Defective bankruptcy notices: getting the basics right

Who? Why? How? The building blocks of a successful bankruptcy notice need to inform the debtor (ie the person who owes you money) of these three questions. Without doing so, how might the debtor have a chance to pay you before you make them bankrupt?

Today’s case looks at a situation where the bankruptcy notice was set aside because the who and the how were not adequately stipulated in the notice.

The Who

You sell items on credit to John under the name Trady Pty Ltd, and are known to everyone in the industry as Trady. John doesn’t pay, and so you commence proceedings to recover your money.

The name you use in the proceedings is Trady. Some time passes, but you win your case against John (for him not paying your debt) and you elect to enforce the judgment on him by issuing a bankruptcy notice.

The notice once expired gives you the right to apply for John’s bankruptcy.

On advice from some marketing hotshot, your company is going through a transformation and so a name change occurs. Your business is now called Cheap-Trades Pty Ltd.

The bankruptcy notice you issue only includes this new company/business name “Cheap-Trades”.

By not including Trady in the bankruptcy notice, does this potentially invalidate your notice?

Yes, according to Judge Jarrot. Why?

  • the names are not at all similar
  • the debtor should not have to decipher the notice or the name (ie in terms of analysing all of the supporting documents and running their own searches)
  • attaching an ASIC company search, without mentioning it in the notice does not fix this

How?

Just as important as knowing who has sent the bankruptcy notice, is a requirement that the debtor be able to know how to pay the debt or how to stop the action.

The bankruptcy notice states that payment of the debt can be made to:

  • XYZ Lawyers
  • PO Box 123, QLD 4000
  • email: xyz@lawyers.com.au

Again the notice was invalidated, because although a solicitors address is generally permitted, a post office box cannot constitute an address for service. Meaning that the address as presented did not allow the debtor the ability to make the payment.

Lessons

Remember to consider whether the debtor can easily understand the who, the why and the how when it comes to bankruptcy notices.

If in doubt, talk to an insolvency lawyer for assistance.

Link to Judge Jarrot’s judgment: https://jade.io/article/650505?at.hl=2019%255D+FCCA+1856

 

 

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