Bankruptcy and Liquidation
A useful publication for those who do not practise regularly in this area of law but need to advise clients generally on the workings of insolvency law for individuals and companies.
Recent updates can be viewed on Obiter - our News & Updates site.
Precedents include:
- Initial letter to debtor client with explanation of bankruptcy
- Example content for an application for winding up
- Example content for affidavit in support of application for winding up
- Example content for an application to set aside a statutory demand
- Example content for an affidavit in support of setting aside a statutory demand
Guides in this publication
MATTER PLAN
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“ In the legal profession the term ‘costs’ refers to the fees and other expenses a solicitor charges a client for their professional services and other payments that arise out of the provision of legal services, including disbursements such as court fees. Costs are one of the most heavily regulated ... ”
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“ Disclosure requirements vary between the states and territories and are embodied in each costs agreement. Law practices are required to make written disclosure of a wide range of matters relating to the costs of legal services before or as soon as practicable after the law practice is retained. ”
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“ Costs disclosure is not required in relation to certain clients, described in the legislation as ‘sophisticated clients’ or ‘government or commercial clients’ as defined by the relevant legislation to include clients such as lawyers, law firms, public companies, liquidators and government entities. ... ”
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“ Cost agreements are not always required although clearly as between the practitioner and their client there will be disclosure but without the need for formal compliance with the regulation. The limits are: ”
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“ In NSW & VIC there is a standard costs disclosure for fees under $3,000 which is included in the precedents. If the total legal costs in a matter (excluding GST and disbursements) are not likely to exceed $3,000 (the higher threshold), a law practice may, instead of making a disclosure under ... ”
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“ Knowing that clients are disinclined to read, sign and return cost agreements, the letter sending them usually provides that unless heard to the contrary the practice will assume agreement. There will almost always be a later opportunity to have the agreement signed. Of course, many practitioners ... ”
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“ Costs are remuneration for professional work when acting in the capacity of a barrister or solicitor. Payments to a practitioner for work which is not professional work, are not costs. Disbursements are payments made, or liabilities incurred in the course of practice and which the practitioner is ... ”
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“ Firms are required to provide an estimate of the total of costs, excluding GST and disbursements, and information on the impact of any significant change to these costs. A law practice must take all reasonable steps to satisfy itself that the client has understood and consented to the proposed ... ”
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“ What is a disbursement Disbursements are payments made, or liabilities incurred in the course of practice, and which the practitioner is bound to pay whether put in funds by the client or not; or payments which, by established custom and practice of the profession, the practitioner is bound to pay. ... ”
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“ A lawyer may request money on account of fees be paid into a trust account before the commencement of work. This is particularly so in criminal and other court matters where the inclination to pay may wane with an unwanted outcome. The funds may cover legal fees as well as disbursements and the ... ”
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“ The costs agreement will set out the billing cycle. Commonly a regular monthly billing cycle is adopted covering work undertaken during the previous month. ”
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“ A lump sum invoice is one which sets out a recital describing the legal service provided and a total amount. An itemised invoice is one which sets out in detail each of the legal services provided, the date they were provided, and the cost for each service. An itemised invoice allows for an invoice ... ”
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“ A law practice cannot charge for the time spent in preparing an invoice. A law practice cannot charge for the time spent in preparing an itemised invoice for a client who has already received a lump sum invoice. ”
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“ All bills should be accompanied by a written statement setting out the avenues that are open to the client in the event of a dispute and any time limits that apply to the taking of such action. Under the uniform law in NSW and VIC each bill or covering letter must be signed by a principal of the ... ”
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“ In 1991 the Australian Competition and Consumer Commission released guidelines to assist businesses in the withdrawal on one and two cent pieces. In the purchase of goods or services for cash, businesses were advised to round the final payment: ”
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“ – When to charge and how to charge Goods and Services Tax (GST) is a broad-based tax of 10% applied to most goods and services, including legal services. Businesses are required to register for GST if their turnover exceeds the $75,000 threshold. If turnover is less than $75,000 than registration ... ”
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“ Reducing fees can create good will but needs to be handled with care as some take offence to the implication that they cannot afford to pay for the work they have retained. It is also a hard won reality that comes from experience that people are inclined not to value any advice given for free. ”
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“ Credit terms are quite common and need to be clearly documented and administered. ”
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“ Notification of rights is a requirement in all states and is found in all example invoice precedents. If the client has not been advised of their rights in a costs agreement, then practitioners must advise the client of their rights at the time of issuing the invoice. ”
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“ Monthly accounting for work in progress is recommended in order to achieve target lockup days. If debtors are not followed up promptly cash flow reduces making it imperative to adopt a debtor’s policy for effective debtor control. All overdue accounts must be followed up promptly and repeatedly. ”
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“ Termination When a retainer is terminated before completion a lawyer may claim costs for the work done to the date of termination on a quantum meruit basis if: ”
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“ Sound financial management is absolutely critical to the success of the law practice. There is a high correlation between practices with poor financial management and increased probability of experiencing professional negligence claims. The link is clear. Principals, who do not manage their ... ”
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“ Methods of payment include: Credit card; ”
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“ All By Lawyers cost agreements include the following authority to transfer money to pay their invoices: Trust money ”
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“ Lawcover recommends that practitioners use the cost assessment scheme to recover costs. Instituting proceedings against a disgruntled client who refuses to pay an outstanding bill exposes practitioners to the risk of a cross-claim in negligence being filed. The advantage of the cost assessment ... ”
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“ Other states For more information on similar procedures that exist in some other states, see: ”
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“ National Personal Insolvency Index Information for debt agreement administrators – Australian Financial Security Authority ”
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“ Insolvency – Company Liquidation Personal Property Securities ”
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“ Insolvency means the inability to pay all debts as and when they fall due. A person who is insolvent may go bankrupt. A company which is insolvent may go into liquidation or, as is commonly said, be ‘wound up’. The test of insolvency is a cash flow test, although a balance sheet may be relevant. ”
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“ Separate legislation deals with personal insolvency and corporate insolvency. Personal insolvency is the subject of the: ”
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“ The word bankrupt has its origins in middle ages Italian banco rotto, meaning broken bench and referring to the practice of breaking a trader’s table to prevent further trading. In biblical times bankrupts were harshly treated, with their wives and children forced into slavery, property seized and ... ”
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“ The Federal Court of Australia and the Federal Circuit Court have concurrent jurisdiction: s 27 Bankruptcy Act. This is exclusive except for the jurisdiction of the High Court and the Family Court. Proceedings may be transferred to the Family Court which then exercises jurisdiction in bankruptcy ... ”
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“ Acts of bankruptcy are found in s 40 Bankruptcy Act. An act of bankruptcy is evidence that a debtor is insolvent. There are 21 such acts, including filing a debtor's petition and noncompliance with a bankruptcy notice. Failures to execute a personal insolvency agreement or a breach or termination ... ”
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“ A bankrupt is either a person against whose estate a sequestration order has been made, known as an involuntary bankruptcy; or a person who is insolvent and has presented a debtor’s petition which is accepted by the Official Receiver, known as a voluntary bankruptcy. Approximately 90% of ... ”
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“ A creditor’s petition must be presented within six months of the act of bankruptcy upon which it is based and the bankruptcy commences on the day of that act of bankruptcy. This time period cannot be changed. Bankruptcy is not a debt collection procedure and before a petition is brought there must ... ”
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“ For the ordinary person with few divisible assets and an average income bankruptcy will have a limited impact. Most people would prefer to avoid the stigma and embarrassment associated with being a bankrupt; however, being freed of the often overwhelming worry of being unable to pay debts can be a ... ”
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“ Transactions that may be void against the trustee are: undervalued transactions: s 120; ”
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“ A transferee who acquires property in good faith at market value has no concerns. Further even if the transferee has to return the property the trustee must refund the consideration paid for the transfer: see s 120(4). The position of spouses needs to be considered. Assets in the name of the ... ”
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“ A trustee is the only party able to institute proceedings and is subject to a limitation period of six years from the date of bankruptcy except in the case of transfers to defeat creditors under s 121, which may be commenced at any time: s 127. It is not relevant to the proceedings that the debtor ... ”
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“ The Bankruptcy Act provides that the vesting of property under the Act, including Part X agreements, is subject to an order of the Family Court in relation to property, spousal maintenance and maintenance agreements under Parts VIII or VIIIAB of the Family Law Act but not financial agreements ... ”
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“ The Bankruptcy Act in Division 4B provides for the assessment of the income of a bankrupt and, if it exceeds the threshold, for payment of a contribution to the estate. This can be enforced by way of notice which in effect garnishees wages or a bank account. The contribution formula is designed to ... ”
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“ Firstly, there is a mechanism provided under Part IV Division 2A Bankruptcy Act by which a debtor can get a 21day breathing space from the pressure of their creditors in which to consider the alternatives to bankruptcy that might be available. This is obtained by the filing of a declaration under ... ”
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“ Documents in new proceedings should be filed electronically with the court. If this is not possible there is the facility for filing paper documents. A creditor may file a creditor’s petition in the Federal Circuit Court or the Federal Court for sequestration of the debtor’s estate. About one in ... ”
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“ The minimum debt is $5,000 and the date of the judgment must be within six years of the date of the bankruptcy notice: s 41. ”
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“ Prior to lodging an application for a bankruptcy notice, a search of the National Personal Insolvency Index (NPII) is necessary. This search will show whether the debtor is already bankrupt or a party to a debt agreement or a personal insolvency agreement. A bankruptcy notice is a formal notice of ... ”
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“ The creditor must file the petition form within six months of the act of bankruptcy, which in most cases is for non-compliance with the bankruptcy notice: s 44(1)(c). While a notice may be served by mail, DX or fax, as well as personally, r 16.01 provides a petition must be served personally. ... ”
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“ A significant proportion of bankruptcy matters are case managed and determined by judicial registrars of the court, including creditors’ petitions, applications to set aside bankruptcy notices and examinations under s 81 of the Bankruptcy Act. The Federal Court publishes a Guide for practitioners ... ”
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“ Part IX Bankruptcy Act is designed to provide a solution for insolvent debtors with only a few assets, a small debt and low incomes as an alternative to what is commonly called consumer bankruptcy. The insolvent debtor gives to the Official Receiver a proposal for a debt agreement in the approved ... ”
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“ An insolvent person may, rather than present a debtor’s petition or await a creditor’s petition, propose an agreement to creditors under Part X of the Bankruptcy Act. These agreements, when properly established bind all creditors, which can be contrasted with an agreement with a particular ... ”
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“ When finalising a matter it is important to terminate the retainer. This informs the client in writing that all work on the matter is complete and that no further work will be undertaken unless the firm is otherwise instructed. If the matter is finalised in such a way that the client retains ... ”
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