By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.
At a high level the process for applying to make someone bankrupt may appear simple and straightforward. But, as the old adage goes, the devil is in the detail. At a granular level, the rules in bankruptcy proceedings are rather technical and procedures must be strictly adhered to. Often enough, a party will make a mistake where the consequence is they must start all over again, adding to lost time and increased costs.
The recent judgment of Metledge v Hopkins [2020] FCA 561 is one such case. The creditor, Ms Metledge, applied to the Federal Court of Australia for a sequestration order against the debtor, Mr Hopkins – that is, an order placing the debtor into bankruptcy and for a trustee to be appointed over his property. The creditor relied on the debtor’s failure to comply with a Bankruptcy Notice.
Bankruptcy Notices are a prescribed form and must provide an address at which payment of the debt supporting the bankruptcy notice can be made within the period for compliance. However the Bankruptcy Notice in question in Metledge specified a post office box, rather than an address where the debtor could physically attend to make payment (or where an offer to secure or compound the debt could be made), such as the creditor’s place of business or solicitor’s office. Where a post office box was stated as the relevant address for payment, Justice Lee posed the query, “Make the payment or offer to whom? The postmaster? A postal clerk?”
The Court found that listing the post office box was likely to mislead the debtor and therefore it was a fatal defect. The Creditor’s Petition was dismissed with costs. As such, the result is that the creditor must:
- Start all over again by applying for a fresh bankruptcy notice;
- Attend to service of the revised bankruptcy notice;
- Commence a fresh Creditor’s Petition (including another filing fee); and to rub salt in the wound
- Pay the debtor’s own legal costs of the Creditor’s Petition.
The above case highlights the importance of getting Bankruptcy Notices and Creditor’s Petitions right. It is not unreasonable to expect that the creditor’s slight misstep could have cost him in excess of $15,000, a significant period of time (particularly bearing in mind the period for compliance has been extended to 6 months as a response to COVID-19), not to mention immeasurable amounts of frustration and anguish.
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Andrew Hack at andrewh@matthewsfolbigg.com.au or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au.
