Debt Recovery

What is an Injunction?

An injunction is a Court order directing a person or entity to do a specific thing or not to do a something.

Most injunctions are temporary and are often made pending the outcome of a full hearing (known as an “interlocutory injunction“). An example may be to restrain a former employee from doing work for former clients where they have agreed to post-employment restraints pending a hearing on whether the restraint is lawful or to prohibit the publication of a potentially defamatory article in a newspaper or television program.

A Court will not grant an interlocutory injunction unless:

  • the Plaintiff has made out a “prima facie” case – a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial – or established that there is a serious question to be heard;
  • the balance of convenience favours the granting of the injunction; and
  • the Plaintiff provides “the usual undertaking as to damages” (that they will pay any damages the restrained party suffers if at a final hearing the Court determines that the injunction wasn’t justified).

A Court has discretion as to whether to make such an order and will consider thongs like whether or not you have asked the other party to do/not do the relevant thing, whether damages would be an appropriate remedy, if you have waited too long to seek the order etc.

Where an injunction is sought from a Court without the affected party being notified, this is known as an “ex-parte injunction” as it is made in the absence of a party. They are for that reason only temporary and the Court requires the applicant to disclose all relevant facts to the case, including those that may lead to refusal of the application, not just those in favour of the injunction as there is no respondent in Court to oppose it. Examples can be “freezing orders” that stop the sale of assets or to freeze a bank account to preserve them pending the Court’s further orders.

Mandatory injunctions can be obtained where for example a party to a contract refuses to comply with their lawful obligations under it. An example of this is a party to a Contract for the Sale of Land that unlawfully refuses to sign a Transfer in registrable form. Such an injunction imposes a positive obligation on the affected party to do something, not just stopping them from doing something.

FURTHER INFORMATION

For further information in relation to business succession, estate planning, litigation and dispute resolution or any commercial law matter, contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your commercial law needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Employment / General / Insolvency & Bankruptcy / Intellectual Property / Litigation / Property  by 01 Jun 2025 0 comments

Order for Security for Costs

An Order for security for costs is to help ensure that unsuccessful proceedings commenced by a Plaintiff do not disadvantage the Defendant. Such applications are more usually made in relation to an appeal rather than an original matter.

A security for costs order generally requires a Plaintiff to pay a certain amount of money into Court (or a solicitor’s trust account) before their proceedings can continue – that is the proceedings are in effect stayed pending the security being provided.

The Court has several sources of power to make an order for security for costs, including:

  • the Court’s inherent power to stay proceedings to ensure the proper and effective administration of justice
  • the relevant Court rules (eg, Rule 42.21 of the Uniform Civil Procedure Rules 2005);
  • s.1335 of the Corporations Act 2001 (Cth).

Due to the weight an order for security for costs may carry, Courts must weigh the rights and interests of all parties to the proceedings. The Court has a broad discretion as to whether to grant such an order and will usually look to factors including (in no specific order):

  • the inherent legal right of a Plaintiff to bring legal proceedings;
  • the strengths and bona fides of the Plaintiff’s case
  • where the Plaintiff ordinarily is resident;
  • the financial standing and asset position of the Plaintiff in the jurisdiction in which the claim has been commenced (including where the Plaintiff may have divested itself of assets);
  • whether there is reason to believe that the Plaintiff can satisfy an order for costs not only from its own resources, but from other resources including those who will benefit from the litigation; the public importance of the case;
  • delay of bringing the application for the order;
  • if the Plaintiff hasn’t disclosed an address or has moved and not updated it, particularly if there is reason to believe that it was done to to avoid the consequences of the proceedings;
  • whether such an order will frustrate the litigation;
  • the justice of the case.

It is uncommon for such an order to be made against an individual Plaintiff (as opposed to a company, partnership or trustee) but not impossible, depending in the circumstances of the particular case and Plaintiff.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

in Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Insolvency & Bankruptcy / Litigation / Risk management  by 01 Apr 2025 0 comments

Serving documents on companies

Section 109X of the Corporations Act 2001 (Cth) provides that a document may be served on a company by means including:

(a)  leaving it at, or posting it to, the company’s registered office; or

(b)  delivering a copy of the document personally to a director of the company.

Documents that may need to be served may be a Summons, Statement of Claim or even a Creditor’s Statutory Demand.

Companies are obliged to register a change of registered address within 28 days of at changing. Directors are also required to ensure their address details on the register are maintained.

Where service of a document not properly effected or there is a dispute about its, there is a risk that the Court may determine that service wasn’t effected, set it aside altogether and there could be consequences such as costs orders.

Service by post

Service by post is cheap and easy.

If posted to a company’s registered address, a document is presumed under s.160 of the Evidence Act 1995 (Cth) to have been received at that address on the 7th working day after being posted.

A problem with service by post however, is that the recipient could argue that it was never received or a dispute could arise as to timing of service.

Personal service

Arguably, personal service by a process server of a document on a director of a corporation is the best way to effect service.

These professionals are in the business of doing this and provide an Affidavit of service which can be used in evidence to prove service to a Court and as they are a third party service provider, there is often no dispute raised as to service and when so there is no “he said”/”she said” type argument as there may be if the parties themselves effected service.

Leaving it

An alternative to posting it or serving it on an officer of a company is leaving it at the company’s registered office.

Again, this is best done by a licensed process server who can swear or affirm what they did and when.

Informal service

The Courts are increasingly allowing alternative methods of service where parties are evading service or any of the above methods do not result in effective service such as through third parties, email, text messages, social media accounts etc.

FURTHER INFORMATION

For further information in relation to Corporations Act issue, legal proceedings, serving documents on companies or any business or commercial law matter, contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Litigation  by 03 Jun 2024 0 comments

What is bankruptcy?

Bankruptcy is a legal process where you’re declared unable to pay your debts and released from most debts (but not child support, court imposed fines, HECS and HELP debts etc) so you can make a fresh start financially.

You can either enter into bankruptcy:

  1. voluntarily; or
  2. on petition to Court by a creditor after not complying with a Bankruptcy Notice.

An order declaring someone as a “bankrupt” is known as a sequestration order.

Bankruptcy normally lasts for 3 years (and one day) provided you comply with your obligations. If you don’t, it can be extended several years.

Once a bankrupt, your Trustee has ownership and control over your assets (with exceptions such as some household items, a car up to a certain value, tools to earn an income, superannuation etc).

The trustee can be the Official Trustee (from the Australian Financial Security Agency, AFSA) or a registered (private) trustee. The trustee is either appointed by the Court or in the case of voluntary bankruptcy, by AFSA or you can nominate one of your choice.

When you are bankrupt:

  • you must provide details of your debts, income and assets to your trustee
  • your trustee notifies your creditors that you’re bankrupt – this prevents most creditors from contacting you about your debt
  • your trustee can sell certain assets to help pay your debts
  • it can affect your ability to be a company director
  • you may need to make compulsory payments if your income exceeds a set amount (currently around $64,000)

Bankruptcy may have a serious impact on you. It may affect your ability to get credit, travel overseas or gain some types of employment so you should get some advice before voluntarily bankrupting yourself. The National Debt Helpline provides free support on 1800 007 007.

Bankruptcy is just one formal option available under the Bankruptcy Act to manage your debt. Other formal options include temporary debt protection for 21 days reprieve from creditors enforcing a judgment against you, a debt agreement  or a personal insolvency agreement (both being arrangements to settle debts without becoming bankrupt).

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Insolvency & Bankruptcy  by 01 May 2023 0 comments

Personal Guarantees

A personal guarantee is a written promise by a person (guarantor) that if a third party doesn’t pay its debts to the party entitled to the benefit of the guarantee, then the guarantor will make those payments.

Personal guarantees are regularly given by directors and sometimes shareholders of companies to personally guarantee the payment of money or obligations on behalf of the company, but they are also given on behalf of other individuals such as children.

They can be essential security for small to medium businesses in their contractual dealings with customers as the guarantor is then personally liable to pay the debt, whereas without the guarantee, the company could enter into liquidation and the contracting entity would have to prove the debt in the liquidation and risk not getting any return at all.

Common examples of where personal guarantees are used are in relation to:

  • leases of real property by companies;
  • loans by banks to adult children when purchasing property;
  • company loans from banks; and
  • company applications for credit at other businesses.

Managing risk

Entering info a personal guarantee is risky. You are placing your own assets at risk for the benefit of another person or entity so you should get legal advice before entering into one as well as assessing the commercial or other merits of providing the guarantee at all.

Considerations to help limit the risk include:

  • capping the maximum amount of the guarantee or the term in respect of which the guarantee is valid for;
  • requiring the guarantee to be secondary only (and not create a primarily liability of the guarantor);
  • removing security provisions such as caveats;
  • not allowing any variation to the agreement between the beneficiary and the person/entity whose liabilities are being guaranteed without your notice or consent;
  • seeking to have the guarantee removed  at some point once the borrower can demonstrate their own capacity to repay the debt.

however, often the beneficiary of the guarantee will not agree to these changes.

Aiding enforceability

If you are seeking to rely on a personal guarantee in your business, then you ought to get it drafted by a lawyer however, some basic tips to aid in enforceability include:

  • obtain a copy of the guarantor’s identification documents to properly identify them;
  • conduct some due diligence on the guarantor’s financial standing/capacity to pay;
  • obtain actual security for the guarantee obligation;
  • ensure it is signed and witnessed by an independent adult

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Insolvency & Bankruptcy / Risk management  by 01 Sep 2022 0 comments

Properly executing documents

When it comes to properly executing documents, depending on the type of document and the parties executing it, there are different requirements for it to be valid.

The manner of execution depends on matters such as:

  • Party – whether a party is an individual, a partnership, the Government, an association or a corporation (and whether those signatories are parties in their own right or as a trustee of a trust or a superannuation fund;
  • Document – whether it is a Deed or just a contract or an Agreement; and
  • Physical/Electronic – whether it to be signed online or in person, or a combination of both.

PARTY TYPE

Individuals

An individual may execute a document by simply signing it with their signature witnessed by a person who is not party to it.

Partnerships

For a partnership to be bound by a document or a deed, either all partners to the partnership or an individual authorised by all the partners (whether or not the individual is a partner) should execute the document or deed.

Often, documents will be executed by a partner on behalf of a partnership. This authority may be set out in the partnership deed or a power of attorney. If you cannot obtain a copy of the relevant authority, you should consider obtaining a warranty from the individual in the relevant execution clause that they have authority of the partnership to so execute the document.

Companies

Section 127 of the Corporations Act (Corporations Act) sets out the ways in which a document may be executed by a company. If a company executes a document in this way, anyone will be able to rely on the protection in other sections of the Corporations Act for dealings in relation to that company. A company may execute documents under seal or choose not to have a company seal and even if the company has a seal, it need not apply it.

A company may execute a document with or without a seal if the document is signed by:

  • 2 directors; or
  • a director and a company secretary o; or
  • a sole director (there is no requirement for a private company to have a secretary).

Companies can also sign via an agent under s.126 of the Corporations Act.

For more information on how companies can becomes bound by the actions of its agents and employees, click here.

Associations

Usually an incorporated association signs documents by having 2 committee members sign it but often the Rules of Association need to be examined to confirm this.

An unincorporated association is not a legal entity and so cannot contract in its own right so be careful entering into any contract of value with them.

Trusts

A trust is not a legal entity and as such, it cannot contract in its own right so all acts relating to a trust must be undertaken by its trustee or trustees.

The type execution clause that should be used will depend on what type of entity the trustee is (eg a company  or one or more individuals) execution clause should be used if the trustee is a company).

Although a trust is not a legal entity, it may be a tax entity so may have its own ABN. You should therefore confirm that the ABN being used is the ABN of the trust and not the ABN of the trustee. An ABN is a great identifier.

If you are unable to confirm that the trustee has the power to enter into the arrangement (which can usually be ascertained by examining the trust deed), you should consider obtaining a representation and warranty from the trustee that it has the power to execute the document or deed on behalf of the trust.

DOCUMENT TYPE

There are various reasons for choosing between the different types of document. such as greater (often double the length) limitation periods for enforcing obligations in deeds compared to just agreements. Sometimes legislation requires transactions by deed, but oftentimes deeds are used as they are the most solemn act a person can perform in relation to an item of property or any other right.

Agreement / Contract

Generally, a contract is in place and is valid if the following conditions are met:

  1. Intention to create legal relations
  2. An offer
  3. Consideration (price) being agreed
  4. Acceptance

A written signature is not necessarily required for a valid contract to exist. The terms of the agreement also can be agreed verbally.

Contracts can be signed electronically (even with the click of a mouse) since the Electronic Transactions Act 2000 (NSW) (ET Act) and corresponding legislation in Australia’s other States and Territories.

Deed

Traditionally, to be a valid, as a deed the document had to be “signed, sealed and delivered” and thus it had to be:

  • written (on paper or parchment);
  • signed and the parties’ seal/s applied); and
  • delivered (physically to the other party),

however now, there is no requirement for a seal (where it is described as a deed or expresses that is is ‘sealed’ and it is witnessed appropriately), the parties are presumed to have ‘delivered‘ it on execution and the parchment requirement has also been dispensed with given the ET Act, amendments to the Conveyancing Act 1919 (NSW) and, in relation to companies, the passing of the  Corporations Amendment (Meetings and Documents) Act 2022, which from 01 April 2022 (after the temporary COVID-19 pandemic measures ended on 30 March 2022), amended the Corporations Act to permanently allow things such as:

  • director or member meetings virtually, such as through Zoom or Teams meetings etc (regardless of the requirements under their constitutions); and
  • documents, including deeds, to be executed electronically.

As Deeds do not require consideration like a contract, often it can be sensible to include a nominal item (such as $10) as consideration just in case the document isn’t valid as a deed – as it can still be relied on as a contract, possibly even if not signed by the other party but part performed.

WET INK OR ELECTRONIC?

Documents now can either be signed:

  • in physical form with ‘wet ink‘ signatures;
  • electronically; or
  • a combination of both.

Either way, the method of signing must clearly and reliably identify the part and indicates the party’s intention in respect of the information recorded in the document.

Obviously, special care needs to be taken with parties that are not Australian residents and to consider the governing law and jurisdiction of the arrangement.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Litigation / Online Issues / Property / Risk management  by 01 Aug 2022 0 comments

Liquidation

Liquidation is the process of winding up a company’s financial affairs and ultimately results in the existence of the company ending and being deregistered at ASIC.

An insolvent company can be wound up by the Court either by voluntary resolutions of the company’s directors and the company’s shareholders or by application by a creditor.

A solvent company can also be wound up through a members voluntary winding up if the company is no longer needed.

A Court will make an order for the winding up of a company if it can be shown that the company is:

(a)    actually insolvent – it cannot pay its debts as and when they fall due (even if the company has surplus assets but cannot convert them to cash them quickly); or

(b)    is deemed to be insolvent (such as through a Creditor’s Statutory Demand having been served but not complied with).

The Court can order winding up for other reasons also.

Unlike during a company’s administration, personal guarantees are unaffected by liquidation – they are personal arrangements.

Secured creditors are also unaffected by the process of liquidation.

In a liquidation, after sale of the company assets etc, the liquidator will distribute as dividends any surplus in accordance with the order of priority set out in s.556 of the Corporations Act 2001 (Cth).

A liquidation lasts for as long as it takes but ends on the company being struck off ASIC’s register or by Court order – either dissolving the company or staying or setting aside the winding up.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Insolvency & Bankruptcy / Litigation / Risk management  by 01 May 2022 0 comments

Deed of Company Arrangement

A Deed of Company Arrangement (DOCA) is a proposal put forward by stakeholders, usually the directors, whilst the company is in administration so as to give a return to creditors better than they may receive in a winding up.

Importantly, a DOCA avoids the need to place the company into liquidation and allows the company to continue to trade with control of the company ultimately going back to the directors.

DOCA arrangements are flexible in that they can provide for may forms of payment from a lump sum or a payment by instalments of a fixed amount of based on net profit.

A Deed of Company Arrangement and must be signed within 15 business days of the 2nd creditors meeting (unless this time is extended by the Court), otherwise the company must be placed into liquidation, with the administrator becoming the liquidator.

Prior to execution, a DOCA must be approved by at least 50% of creditors by number and in value of amounts owed. Once signed, DOCAs are binding agreements between the company and its creditors and the administrator is in control of the company.

If entered into, a DOCA subsists for as long as its terms provide, until the obligations in the DOCA have all been met or until Court order.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Insolvency & Bankruptcy / Litigation  by 01 Apr 2022 0 comments

Voluntary Administration

Voluntary Administration (VA) is a process that enables insolvent companies to satisfy their debts. Once an administrator is appointed, the administrator can assist the company to trade its way into a healthier financial position with a view to either the company:

(a)    being placed back into the director’ control,

(b)    entering into a Deed of Company Arrangement (DOCA) or

(c)     being placed into liquidation.

Administration begins generally when the company directors (not the shareholders) resolve that the company is or is expected to become insolvent (but it can commence when a liquidator believes that that a proposed DOCA may give creditors a better return that liquidator or if a secured creditor has a right under their finance arrangements to appoint an administrator).

During a Voluntary Administration, the directors lose all control of the company and the administrator assumes sole responsibility the assets and affairs of the company.

There are 2 creditors meetings in a Voluntary Administration, the first within 8 business days of the administrator being appointed and the second, within 30 business days of that date. At this second meeting, the creditors determine the company’s fate – choosing either to enter into a DOCA if one is proposed or liquidation.

Secured creditors can exercise their security in a VA but must do so within 13 business days of the administration commencing. Unsecured creditors are unable to enforce their claims during the moratorium period that exists during the administration.

During the administration period, any guarantee of company debts cannot be enforced against a director etc.

VA ends on the entry into of a DOCA, if the creditors so resolve, if the company is placed into liquidation or if the Court orders it to end.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Insolvency & Bankruptcy / Risk management  by 01 Mar 2022 0 comments

Forged cheques

Cheque use in Australia has dropped by 83% over the last 10 years and is dropping by around 20% per annum. Although the use of cheques in Australia is declining rapidly with the alternative (and quicker and easier) payment methods such as EFT, debit and credit cards, PayWave, ApplePay, Stripe etc, Australians still use around 60 million cheques per year, so it is important to know what duties you may owe to your bank in relation to forged cheques.

There are 2 principal duties owed by a customer to a paying bank in relation to cheques:

  1. a duty to take reasonable care when drawing cheques so as not to mislead the bank or facilitate a forgery; and
  2. a duty to notify the bank promptly after becoming aware of a forged cheque.

If a customer becomes aware of a forgery but takes no steps to inform the bank and the bank acts to its detriment in paying the cheque, then the customer cannot later deny that the cheque was genuine.

There is no obligation on a customer to examine bank statements to detect forgeries and notify the bank of discrepancies. The customer’s obligations are limited to the above duties. Subject to those duties, the bank bears liability for payment of a cheque drawn without the customer’s authority.

The relationship between a bank and its customers in relation to cheques is a contractual one and the above duties are terms implied into that contract but banks can insert provisions into their terms of service to place the burden of losses from forged cheques on their customers if they so choose, so check the T&Cs of your bank or building society.

Steps to help prevent or detect forged cheques

Not all cheque forgeries can be prevented however, to attempt to prevent forgeries:

  • check for watermarks, ‘void’ pantographs, microprinting or other security measures
  • check the cheque looks ‘authentic’ – high quality printing, paper, correct spelling, even spacing, no smudges
  • don’t pre-sign “blank” cheques or leave cheques partially completed
  • cross cheques or mark them as “not negotiable” or “account payee only” so they are unable to be cashed or negotiated and have to be paid to an account
  • insert the dollar amount in numbers as close as possible to the ‘$’ sign and cross out any blank space to attempt to prevent other numbers from being inserted
  • state the full amount in words without leaving any spaces between or after the words – cross out any blank space
  • promptly alert your bank or the police to any suspicious, unexpected or unauthorised account transactions (cheques cant be ‘stopped’ once presented).

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Risk management  by 01 Feb 2022 0 comments
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