1. I have received some court documents and I think I’m being sued. What do I do?
You should contact a solicitor as soon as possible for advice on what the nature and effects of those documents are, and what the appropriate steps are to take. It’s important not to delay, because depending on what type of matter it is, the law may impose restrictions on the time you have to respond and judgment could be made against you in your absence without you having a chance to defend yourself.
2. I failed to respond to a claim and just found out there is a default judgment against me. Is there any way to reverse this?
This will depend on the circumstances, but there is sometimes a way to have the default judgment set aside so that you can defend the claim. You should contact a solicitor as soon as possible as time restrictions may apply, and there is a risk that the other party may take actions to enforce that judgment against you.
For more information on enforcing judgments, click here.
3. Someone owes me money but has failed to pay. How can I sue that person?
Whether you can successfully sue someone will depend on many factors, such as the terms of the agreement, the quality of the evidence, any defenses available to the debtor and many, many more considerations.
You should contact a solicitor with all the relevant documentation in order to obtain advice on your prospects of success. Your solicitor will advise you on the costs and risks involved, and the possible outcomes, benefits or detriments, and you should weigh up those factors when deciding whether to proceed.
Even if you are successful, payment is not automatic! People may continue to avoid paying you, so you may need to enforce that judgment through further court processes, or the person may simply not have any money to give you. Your solicitor can advise you on enforcement processes.
Your solicitor can also assist with your business structuring, and can draft terms and conditions and other engagement documentation for your business to reduce the risks involved with having debtors. Clear terms and conditions can provide you with more certainty and depending on your circumstances, you may have potential options for reducing risk such as requiring guarantees or security.
For more information on debtors, terms and conditions and structuring, click here.
4. My company has just been hit with an unexpected tax debt and it can’t be paid straight away. What can I do?
The ATO winds up many companies every year. You should take this debt very seriously. You may be able to enter into a payment plan or otherwise resolve it directly with the ATO, but there is no guarantee of this and the interest charges and penalties add up very quickly so time is of the essence.
You should contact your solicitor for advice and also put your solicitor in contact with the company’s accountant as soon as possible because in addition to the above, the ATO may issue a creditor’s statutory demand. A statutory demand has strict time restrictions and may allow the ATO to wind up your company if it cannot be complied with or set aside in court.
You may be at risk of personal liability through director penalty notices issued by the ATO which have time restrictions. You may potentially be liable for various things you did or did not do before your company was placed into liquidation if the ATO is successful in winding it up and a liquidator is appointed.
For more information on statutory demands, director penalty notices, and liquidations click here.
5. I went into business with a friend and we are both directors and shareholders of our company. Lately we have been having many disagreements and I’m thinking of breaking up with my business partner and going out on my own. What should I do?
You will have many things to consider in this scenario. If you have a properly drafted shareholders’ agreement, there will be mechanisms for dealing with this. If you do not have such an agreement in place, or you have one but it is poorly drafted, there will likely be more complications. Given the fact that there is a friendship involved as well as a business, the likelihood of a full-blown dispute arising is quite significant as emotions can run high in these situations.
These disputes tend to be messy and costly, especially if you begin taking action without proper advice and after tempers have already begun to flare. You should contact a solicitor for advice as soon as possible and provide a copy of any shareholders’ agreement and any other relevant documentation.
For more information on shareholder disputes, click here.
6. My company has been experiencing financial trouble and I’m concerned that it might need to go into liquidation. What should I do?
Company directors owe many duties for which they are personally liable, one of which is to avoid trading a company whilst it is insolvent. If you are concerned that your company may be insolvent, you should contact your solicitor for advice as soon as possible to reduce your personal risks and to increase the chances that the company may be salvageable through a scheme or administration of some type.
Your solicitor will advise you on your own personal liabilities and risks. Your solicitor may also recommend that you speak to an insolvency practitioner (an accountant who specialises in liquidations and other types of administrations) about how best to deal with the company as there are may be various options open, depending on the company’s circumstances.
For more information on insolvent trading, click here.
7. My company went into liquidation recently and the liquidator keeps demanding money from me for ‘voidable transactions’ and ‘breaches of director’s duties’. I don’t really understand what this is about. Do I need to pay?
There are many types of claims that liquidators may be able to make against directors, former directors and other officers of a company in liquidation. All these claims have different elements which the liquidator must prove in order to be successful, and there may be defenses available to you. One set of facts or a certain action or omission by you could potentially give rise to different types of claims against you. You should contact your solicitor for advice as to your prospects of successfully defending such claims. As liquidators are tasked with getting in funds for creditors and are generally commercially minded, your solicitor may be able to negotiate an outcome with the liquidator even if the liquidator has a reasonable claim against you.
For more information on voidable transactions and breaches of director’s duties, click here.
8. I have a large debt I know I can’t pay right away but I’m hoping I can make a deal with my creditor even though the creditor doesn’t have any formal system in place for that. What can I do to get the creditor off my back?
Your solicitor can assist you in negotiating with the creditor. Although the creditor may choose not to cooperate, many will be willing to enter into a deed of settlement on terms agreed between the parties in order to resolve the matter. For instance, the creditor may agree to let you pay by instalments or may agree to accept a reduced sum as payment in full. You should contact your solicitor for assistance and advice.
9. I managed to get a judgment myself in a local court but I haven’t been able to get the debtor to pay and now I want to bankrupt him. How can I do this?
The most common way to do this is to serve the debtor with a bankruptcy notice. Your solicitor can assist you in lodging this. The amount of the debt must meet the threshold and it must not be over the limitation period in age. Once your application is accepted and the bankruptcy notice is created by the Australian Financial Security Authority, your solicitor can assist in arranging for it to be served on the debtor, as the service needs to be done correctly in order for you to rely on the bankruptcy notice later to bankrupt the debtor.
If the debtor fails to pay in the strict time period set out on that bankruptcy notice (usually 21 days), then your solicitor can assist you with an application to the court (known as a creditor’s petition). If successful this will result in the debtor being made bankrupt for failing to comply with the bankruptcy notice. The debtor may or may not object to the bankruptcy notice or the court proceedings and if there is an objection or defense your solicitor can further advise you on prospects and also on what happens after someone is made bankrupt.
For more information on bankruptcy notices and creditor’s petitions, click here.
10. I’m involved in a big dispute over a valuable business contract and I don’t know what to do. How can I handle this situation?
You should contact your solicitor for advice as such disputes can have devastating effects on your business. Your solicitor can assist you in understanding your business’s position, rights and liabilities and the prospects of any claims. Your solicitor can also assist in resolving the dispute, whether it be formally or informally, and can guide you through any court processes, settlement negotiations, mediations, deeds of settlement and other points throughout the life of the dispute. Your solicitor can also assist in negotiating and drafting new business contracts as a properly drafted agreement can increase certainty and help reduce the risks of disputes arising or worsening.
For more information on commercial disputes, click here.