Enforcing Judgment can be challenging - Bankruptcy Notice


Once a party has received Judgment in his or her favour there is no certainty that the Defendant will make payment.  Often the Judgment needs to be enforced to receive payment.

Also often the Defendant is impecunious and one needs to consider these matters at the commencement of proceedings and consider whether the cost benefit of proceeding even if one has a very good prospect of success in obtaining a Judgment.

One option of enforcing a Judgment is to take bankruptcy proceedings. 

The laws of bankruptcy are technical and unforgiving and any misstep could carry severe consequences. 

If you have received a Bankruptcy Notice, it is important that you take timely and correct action to deal with the Notice. 

The situation is well illustrated in a recent case in which we acted on behalf of the successful plaintiff in the original proceedings.  Following the decision at the original hearing the unsuccessful party (the original Defendant), now the Judgment Debtor , took prompt steps to institute appeal proceedings against the original decision within the timeframe prescribed by the rules. 

The Judgment Debtor /Defendant, however, took no further action in relation to the judgment.

The lodging of an Appeal of itself does not stay the Judgment or prevent the successful Plaintiff enforcing the Judgment against the unsuccessful Defendant however in certain circumstances the Appeal Court in this case the Court of Appeal could grant a stay of proceedings pending the determination of the Appeal.  This needs to be considered and swift action is required to protect the unsuccessful Defendant from enforcement proceedings by the successful Plaintiff pending the outcome of the Appeal.  

There are also other issues that may arise.  Careful consideration needs to be given to these aspects. 

Our client had issued a Bankruptcy Notice which was served on the Judgment Debtor /Defendant.

The Judgment Debtor /Defendant had not applied to the Court for a stay of execution of the Judgment pending the Hearing of the Appeal.

A separate application was made to the Federal Circuit Court seeking to set aside the Bankruptcy Notice and to extend the time for compliance by the judgment debtor/defendant with the Bankruptcy Notice on the basis that the Appeal proceedings were pending.

The Judgment Debtor/Defendant in that scenario faced difficulties with his application. 

Following the failure of the unsuccessful Defendant to comply with the Bankruptcy Notice the Judgment Debtor /unsuccessful Defendant commits an act of Bankruptcy.  The Defendant upon being served with a Bankruptcy Notice could have made an Application to extend the time for compliance with the Bankruptcy Notice but took no action prior to the expiration of the period set out in the Bankruptcy Notice in which he had to comply with the Bankruptcy Notice.

The next stage following the failure of the judgment debtor to comply with the Bankruptcy Notice or have the time for compliance of the Bankruptcy Notice extended pending the determination of the Appeal in Bankruptcy proceedings is to take steps for a Creditor’s Petition to be issued.  On behalf of our client we arranged for a Creditor’s Petition to be issued.

Separately in these particular circumstances it became clear to the unsuccessful Defendant who was the Appellant in the Supreme Court of Appeal that it was appropriate to make an Application for a Stay.

The Appellant to the Appeal (being the unsuccessful Defendant) made the Application to the Court of Appeal.  Having regard to the timing of the Application for a Stay in the Supreme Court of Appeal and the imminent date for the hearing of the Appeal it was clear that the Court of Appeal would grant a Stay of the Judgment pending the outcome of the Appeal.  There were negotiations in relation to the terms of the Stay. 

The Stay of the Judgment of itself provided some restrictions in enforcement of the proceedings pending the outcome of the Application by the unsuccessful Defendant.

Difficulties arise for the unsuccessful Defendant to have the Bankruptcy Notice either set aside or the time for compliance with the Bankruptcy Notice extended as the time for compliance with the Bankruptcy Notice expired before the Judgment Debtor made the application.

The date of the Judgment Debtor for committing the act of Bankruptcy can be critical in relation to the trustee who is later appointed in recovering monies from third parties who may have received preferences or the benefit of uncommercial transactions in dealing with the Bankrupt.  The failure of the Judgment Debtor (unsuccessful Defendant) in making the Application to extend the time for the Bankruptcy Notice within the period allowed for could be critical in relation to numerous matters as to the extent that the successful Plaintiff can recover.

If you have a Judgment in your favour or there is a Judgment against you it is critical that appropriate steps be taken to either attempt to enforce the Judgment (having regard to the cost benefit) or to defend the Application that may be made against you. 

At Watson & Watson our Senior Solicitors have experience in Bankruptcy matters to provide you with the appropriate advice you need to navigate through the difficult issues relating to recovery or defending your position.  Do not delay and seek appropriate and timely advice. Please contact Richard Watson, Accredited Specialist Commercial Litigation or Shereen Da Gloria his Personal Assistant to discuss your matter.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.

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