraisal stage of ascertaining whether or not you have enforceable rights or remedy for recovery of a debt against another party. The law of contract requires that there be a term of the contract, which when breached, causes damages, as necessary prerequisite for a successful recovery action.
The starting point is then to articulate what the terms of a contract are so that you can adduce the appropriate evidence to demonstrate that the terms have not been complied with.
Can a Strata Body Corporate recover all of the legal costs it incurs when chasing outstanding Strata Levies?
It is quite common for civil legal action to leave successful Plaintiffs out-of-pocket in respect to their legal expenses, even if they obtain an order for the defendant to pay their legal costs. An order for costs does not ordinarily cover the full cost of providing the legal service to the Plaintiff in the Proceedings. The usual costs order is on a “party/party” basis which translates into approximately 60-70% of the actual costs incurred.
The Court of Appeal decision in Owners of Strata Plan 36131 v Dimitriou [2009] NSW CA27 (25 Feb 2009) considered an appeal from a decision of an Associate Justice of the Supreme Court (in his review of a Magistrate in the Local Court) and considered the scope of Section 80 of the Strata Scheme Management Act 1996 (the ‘Act’), the terms of which apply as following:
(1) An owner’s corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owner’s corporation incurred in recovering those amounts.
For any legal recovery action in the Small Claims Division of the Local Court, the “actual costs” will grossly exceed the amount awarded in any costs order. The Small Claims Division of the Local Court has a “scale” fee which caps the maximum legal cost recoverable which is much less than the 60-70% referred to above.
The Court of Appeal holds that the “difference” between the Costs Order and the actual costs incurred (subject to some limitations) can be added as an additional head of damage in any legal action.
Accordingly proceedings brought under this Act for contributions should claim the following:
1) The contribution (i.e. strata levy)
2) Interest under the Act
3) Legal costs incurred in seeking to recover the Contribution (Strata Levy).
The Court however, did not write a ‘blank cheque’ for Plaintiff’s solicitors to accrue legal costs. The recoverability of expenses (including legal costs) under this section are subject to the following conditions:
1) The costs must be incurred in recovery of the contribution levy (not some other litigation).
2) The costs had to be reasonably incurred.
Comment from Mark Streeter Sydney Debt Recovery Lawyer
The Court did not make a “finding” as to whether or not the legal costs would be recoverable on a “party/party” basis or ‘indemnity basis’ and accordingly the guidance to Local Court Assessors and Magistrates hearing applications under this Act is limited to the above tests.
In conclusion – the short answer is NO – Strata Body Corporates are generally not able to recover all of their legal coasts when pursuing outstanding Strata Levies.
Breakdown of a business relationship lead to two court cases
The first court decision over who was responsible and who was to pay cost was overwritten by the second court decision.
Facts behind BATTERHAM –v- MAKEIG [2010] NSWCA86 (22 April 2010)
Makeig, a property development consultant, entered into an agreement with Mr Batterham to provide project management and consultancy advice to assist with rezoning of real estate in the village of Kitchener near Cessnock. The intention was to prepare the land for development and sell it on to a developer.
Makeig entered into a written agreement with Batterham. The document was signed on 5 March 2005. An essential term of the agreement was as follows:
(a) Makeig to undertake the management of the project
(b) Makeig agrees to pay all consultant’s costs now the costs ancillary to consultancy services in a timely manner ...
(c) Makeig agreed to pay and has paid costs relating to .... comprising the option fee, the land clearing costs and the survey fee.
(d) All professional work required to achieve the above result will be carried out by Makeig in a timely manner.
The agreement provided that the profit of the enterprise would be split 11/18 to Batterham and 7/18 to Mr Makeig. This written document was called the “Kitchener Project Agreement.”
The project progressed through the Council process. In January 2006 Batterham was told by the Council that the Department of Planning required a Local Environment Study. Further fees were sought by Council in late 2006. They asked for $36,500.00 which was paid by Batterham on 28 November 2006 and further amount of $16,000.00 on 8 December 2006.
Batterham came to the view that by December 2006 he could no longer work with Makeig.
Prior to the payment in November 2006, Mr Makeig had delivered up to Mr Batterham an invoice for $450,000.00 seeking to have Council reimburse him for expenditure of his time in preparing the work for the rezoning of the land. Mr Makeig gave evidence that he had adopted a “poker stance” and refused to make payments or be actively involved in the project until his demands were met.
Mr Batterham terminated the agreement based on Mr Makeig’s breach of the agreement.
Makeig sued Batterham for damages in the Supreme Court and was successful before Justice Ward.
The Court of Appeal on 22 April 2010 reversed this primary judge decision giving judgment in favour of Batterham and ordering that Makeig pay Batterham’s costs of both the Appeal and the Trial below.
NSW Court of Appeal Judgement
The Court of Appeal judgment is a helpful overview of some very important principles of the law of contract. Helpfully none of the essential findings were on credit of the witnesses but rather on the construction of the facts and the evidence and how those facts can be construed in regard to the law applicable in the case.
Accordingly the Court of Appeal did not feel constrained from reversing the Trial Court decision finding on the construction of the Kitchener Project Agreement.
The Court of Appeal considered the construction of the words “consultant’s costs” and the words “ancillary” and it concluded that it was Makeig’s obligation, under the Kitchener Agreement, to pay the fees to the council for the further work relating to the Local Environment Study.
The Court of Appeal noted that this was a laymen’s agreement and it should be construed according to its commercial purpose not in any pedantic way. The “lodgement fee” required by the council was in fact a payment for consultants (to be retained by the council) to prepare the Kitchener precinct to be included in the Cessnock master plan.
Makeig did not pay Nov/Dec 06 Council lodge fees and refused to do so. The Court of Appeal found that although, on Makeig’s evidence, this was a game of “poker” which he was bluffing in order to gain an advantage for himself there was no objective evidence that Batterham knew it was only a bluff and not Makeig’s genuine intention to breach the agreement. Accordingly the Court of Appeal found it reasonable that Mr Batterham, having received the definite refusal by Makeig to undertake his essential term of the agreement, proceeded to terminate the agreement.
The Court of Appeal observed that the question of repudiation is a question of fact and having regard to the trial judge’s finding that this clause was an essential term the only conclusion based on the evidence before the Court was that Makeig had repudiated the Contract.
Accordingly the Court of Appeal reversed the Trial Judge Decision and substituted their own judgment in its place.
Comment from Mark Streeter - Sydney Lawyer
This was a very interesting case of hotly contests facts and substantial factual issues. Notwithstanding the complexity of the relationship and the number of communications the actual “breach” identified and relied on by the Courts was based on one letter and two conversations!
Many people wonder what can and can't a bankrupt individual do when they are declared bankrupt?
Bankruptcy has serious effects on the individual. Upon becoming bankrupt almost all of their property goes to (‘vests in’) the persons Trustee in Bankruptcy.
It is then an offense for an undischarged bankrupt person to engage in the following:
a) Obtain credit or enter a commercial transaction for value in excess of $4,623.00 without disclosing that they are bankrupt.
b) To carry on a business under an assume name without disclosing the true name and status of bankruptcy.
c) May not leave Australia or do any act to prepare to leave Australia without the permission of the persons Trustee in Bankruptcy.
Property acquired by the person after being made Bankrupt but before being discharged from Bankruptcy is generally divisible among creditors.
If the bankrupt was in a partnership this partnership is automatically dissolved by becoming bankrupt unless specifically agreed in the partnership agreement to be otherwise.
The bankrupt cannot be:
a) A director of a company.
b) A member of the Local Council, a Member of House of representatives or the Senate or a member of the State or Territory Houses of Parliament.
c) Any civil action commenced by the bankrupt (before they became bankrupt) is “stayed” until the Trustee elects to pursue or discontinue the action.
What's your experience with Debt Recovery? Is it improving?
As a Sydney lawyer dealing with debt recovery and debt collection it was interesting to read the Sydney Morning Herald article business pay up more quickly. This article commented on the statistics from Dun & Bradstreet’s trade payments analysis which showed a fall in the payment terms for Australian businesses in the third quarter or 2009. This means companies are paying their bills sooner than they were previously.
Surely businesses have learned lessons from the global financial crisis and taken a more serious look at their engagements with their customers. Even if they were not directly touched by the financial meltdown, businesses had good cause to look at their debtors and assess their risk and exposure in the event their customers failed to pay what was owed.
As a lawyer helping Australian businesses in the ‘sharp end’ of credit control we have observed some changes. There is an increased focus on checking existing or potential customer’s credit worthiness. It appears to us that businesses are also spending extra attention on:
* ensuring that there is clear documentation that evidences payment terms
* tighter internal protocols that require orders be completed in writing by an authorized officer of the customer
A clear and common understanding of the terms of trade facilitates a more prosperous relationship for both customer and suppliers. Uncertainty or misunderstanding can lead to dissatisfaction, objections and queries of accounts and consequential delays in payment.
Comment from Mark Streeter Sydney Lawyer
If you have clients not paying your invoices on time you should consider legal action. Often just bringing a legal firm into the situation can speed up the payment process.
Shared property gambled away may need to be repaid
An issue may arise as to a particular person’s conduct either during the marriage or after separation that disposes of matrimonial property. The Family Court is a Court of Equity i.e they will not permit a party to take an unfair advantage because of unilateral action for their own benefit without bringing these funds to account. This concept is often called “wastage”.
In determining whether or not a certain expenditure or disposal of asset is classified as “wastage” and attributed wholly to a particular party the Court considers the following questions (insert A/B and G/B criteria).
Examples - The most common example alleged to constitute “waste” in the context of Family Law property resolutions is gambling. Gambling in its own right is not necessarily wastage. It has been accepted by the Courts that for some, this is a form of entertainment and it is a question of degree to be assessed in every case on its own circumstances.
The Court has also found conduct which reckless, negligent or wanton and reduced or minimised the value of the assets should also be held to account.
If a finding has been made that quantifies a “wastage” amount, these figures will be “added back” into a notional pool of assets for consideration of division.
Comment from Mark Streeter Sydney Lawyer
One of the difficulties in preparing the case in wastage is it the innocent party’s “onus” at least at the first stage to prove on the balance of probabilities, that the other party has “wasted assets”.
This investigation, may involve quazi fraud investigation and detailed examination of betting accounts, electronic records, and may include the “reconstruction” of financial accounts. Accordingly the process is time-consuming and if it requires forensic accounting to verify the waste the investigation process will be be expensive to present this evidence in a form that is admissible before the Court.
Don't be shocked if your debtor appoints an Administrator
Have you ever been ‘surprised’ to receive a letter regarding one of your clients who owe you money advising that an Insolvency Practitioner has been appointed an Administrator of the company?
This notice may have you scurrying for a copy of the original credit application to check to see if you obtained a director’s personal guarantee. However be careful about rushing off to commence proceedings for enforcement of the debt while the company is in Administration. Section 440D of the Corporations Act 2001 has the effect of staying the commencement and continuance of litigation against a company that is in Administration. The Stay lasts for the duration of the Administration.
If you already have a judgment debt, section 440F prevents enforcement for the duration of the administration. Section 440J also prevents you from commencing proceedings against directors under personal guarantees for the period of the administration period, without leave of the Court.
Just because an Administrator has been appointed over the Company does not mean that you will not be paid. You may have a secured interest over goods supplied if your terms of trade have an effective ‘retention of title’ clause. Alternatively, there may be a dividend paid to unsecured creditors as part of a proposed deed of company arrangement or in a liquidation.
Comment from Mark Streeter Sydney Lawyer
Your ability to obtain personal and directors guarantees is a component part of the initial negotiations of the terms of supply. It may also be a function of your bargaining position and your willingness to assume commercial risk. Many customers start off on small orders but then the scale, frequency and amount of the orders increase. Accordingly having certain credit limits (below which a personal guarantee may not be required) should be periodically reviewed to see whether or not the trading history of the customer has, by their conduct, crept them into a new level where the credit risk policy of your organisation requires the additional protections of a personal guarantee.
Use the “lessons learnt” to improve your starting procedures. The introduction of the Personal Property Security legislation in 2010 will provide another opportunity for you to review your terms of contract and require new signups by existing customers. This may provide you an opportunity to regularize your terms of trade and to “update” your documentation, data and business intelligence on your customers and key employees within those organisations.
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