In today’s episode, Chamberlains’ Director Jon May is joined by Canberra Costing Consultants Duncan Harrington & James Hall, to discuss all things legal costs & party costs, in the ACT.

As with all Chamberlains Lawcast episodes, the information provided cannot be considered as legal advice, if you have any questions in relation to any information presented, please contact our office on 02 6188 3600 or visit our website at chamberlains.com.au   

Presented by; Jon May ft. Duncan Harrington & James Hall.
Date; 01/12/2020
at Chamberlains Law Firm, Canberra. 

In today’s episode, Chamberlains’ Managing Director, Stipe Vuleta, is again joined by Condon Advisory’s Managing Principal Schon Condon, Associate Gavin King, and Chamberlains’ Director Harold O’Brien, to discuss all things corporate insolvency post COVID-19. 

As with all Chamberlains Lawcast episodes, the information provided cannot be considered as legal advice, if you have any questions in relation to any information presented, please contact our office on 02 6188 3600 or visit our website at chamberlains.com.au   

Presented by; Stipe Vuleta ft. Schon Condon, Gavin King & Harold O’Brien
Date; 20/11/2020
Location; Chamberlains Law Firm, Canberra.

Transcript

Stipe Vuleta: Hi listeners it’s Stipe from Chamberlains again, and we’re back chatting to Condon Advisory and Harry from our property and commercial team. Gentlemen, how are you going?

Schon Condon: Good. Really well.

Gavin King: Yeah, not too bad.

Stipe Vuleta: Look, it’s an auspicious day we’re here chatting about all things, property, all things, corporate insolvency, and a lot of what’s going on with the federal government’s decision with respect to tenants, nationally, Harry have you seen a lot of distress in the market with respect to the tenant side?

Harold O’Brien: Uh, I have in fact, yes. Um, and not only are tenants suffering, but also landlords. Um, and I, and I I’ve seen it on the faces of some landlords… Really genuinely stressed.

Stipe Vuleta: Wow. Um, yeah, look, I guess it’s concerning because something that we worry about a lot in the context of the corporate insolvency space is generally the conduct of landlords and, and even historically the very aggressive action they’ve taken against their corporate tenants.

Uh, you know, we’ll all recall the changes to the, to the voluntary administration regime really very much led by, you know, the conduct of Westfield in South Australia and what it used to do when people would suffer corporate financial distress. Schon, you’ve been in the industry for almost 40 years. Tell us a bit about what happened.

Schon Condon: Look, it’s really interesting. I remember one, one job while I had myself. It was in one of the centres I can’t say that it’s the brand name that you mentioned, but, it was in one of the centres and we got appointed by the courts and we got notification about lunchtime. And I went out to the premises that afternoon and it was an interior decorating shop. So, it had a bit of paint, mainly papers, wallpapers, and all of those sorts of things. I’ve arrived at the, there wasn’t a lot left. Um, the director, um, hadn’t been there that day, so It had been closed up and I managed to access to the premises and there was some fit out, a bit of stock and, and whatnot.

So I ended up going and seeing the centre manager, told him that I was going to get a valuer out, um, the following morning, uh, and went to sort out, uh, whatever it is they deal with, that’s all fine. But I queried him about selling the business and he said, look, we’re not really interested in these types of business there anymore. Um, because its not generating the turnover that we expect to cover the rents that they were demanding. And I accepted that now the following morning when I arrived with my, my, um, valuer. We were confronted with a completely empty stall. And I was bewielded. We went down to city center management and there’s no one around, there was nobody to speak to.

Schon Condon: And I ended up managing to speak to one of the other shop owners who took me out the back, into the delivery bay area behind the shops, on the, on the condition of, I didn’t disclose to anyone, who had done it, but he said that what effectively happened, he said mate, five minutes after you left yesterday. They came in and they pulled everything out of the store and put it at the back, and the message was given to all of the shopkeepers that anything that I wanted that could have.

Um, and so with any ability to trade the business on or anything was lost. In that one single action in that bloody mindedness. If we don’t care, um, was, was it, and there is, there is a lot for some certain groups of landlords was, uh, to pay for, and, you know, they’ve driven rents to, to levels, which were unsustainable, which is the first point was the thing that drove, uh, the internet supply people to the position that they were.

I mean, the minute you, you say you’ve got this, a similar situation occurred actually in the taxi industry, um, because you’ve suddenly got an amazing cost to buy the plate. Um, and the return on the plate meant that that had to be added to the, to the cabfare, which meant it became a disproportionate. So Uber’s ability to walk through the door and, and squash it. Uh, was quite successful. And now it’s quite interesting that the cost of a Uber fare in certain instances can be very similar, if not, more than a uh, an ordinary taxi fare. So it’s, it’s really interesting. This change has had come, and I think as Harold was saying, in the current market. Um, this is probably one of the best situations where landlord and tenant need to sit down.

Schon Condon: Um, and work out a solution, which is not going to be what either party wants. But it’s got to be found on common ground. The landlord must understand what’s going on and what potential future demands on business premises could well be. And, um, they can, they can set a level of rent where the bloke says, where the tenant says, I can’t operate at that point. And so they will go and find alternative solutions, whether it’s telling staff to work from home, um, you know, with, with the lack of having the need to bring people in the offices, then you can go and get a, um, factory unit style of thing and have the staff coming in there, and then you’ve got storage space and, and all sorts of options that the whole world is a very changing place. But I think for any landlord, that wants to go for a confrontational approach. Um, and for the very large retailers, cause I think they’re the only ones that are actually driving, uh, a tenant confrontational approach.

Um, I think it could be a very costly decision at the end of the day. One of the interesting quotes that I read the other day coming out of the U.S there’s actually malls now that are buying up the dying [00:06:00] brands. The franchise type brands, and buying them up. So that it’ll switch from being landlord to actually the business owner of a number of stores, which they operate in a number of environments. So the market’s changing underneath everyone right now.

Stipe Vuleta: Wow. That is, um, that’s quite illuminating because what you were saying and what Harry mentioned got me thinking about. Um, this intersection of the preservation of value, you know, for the last 20 years in particular and insolvency, we’re really, we really talk about the preservation of value to the extent that we can. It’s not about being punitive. It’s not just about investigation. It’s about preserving businesses in the VA process or through schemes of arrangement or, preserving value, at least some value for creditors in the context of the liquidation. But this seems to be emerging of how do you preserve the value of, of landlord businesses and their enterprises, particularly the mega landlords across the nation, and the value to society and the potential detriment of their many tenants continuing to face ongoing financial distress.

Harold do you think that there is a way forward for a consensus based landlord tendency advocacy process?

Harold O’Brien: Well, it’s an interesting question Stipe.. I’ve often thought whether it, the landlord and the tenant form, form some sort of cooperative or joint venture in a sense, and tried to share in the profits, let’s say of the business itself and rent be determined in accordance with that somehow. Um, yes. Yeah, it’s a difficult, it’s a difficult question.

Stipe Vuleta: Yeah, look, I mean, I think even, even hearing you work through the question in your mind, I can see that it’s going to require if something like that was to be successful, it’s going to require a shift in thinking, um, for landlords and tenants. Um, Gavin, have you seen any scenarios over the last couple of years where, you know, had some consensus been reached between landlords and tenants? A corporate insolvency might have turned from, I guess, uh, a failure to a success.

Gavin King: Yeah. I think there’s a number of businesses that we’ve been involved in. Like, uh, one that comes to mind is like a little tyre automotive type deal. Um, it was clearly, you know, the business had issues and they had VREO in fact, it wasn’t working in the business anymore. He was more just managing staff and not managing that staff well. Um, but our dealing with the landlord levels effectively absent for most of the appointment, um, went through a VA, do a lick them. Yeah, try to try it on to sell it, um, until it becomes to a point where it was just untenable to sell anymore. Because they couldn’t reach an agreement when we had to get it all out, you know, so effectively a, I say on type value rather than trying to find someone that would take over the lease because the landlord just wouldn’t not negotiate on the lease. They thought they had this prime spot. Anyone would walk into it. Um, you know, I think we took the appointment a year and a half, two years ago. I think it’s still vacant.

Um, because you know, they just couldn’t see sense in, getting someone back in there with a reduced rent, doing the same thing, versus having an empty shop. So I think that’s where some of these, big, mega sort of landlords, um, they’re going to find a lot of issue. They’re going to be these, bigger retailers, franchise retailers are going to be closing up. I think they’ll find a lot more difficult to find they were going to come in wanting to pay the rents that they’re seeking

Schon Condon: A sobering form of education. Um, Google abandoned, particularly abandoned, um, buildings and structures and things like that. And when you go through and there are complete shopping malls that look like, you know, Western Paramatta, uh, that had been abandoned and abandoned for years full of trees and water and all sorts of things. And it really puts it into perspective, um, that, that these, these are realities that are not of the future. These are realities that can be [00:10:00] found in places around the world right now. Abandoned places.

Gavin King: I seen one the other day on that point on that was, you know, the, the roof had collapsed there also mosquitoes had started getting in and water had gotten in, and I think the locals had all put fish in there, um, to sort of kill the mosquitoes. And so potentially as a food source, but like, it’s just, it’s interesting in that, you know, I think America is a classic example of having these just vacant malls, where they spent, billions of dollars on setting them up and end up having no one in them.

Stipe Vuleta: Yeah. Well, I guess it’s, um, it’s, it’s an interesting thing to talk about and certainly when you jump online, they make for really good browsing. But I guess we’ve just fallen into a recession recently. I mean, not to date this particular recording, but it’s, it’s a big deal first time in 60 or 70 years and, and, maybe something like this will be a reality in the future, but, but that being said, insolvency for the time being corporate insolvency numbers are still pretty flat.

Schon Condon: They’re well down, I mean, I’ve been watching, we get a daily list of what’s what’s happening thats, been diminishing the further we go into these pandemic, um, And that’s probably a lot to do with the hiatus that we seem to have been parked in. It’s almost like a Dick Tracy watch where they say, I hold everything and there’s this pause. And then they sort of think about what’s going on in, in the middle. Uh, and I don’t think that’s really going to change until we get out of that. But the situation is if you’re insolvent before, particularly in the retail space, then I’m not sure that there’s going to be any change to this, that’s going to bring you at the other end and magically make you solid.

Schon Condon: Um, the recessions an interesting point as well, because yes, over the last few days we’ve, we’ve had it announced that, Australia’s now in recession first time in 30 years, um, prior to, well, the last one was in 91, 92. And prior to that, we tended to live in a seven year business cycle, which went from boom to, to the recessional, not quite depression, but a recession or, bust. And in, in many ways it was sort of like a cleansing process. There was an amount of insolvency, it wasn’t massive. I mean, it was talked about in big terms, but it wasn’t catastrophic. And it was when you really looked at it, most of the businesses that went broke were the ones that should’ve gone broke. It was almost that part of the business cycle, that cleaned the system out. And I’ve said for the last 30 years, Um, their have played with cheap interest rates, the whole lot.

Schon Condon: There’s been a lot of businesses kept alive artificially that really should have been out of existence well before now, uh, and strong ones. And you know, when you’ve got, when you’ve got a competitive, you put two shops, let’s call them computer shops. Um, one’s a decent business doing all the right things, and the bloke next door to it, is not paying his tax. And he’s just counting his prices to get the trade by not paying his tax. Well, he will go broke at the end of the day because the tax department will come out after him. But meanwhile, the bloke next door running, the legitimate business will go broke as well because the customers aren’t coming to him. Cause they can get it cheaper next door.

So that’s the damage that’s been done to society? Uh, in, in this process there’s been various industries have been recession within the last 30 years, we as a country haven’t been. And that’s been mining and property and various other things that have kept the overrule up there, but there’ve been certainly component to the Australian economy that have been suffering for years.

Stipe Vuleta: Well, are there any, you know, forget retail because we spent a lot of today’s recording talking about retail and landlords and tenants, but are there any particular industries you think are, are particularly at risk in the context of what is happening and what may very well get worse before we see this cleansing process? You so speak of Schorn or Gavin?

Gavin King: Yeah, I think the cleansing is going to be a lot of industries that rely on other, like the retail add on type stuff. Um, so if you’re supplying shop fitting, you know, all that sort of manufacturing type stuff, it’s probably going to be for a bit of struggle. Um, car tyre manufacturing type stuff, people aren’t driving as much anymore. They’re all staying home. So that sort of thing, that’s probably a big issue as well. And that’ll flow onto the subsidiary issues in that. Um, but I think it’s, there’s a lot of, you know, looking at it and where it goes from the top line to where people aren’t spending money anymore. I see. No, one’s traveling for a long time. Um, so I think we need to talk about travel agents and potential airlines, and they can grow, say nice from the news. Um, we don’t need to spend any more time talking about them. Um, but it’s also the smaller ones.

Um, you know, like healthcare services, personal services, people aren’t getting their haircuts done as much, nails, all that sort of thing, I think will impact as well. Um, when a personal note, my wife, she’s a dog groomer, hasn’t been busier. Um, everyone’s at home with their pets.

Stipe Vuleta: It’s funny you raise that. I mean, um, Harry and I were working on a restructure of a business, uh, sort of over the last few months and the superficial indicators during the context of Corona sort of implied that they, they might really struggle. And, and we were looking at it from the context of a tendency advocacy perspective. You start looking at the structure of a business and trying to get out of inefficient leases and really just prod them in the right direction so they can continue to be profitable. And as people started approaching the end of the lockdown period, this particular business boomed, because they supplied premium goods for the household and people were sitting at home and deciding they want, those new things around them to make them feel better about all this time they’re spending at home.

So I think there’ll definitely be some winners, uh, but I feel like, you know, for every winner there might be more than a few losers. And, do you guys think that the current insolvency industry is going to be, is going to be able to handle all this corporate insolvency?

Schon Condon: Absolutely. I don’t think, I mean, there are people coming through the profession. Um, the industry has been smashed for awhile, the largest contractor, all of it has been, um, the, the treatment of the industry. And that’s very sad. Um, but there is a need for insolvency that as long as people are lending, there will be people don’t break and therefore you need a proper system and a properly organized system to deal with that. Um, but with the, the onslaught, we have been under utilized for some time now, and this will just mean that we will get busy. We’ve been busy before and there’s, I think Gavin won’t let her come in a little bit earlier. Um, when you’ve gotta hook in, we hook in, and you get the job done and you do it. Hopefully what this might do is, give everyone a chance to look at what parts of these are inefficient, and maybe now’s the time to get some of the garbage out of the system, um, in how we deal with things. Something that can be done in 15 minutes, takes two and a half hours because of the red-tape that gets added to it. They’re the sorts of things that could truly be focused on at this point in time.

Stipe Vuleta: Yeah. It’s an interesting point because you, you circle back to things like creditor outcomes and, and I guess the primary goals of the, the corporate insolvency system in Australia, at least outside of the voluntary administration process and, and you think how much better would creditors be if it was just cheaper and easier for those independent persons like yourselves who are involved in industry to get better outcomes for them? I mean, ultimately red tape doesn’t help anyone other than government, but it’s, um, it’s an interesting thought as well. I think in the context of. People really thinking about where they will be six, 12, 18 months from now.

So not so much insolvency practitioners and lawyers, but our clients in the industry. Um, am I someone who hasn’t yet fully appreciated the financial, social, cultural impacts of this recession or of what’s about to happen in my sector? Um, am I being supported by government stimulus and incentives? And maybe now is the time for them to get advice. Um, at a previous session we had about personal insolvency, we talked about getting good advice early, being decisive, taking action and mitigating risk. Uh, I genuinely fear that there are a lot of industry participants, a lot of small businesses who are sticking their head in their sand at the moment. And the ultimate loser for that will be society.

Gavin King: Yeah, I think I agree. Stipe. The issue with most of the people putting it down with insolvency is, they do put their head in the sand, they don’t look at their options. Um, and they tend not to look at those options until they’re forced to, either a creditor, pushing them towards something, the ATO chasing its debts, or, you know, your suppliers putting you on CAD and you’re going well, I don’t have any cash anymore. Um, how do I [00:19:00] deal with it? Um, and I think it’s a huge swath of businesses out there that are, that are being funded by the government at the moment that will not debate.

Um, but again, really struggled with some of the benefits of the current situation staff being removed, um, and will ultimately, you know, the best thing they should be doing right now is going well, my I am being funded by the government right now. Maybe I need to go speak with unsolved practitioner so I can clear some of the old Deadwood that’s in my business, grow through a proper restructure and then be able to come out on the other side, clean up leaner a bit more mean because you’d have to go through this process and really had to have the hard conversations with some, professionals about what your business needs to look like to make money in the future.

Stipe Vuleta: Look, I think that’s a really pertinent and meaningful point to end on. I think this is all about helping people to continue to make money and to continue to be prosperous. And if you’re not getting advice today, then maybe you’re not going to get the outcomes that you want. So gentlemen, it’s been lovely chatting and thank you for coming on today.

Schon Condon: Thank you very much for the opportunity. It’s been, really good.

Gavin King: Thank you.

In this episode, Chamberlains’ Managing Director, Stipe Vuleta, is joined by Condon Advisory’s Managing Principal Schon Condon , Associate Gavin King, and Chamberlains’ Director Harold O’Brien, to discuss all things personal insolvency.

As with all Chamberlains Lawcast episodes, the information provided cannot be considered as legal advice, if you have any questions in relation to any information presented, please contact our office on 02 6188 3600 or visit our website at chamberlains.com.au

Presented by; Stipe Vuleta ft. Schon Condon, Gavin King & Harold O’Brien
Date; 13/11/2020
at Chamberlains Law Firm, Canberra.

Transcript

Stipe Vuleta: Welcome back everyone! I’ve got Harold from Chamberlains, and Gavin and Schon from Condon Advisory in which adding all things, Windsor, motor vehicles and cruising around. Schon, how you going?

Schon Condon: Good. Thank you. Yes good.

Stipe Vuleta: So, I understand you spent a lot of time in Windsor driving the old car out, enjoying the lovely roads.

Schon Condon: Yeah, no, I enjoy, I must admit I’m very much the Car freak. I’ve got an old MG TF 1955, uh, 1500, which I get out and about, when I can, not as often as I would like to, but very pleasant drive. Good, good to have the old it’s very low car and a very small car. So, you really feel the attachment to the road.

Stipe Vuleta: I feel, I feel, uh, driving or owning an old car is like having a boat, you know, it’s, um, it’s quite quite enjoyable, but it is a lot of work in maintenance.

Schon Condon: It requires some mechanical, big, but fortunately I’ve got a mechanical bench, so I’m not afraid to pick up a spanner or a screwdriver, um, and, and do it. But yes, I actually put Boats in a slightly different category. Um, there’s a quote which I’ve got, but I won’t use it on your recording.

Stipe Vuleta: Haha! So a bit of a technical mind, and today we’re talking about personal insolvency it’s I think an area that a lot of accountants and advisors in the personal, or, in the insolvency space probably don’t appreciate for the complexity that it creates.

Schon Condon: It’s, it’s an area which has its own quirks, um, and a little bit of an historical note, which might be of interest to people listening. I remember doing some study and in Roman times, pre-AD, um, they were fighting a battle with the Greeks that resulted in 70,000 Greeks being killed, uh, on the success of battle. But at the same time, the Roman Senate was dealing with the issue of individuals failing to pay their debts. And this process of bankruptcy was actually created at that time. And its three-year period, was, was created at that time. And what effectively it meant was that the bankrupt was put into servitude of his creditors, uh, for a period of three years.

Schon Condon: And quite commonly, one of the creditors would typically pay off something to the other creditors. And then he’d end up with the bankrupt as a personal servant for the period of three years as he served out his time, uh, which I found that juxtaposition between sorting out this thing and preventing debtors from up until that point in time, simply being killed.

Schon Condon: Um, versus the battle was raging across not far away. Um, and 70,000 people being wiped out in one day was really, really interesting. But no, there is some very real quirks to how bankruptcy rule works. Um, it is very much a piece of legislation, which is dealt, meant to deal with the situation from being in the middle. There’s a creditor and there’s obviously the need to get money back to the creditor and all that. But there’s also a respect for the individual rights of the debtor. And in the majority of cases, it’s a poor, unfortunate person, that’s found themselves in a situation where they can’t pay their debts.

Schon Condon: They didn’t steer their life into that situation. There is a handful of people who, ah shall we say, the crooks in the society who will quite deliberately go out and scheme and do whatever they need to, to get money and then milk it away, and then go bankrupt and that. But I can assure you from 40 years in the game, that’s by far and above the, the minority of the people involved.

Schon Condon: And so, there’s a lot of people that don’t fully understand it. And the regulator does a pretty magnificent job actually in making sure that that balance is maintained. And I’ve got a lot of respect for how they approach things. Um, so with that sort of thought, unless you properly know, I understand bankruptcy and I’ve actually seen some decisions in lower courts when they’re not exactly dealing with a bankruptcy issue, but it’ll involve something bankruptcy.

Schon Condon: And they’ve actually missed some of the quirks of the bankruptcy legislation in the decision that they’ve made, which would have been better guided. And that’s probably had, one of the two lawyers or even potentially the magistrate or whoever had some understanding of the bankruptcy law in the decision might have been a slightly different one.

Stipe Vuleta: It’s funny you raise that because an area that I’m passionate about, I do a bit of work with Harold in and around is this tripartite intersection of, you know, real property of trust law, family law, and bankruptcy. Because you find, you know, people get themselves into these situations where, you know, they’re stressed, they’re under pressure because their financial circumstances, they may be haven’t yet had the opportunity to speak to a bankruptcy trustee or another insolvency professional. It has all these other negative impacts on their lives. So sometimes I guess you guys are not just stuck dealing with, you know, a legislative process for absolving people from some of their financial sins, if I’m off, put it in a crude way, but, um, otherwise, you know, helping people go through very challenging issues.

Schon Condon: No, that’s, that’s very true. It’s funny. I’ve had one marriage which is still in existence, um, but I’ve been the third party to more divorce proceedings then I can point a stick at! Um, and, and they have all of their quirks, and the balance between. Uh, then the age of the family versus, um, the rights of creditors and all sorts of things can often end up in very complex situations. Particularly when there are other, we’ve got one interesting matter at the moment, uh, where other members of the family have suddenly, um, formed a desire to suggest that the property, properties held in the names of the bankrupt, or the bankrupt, and her husband are in fact, technically in trust for someone else.

Schon Condon: Now I can’t go into too much detail. Because it’s a living, breathing case at the moment, but, um, you, when you throw those sorts of things into it, it’s amazing to see how quickly costs and confusion can escalate.

Stipe Vuleta: It’s an interesting point you raise because it gets me thinking about some of the classic personal insolvency cases, even the ‘Cummins’ case about the gifting of property and transactions to defeat creditors, and, and you really start thinking about the importance of getting good legal advice when you’re entering into transactions. And, you know, determining the strategy upon which you want to protect your assets. Harry, do you, uh, have any tips for people in the context of, uh, you know, the type of advice they should seek before they’re buying property?

Harold O’Brien: Well, I, I, yes. I, I think, uh, depending on the type of business they have and whether they’re at risk, whether they should consider, um, who actually acquires the asset, the property. Whether that persons involved in the business or not. Um, in particular, the family home is one that can be acquired by a family member. Um, uh, and if it’s your domicile, um, in the future, you can in new South Wales, get some exemptions where it’s your family home to go back on title. Um, so definitely it’s something worth looking at and considering at that time, um, I mean, there’ve been plenty of instances where I have seen, uh, businesses that are set up where the husband and wife are both directors and one of the parties aren’t involved in the business at all. There’s no reason for them to be. Um, and I’m not sure why they would do that, but, um, clearly, they haven’t, um, obtained advice, um, before they’d entered into that transaction.

Stipe Vuleta: Yeah, well, I guess it, it, it flows back into something, we see a lot in personal insolvency and bankruptcy, which is that element of the greater pool of debtors that go bankrupt. And I guess directing this at Gavin, um, business risk and bankruptcy, I mean, it’s, it’s a fraud area. What are your recent experiences with it?

Gavin King: I guess the two go hand in hand more than most people realize, but people see corporate failure. In most circumstances, the creditor’s probably think it doesn’t lead to a personal failure. Um, but in most cases it does, um, the directors out there generally have signed personal guarantees, they’ve signed a mortgage, they’re probably their own real property. Um, they’ve signed all this other stuff up that results in them having to consider their own personal options. Um, and it’s one that they probably need to take a bit more advice on, um, before they get into these sort of structuring issues, or going into a business, um, and then you’re tying up their partner in it, um, who might not have any role.

Gavin King: Um, an interesting one of that, we’ve dealt with recently was, um, we did one, the husbands divorce proceedings, husband, divorced wife, they had the property was in both names. Husband had mortgaged it and signed it up. Then there was some fraud in there as well. So, it’s a slightly different circumstance, but you know, I think the case remains, in that he really went bankrupt four years ago. She got lumped with the balance of the loan. They were still chasing her, not withstanding the fact that know she was a schoolteacher earning minimal money. Um, you know, got lumped with this leftover debt, um, that we just couldn’t negotiate and told them she had to go bankrupt, but you know, people need to consider all their options and what they’re actually signing when they’re getting informed.

Stipe Vuleta: Yeah. Well, I guess, um, you know, if you fail to plan, you plan to fail and, and, uh, a good, a good reason to. Maybe not just speak to a lawyer, um, but to speak to a, uh, risk and, and insolvency professional before you get yourself into a real hot mess.

Schon Condon: That’s a really interesting point. Um, regrettably, most of the people that we see who want to talk about restructuring their affairs, are doing so with a visible issue on the horizon, shall we say. It might be, I haven’t, I haven’t yet received the, uh, demand from the lawyer, but because of something that’s gone wrong or whatever, I know I’m going to get one in due course back. What can we do about things right now? And going back to the point that you were making with earlier, um, there is proper planning that people going into business should do, and it should be done early. Not, not when the problem’s there. But when you’re sitting up preferably, so that you can, um, make sure that these sorts of dramas are prepared for rather than confronting when they become a problem. And from that perspective, the idea of gifting, as you mentioned, whether it’s the ‘Cummins Principle’ thing, or even just, I want to give something away to my family.

Schon Condon: Um, There’s nothing wrong with that. And then the bankruptcy act doesn’t prevent it and it doesn’t include it in the fact that you’re in business, it doesn’t preclude that. But the critical thing is you need two components to it, structurally it needs to be done properly. So therefore, there is a legal element component to it so that the transaction is affected in a proper sense.

Schon Condon: But at that point, the lawyers should be seeking advice from a relevant professional. Um, the, it shouldn’t be the necessarily their accountant. It should be somebody independent. Um, so that the, the Lawyer can rely on the fact that there’s an independent view, but they should be getting a view to, to confirm the fact that the people are in fact, solvent, with no visible sign of insolvency, uh, into the future because giving away something that you own, is no issue with, there’s no one else seeking to claim it. Um, but mystically and we see it a lot, um, we end up with bankruptcies where the title deed was transferred five months ago, and Lawyers still do it! Now, put on, on the title, they transferred for $1.

Schon Condon: And you know, if you want to work out whether property transactions undervalued then using a dollar is the transfer, is probably a good way to do it. Um, if you put it a more responsible number on there, then issue becomes wasn’t ever paid, actually paid, but that becomes a separate issue.

Stipe Vuleta: Yeah. Well, it’s really interesting because it’s this, um, this weird matrix of a number of risk points for individuals that are getting into or conducting business, because you’re talking about, well, what am I personal and philanthropic goals and what is the context of my life at the time that I want to start, investing in those long-term goals, versus, what are the potential risks that I might face in the future. And like you said, the only real certainties, the time, distance between those two things. We see, we see it a lot in the context of property structuring for individuals, just the, the need to properly document arrangements about not owning things equally in a marriage and why those things might be important.

Stipe Vuleta: And people always think, well, you know, I’ve got a prenup or I’ve got a postnup uncovered, or I don’t want to get one. But this isn’t even about the family law. This is just about how we want to own our home and how we want to structure ourselves in the future. And what is the reason about that? So, you’re absolutely right, Schon, uh, getting good advice, not just from your accountant, but from the lawyer and an independent insolvency practitioner is so key in mitigating your stress ultimately. Whether you’re a hundred percent protected. At least mitigating your stress as you approach potential financial crisis.

Schon Condon: Absolutely. I mean, I know from a, from a trustee’s perspective, um, if I’m confronted with a situation where they gave away a piece of real estate to a family trust… 15 years ago as a gift, and I’ve got proper documentation from a lawyer clearly existent from that point in time. Well dated and stamped or whatever. And then they turn around and say, well, here is the report from XYZ, who is probably someone that the court’s going to significantly respect. And, and that report is similarly dated and visible to be from that period. And the persons remained solvent up until the last two years maybe, when there were business dramas that happened or whatever it was that caused the bankruptcy, maybe it was a failed development. I’m not sure. Um, but if you’ve got that, then the chances of drumming it into a court, um, and trying to force a disposal and undervalue, uh, would be fraught with danger. In fact, I’d be suspecting that the judge would throw the trustee out with costs and rightly so, because it was done right. And the information’s’ been provided.

Stipe Vuleta: Yeah. And I guess that’s a really interesting point to end on, which is, there’s a lot of, um, I guess, distrust in and around the insolvency industry, because often, you know, you guys in particular and us as lawyers who might represent trustees, are caught mopping up the messes of poor planning for the interests of creditors, but ultimately you’re impartial observers and investigators. So, if people have planned correctly and done things, right, um, they should have confidence in the process.

Schon Condon: Uh, that’s exactly right. And I’ve got to say to you, poor planning is one component to it, regrettably. Um, and, and this can sit across lawyers, accountants, and various other professionals. There’s been a number of examples of where the intent existed some time ago to do something. And it was sort of possibly the client that said, you come back to me and we’ll get this all sorted. And in time, slip by, the practitioners become very busy with other clients and things. And because it wasn’t kept forefront and because the client thought, well, that’s obviously not a real issue, and in of course, when someone’s confronting bankruptcy, what potentially could have been and should have been done 10 years ago, um, they’re trying to rush through now. And unfortunately, when you have that visible sign of an impending climb, it is too late. There are things that you can still do to control the damage, but substandard damage has been done at that point in time.

Stipe Vuleta: Right. Well, I mean, I think that’s, uh, an appropriate, but slightly more the drop-off point for today’s discussion. So, get advice, but get good advice. Be decisive and act and act early.

Schon Condon: Yeah, absolutely. And it’s not a, to me, it’s not a morbid point. It’s, it’s the constructive point. It really is. Much of the problem that we see can be completely avoided if people have done things properly in the first place.

Harold O’Brien: Yeah. I actually recently had a transaction where you can actually rectify a structure, that’s not been set up properly in the first instance. So, I had a client that was selling their property, and looking at buying a new property. Uh, they were looking at renting some new premises. So basically, with the spouse. Uh, the spouse was removed as a director of the company. Um, and in entering into the new transaction, the landlord had requested originally a guarantee from both the husband and the wife. Um, one of the spouses was removed, um, and we were only required to provide a guarantee from one of the parties. So, going forward the. Uh, acquisition of the new property will be in the name of the person that is not involved in the company.

Harold O’Brien: So when you were looking at buying and selling and people are always upgrading their homes and houses and so on, it’s a great opportunity to look at your structure again, and you might be able to rectify it without the cost of stamp duty and trying to transfer something.

Stipe Vuleta: That is, that is a really interesting point. So what you’re saying is, Um, it’s not always too late, unless you’re in an impending risky financial scenario. There are ways to fix the sins of the past, and put yourself into a better position moving forward.

Stipe Vuleta: Great. Well, thanks gentlemen. Um, it’s been lovely chatting and look forward to doing it again.

Schon Condon: We truly appreciated the chat. 

Stipe Vuleta: That’s alright, thanks guys.

In this episode, Chamberlains’ Managing Director, Stipe Vuleta, is joined by Accross Business Principal & Director Kieran May, to discuss all things Jobkeeper, SGC Amnesties and strategy about recovery post COVID-19.

As with all Chamberlains Lawcast episodes, the information provided cannot be considered as legal advice, if you have any questions in relation to any information presented, please contact our office on 02 6188 3600 or visit our website at chamberlains.com.au   

Presented by; Stipe Vuleta ft. Keiran May
Date; 13/10/2020
Location; Chamberlains Law Firm, Canberra.