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CREDITORS’ PETITIONS SOME PRACTICAL CONSIDERATIONS

This article by M.D. Martin, Barrister-at-Law, explores essential aspects of creditors' petitions in bankruptcy within Australia. It outlines jurisdictional requirements for making sequestration orders, the conditions under which creditors may petition, and procedures involved in the petition process. The discussion includes the role of secured creditors, requirements for proof at hearings, grounds for going behind judgment, and rules concerning substitutions and adjournments. This informative guide provides clarity on navigating creditors' legal rights in bankruptcy situations.

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CREDITORS’ PETITIONS SOME PRACTICAL CONSIDERATIONS

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  1. CREDITORS’ PETITIONSSOME PRACTICAL CONSIDERATIONS By M.D. Martin Barrister-at-Law

  2. JURISDICTION TO MAKE SEQUESTRATION ORDERS – s.43 • Act of bankruptcy. • At the time when the act of bankruptcy was committed the debtor:- (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling, house or a place of business in Australia; (iii) was carrying on business in Australia either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager.

  3. CONDITIONS ON WHICH A CREDITOR MAY PETITION – s.44 • The creditor is owed at least $2,000.00. • The amount owing is a liquidated sum payable either immediately or at a certain future time. • The act of bankruptcy on which the petition is founded was committed within six months before the presentation of the petition.

  4. SECURED CREDITORS A secured creditor:- • can only petition for the amount for which his or her debt exceeds the value of the security. • may petition for his or her entire debt provided the petition contains a statement that the security will be surrendered for the benefit of creditors generally in the event of a sequestration order being made. • must set out particulars of the security in the petition.

  5. PROCEEDINGS AND ORDERS ON CREDITOR’S PETITION – s.52 At the hearing of a creditor’s petition the Court shall require proof of: • the matters stated in the petition; • service of the petition; and • the debt on which the petitioning creditor relies is still owing.

  6. GOING BEHIND JUDGMENT • Special circumstances. • Default judgment. • Two stage process.

  7. SOLVENCY s.52(2)(a) • “able” but not “willing”. • Evidence. • Will creditor be paid by other means.

  8. OTHER SUFFICIENT CAUSE – s.52(2)(b) • Fraud or abuse of process. • Litigation or cross claim against creditor.

  9. PAYMENT OF DEBT TO PETITIONING CREDITOR • No basis to prosecute petition. • Is another liquidated debt still owed. • Costs.

  10. SUBSTITION OF PETITIONER – s.49 • Petition not prosecuted with due diligence. • Payment of petitioning creditor. • Liquidated debt. • Stand in the shoes of the petitioning creditor.

  11. ADJOURNMENT TO ALLOW APPEAL • Appeal must be genuine and arguable. • Evidence.

  12. ADJOUNRMENT TO CONVENE MEETING - PART X • No adjournment as a matter of course. • Interests of creditors as a whole.

  13. ADJOURNMENT TO ADDUCE FURTHER EVIDENCE • Petition not adjourned on first return date as a matter of course. • Must show adjournment will actually produce cogent evidence.

  14. DEBTOR’S PETITION • Approved form. • Accompanied by statement of affairs. • Sufficient connection with Australia. • Rejection of petition by Official Receiver. • Referral of petition to Court. • Creditor’s petition pending.

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