News & Articles

Unpaid Wages and the Fair Entitlements Guarantee

25/11/2019 By // by Wayne Davis

The Fair Entitlements Guarantee (“FEG”) is a statutory safety net where the Australian Government will pay employee entitlements to eligible employees of a company that gets wound up in insolvency, or for people who have been made bankrupt.

The Federal Government will pay:

Up to 13 weeks of unpaid wages;
Any unpaid annual leave and long service leave;
Up to five weeks payment in lieu of notice; and
Up to four weeks per full year of redundancy pay.

The fair entitlements guarantee is provided in the Fair Entitlements Guarantee Act 2012 (Cth) (“the FEG Act”) and the Fair Entitlements Guarantee Regulation 2012 (Cth) (“the Regs”).

Our lawyers can advise and assist with statutory demands, winding up applications, Fair Entitlements Guarantee claims, and the review of decisions in the Administrative Appeals Tribunal

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What is the Fair Entitlements Guarantee?

Section 6 of the FEG Act defines the various kinds of employment entitlements of a person whose employment by an employer has ended, including:

Annual leave entitlement;
Long service leave entitlement;
Payment in lieu of notice entitlement;
Redundancy pay entitlement; and
Wages entitlement.

Section 7 of the FEG Act defines “wages” to include the following:

Allowances;
Loadings;
Amounts payable for overtime;
Amounts payable at penalty rates; and
Other amounts that the governing instrument for the relevant employment identifies separately and makes payable regularly.

Read the definitions in sections 6 and 7 of the FEG Act to know what the above relates to.

Why does the Fair Entitlements Guarantee Exist?

The FEG exists to protect vulnerable workers from losing their employment due to the insolvency of the employer company.

In the explanatory memorandum to the Fair Entitlements Guarantee Bill 2012 (Cth) it says:

The scheme … is necessary to fulfil a significant community need to protect the entitlements of Australian employees who would otherwise stand to lose their entitlements if they lose their jobs due to insolvency of their employer.

In Jones (Liquidator) v Matrix Partners Pty Ltd Re Killarnee Civil and Concrete Contractors Pty Ltd (In Liq) [2018] FCAFC 40 Justice Allsop CJ said:

The protection of employees in the aftermath of the insolvency of businesses is, and has been for many years, a matter of high public policy. The vulnerability of those who work in an employment relationship to the financial consequences of the decisions of business controllers and the economic environment is well-known. It has been consistently addressed in terms of priority in access to funds and latterly by a qualification to the reach and operation of securities over the assets of the business enterprise. That statutory addressing of the question as a Parliamentary response has been informed by considerations of the protection of the vulnerable and of fairness in the operation of the insolvency regime…

Essentially, the objective of the scheme is to provide for the provision of financial assistance to former eligible employees where the end of their employment is linked to the insolvency or bankruptcy of their employer.

An employee must be an eligible employee for the purposes of FEG.

Who is an Eligible Employee?

Section 10 of the FEG Act defines the general conditions for eligibility, they are:

The person’s employment by a particular employer has ended;
An insolvency event happened to the employer;
The end of the employment:
1. was due to the insolvency of the employer; or
2. occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or
3. occurred on or after the appointment of an insolvency practitioner for the employer;
The person is owed one or more debts wholly or partly attributable to all or part of one or more employment entitlements;
The person has taken reasonable steps, to prove those debts in the winding up or bankruptcy;
If the person was owed any of those debts before the insolvency event happened, the person took reasonable steps before that event to be paid those debts;
When the employment ended, the person was an Australian citizen or, the holder of a permanent visa or a special category visa.

This eligibility criteria is subject to a number of exclusions.

Who is Not an Eligible Employee?

Section 11 of the FEG Act defines the exclusions.

A person is not eligible if they are an excluded employee pursuant to section 556 of the Corporations Act 2001 (Cth) – namely a director or previous director, a spouse of a director or previous director, or a relative of a director or previous director of the company.

“Spouse” of a person is defined to include a de facto partner of the person.
“Relative” in relation to a person, is defined to mean the spouse, parent or remoter lineal ancestor, child or remoter issue, or brother or sister of the person.

Different eligibility criteria apply to the Corporations Act and the Bankruptcy Act. You should read Section 11 of the FEG Act.

Also, a person is not eligible if they converted from contractor status to employee status with the same employer within 6 months of the insolvency event.

One of the most crucial elements of the eligibility requirement is the causal link between the insolvency of the employer and the end of the person’s employment.

The Causal Link to the Insolvency Event

In the explanatory memorandum to the Fair Entitlements Guarantee Bill 2012 (Cth) it says:

The causal link between the insolvency of the employer and the end of the person’s employment is a crucial element of the eligibility requirement.

Section 10(1)(c) of the FEG Act defines eligibility if the end of the employment – (i) was due to the insolvency of the employer; or (ii) occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or (iii) occurred on or after the appointment of an insolvency practitioner for the employer.

Subsections (ii) and (iii) are straightforward and can be calculated in accordance with relevant dates.

However, subsection 10(1)(c)(i) is less easy to define because what does “due to the insolvency of the employer” mean?

To unpack this, we need to understand what “insolvency” means and what “due to” means.

In relation to company insolvency, read our article – When is a Company Insolvent?

In relation to the phrase “due to”, the dictionary defines “due to” to mean “attributable to”, “caused by”, “ascribed to”, and/or “ascribable to”.

So, the end of employment must be caused by the insolvency of the employer.

In Milardovic and Secretary, Department of Employment [2019] AATA 213 Member K Parker said:

A key issue in this case is whether Mr Milardovic’s employment ended due to the insolvency of VS. This requires the Tribunal to determine:
(a) when Mr Milardovic’s employment with VS ended;
(b) whether VS was insolvent at the time Mr Milardovic’s employment with VS ended; and
(c) if so, whether Mr Milardovic’s employment ended due to the insolvency of VS.

So, evidence in relation to the above will need to be provided to FEG in order for them to make the assessment.

For more information read the Eligibility for FEG Assistance Factsheet from FEG.

Making a Fair Entitlements Guarantee Claim

A fair entitlements guarantee claim can be made online at the Federal Government Website.

First you will have to register. Once registered you will need to file your claim.

Read the very good How do I access FEG Online Services factsheet.

It is mandatory that you provide evidence of citizenship status at the time the employment ended so that FEG can assess your eligibility.

This can be passport, visa, birth certificate, Immicard, or Registration by Descent document.

You may also be asked to provide:

The signed employment contract or letter of appointment;
Any payslips;
PAYG payment summaries;
Bank statements for the 13 weeks prior to the relevant date;
Bank statements for the 30 days immediately after your employment ended;
Evidence of weekly or annual wage rate;
Separation certificate; and
Letter of termination.

If you are eligible because of section 10(1)(c)(i) of the FEG Act, you may also be required to make submissions in relation to why your employment ended due to the insolvency of the employer, namely:

When the employment ended;
Whether the company was insolvent at the time the employment ended; and if so
Whether the employment ended due to the insolvency of the company.

How long do you have to make your FEG claim?

Time Limits for Fair Entitlements Claim

Section 14(2) of the FEG Act says:

(2) The claim must be made before the end of 12 months after the later of the following events:
(a) an insolvency event happens to the employer;
(b) the person’s employment by the employer ends.

An “insolvency event” is defined in section 5 of the FEG Act:

An insolvency event happens to an employer of a person:
(a) when a liquidator of the employer is appointed (provisionally or otherwise) under the Corporations Act 2001 ; or
(b) when the employer becomes a bankrupt under the Bankruptcy Act 1966 ; or
(c) if the person is or was employed for a partnership by 2 or more of the partners–at the first time an event described in paragraph (a) or (b) happens, or has happened, to all of the partners by whom the person is or was employed.

So, the Fair Entitlements Guarantee claim must be from 12 months of the later of the employment ending, or the appointment of a liquidator or bankruptcy trustee.

Best Practice – Get your claim filed as soon as possible.

Once filed by an eligible employee, the authority will work out your entitlements.

The employee will be paid the basic amount for each (if applicable):

Wages entitlement;
Annual leave entitlement;
Long service leave entitlement;
Payment in lieu of notice entitlement; and
Redundancy pay entitlement.

If you are deemed ineligible or the amount of the payment is insufficient, then there are a couple of things that a person is able to do. These include:

Seeking an internal review of the decision; and/or
Seeking a review by the Administrative Appeals Tribunal.

We will explain this process in more detail below.

Seeking an Internal Review of the Decision

Section 38 of the FEG Act says:

(1) A person may apply to the Secretary for review of:
(a) a decision whether the person is eligible for an advance; or
(b) a decision on the amount of an advance the person is eligible for.

Generally, the application must be made within 28 days after the date of the notice of the decision.

The application for internal review must be in writing and must state the reasons why the application is being made; and set out, or be accompanied by, any information or documents relating to those reasons.

If a person applies for a review of a decision, section 39 of the FEG Act says:

The Secretary must review the decision and:
(a) affirm the decision; or
(b) vary the decision; or
(c) set the decision aside and substitute a new decision.

If the authority affirms the decision or varies the decision and it is still not reasonable, then an employee can apply to the Administrative Appeals Tribunal.

Seeking a Review by the Administrative Appeals Tribunal

The Administrative Appeals Tribunal (“AAT”) provide independent merits review of a wide range of administrative decisions made by the Australian Government, including Fair Entitlement Guarantee decisions.

Section 40 of the FEG Act allows an application to be made to the Administrative Appeals Tribunal by a person for review upon certain conditions in relation to eligibility or the amount of money payable.

Appeals to the AAT can be made online – https://forms.aat.gov.au/landing.htm?formCode=app-for-review

Generally, the application for review by the ATT must be made within 28 days of being given the internal review decision.

We strongly advise seeking legal assistance in relation to reviewing a FEG decision.

Can an Employee Wind Up a Company?

Section 459E of the Corporations Act 2001 (Cth) says:

A person may serve on a company a demand relating to:
(a) a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or
(b) 2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.

The statutory minimum is $2,000.00.

So, if a company owes unpaid wages to the employee, and the unpaid wages amount is more than $2,000.00, then the person can serve a creditor’s statutory demand.

Serving the Employer with a Statutory Demand

If the employer is a company, then section 459E allows the employee to serve a creditors statutory demand for payment of the wages.

A statutory demand is a demand made on an insolvent company (not a person) for the payment of a debt or debts, including unpaid wages.

Once served with the statutory demand, the employer will need to do one of the following within a strict 21-day timeframe:

Pay the amount of the debt or debts; or
Secure or compound for the debt to the employee’s reasonable satisfaction; or
Apply to set the demand aside.

If the employer company fails to do any of these things within 21 days, then it is presumed to be insolvent and the employee (or employees) can apply to wind the company up in insolvency.

As soon as the company goes into liquidation, if the employee is an eligible employee, then the employee with be entitled to the Fair Entitlement Guarantee claim.

Read our Complete Guide to Statutory Demands

However, care must be taken to particularise the debts and the amount of the debts correctly or face a potential application to set the statutory demand aside.

Defect in the Demand Causing Substantial Injustice

One of the grounds that a statutory demand can be set aside is where there is a defect in the demand that may cause the employer substantial injustice.

Section 459J(1)(a) of the Corporations Act says:

(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside

There are a number of calculations in relation to unpaid entitlements that may cause a defect in the demand including correctly calculating:

Unpaid wages;
Unpaid annual leave;
Unpaid long service leave;
Unpaid payment in lieu of notice; and
Unpaid redundancy pay.

It is extremely important that these calculations are 100% correct.

Tekno Autosports Pty Ltd v Jenkins [2014] FCA 774 is a case relating to a statutory demand served on a debtor company in relation to unpaid wages. In this case a number of disputes arose in relation to the amount of the debts, including a dispute as to whether the demand should be gross wages or net wages. In his decision, Gleeson J said:

I am satisfied that there is a genuine dispute as to the amount of the debt insofar as it claims Mr Jenkins’ gross salary without deducting the tax required to be deducted by clause 3.4 of the employment contract.

Issuing a statutory demand for non-payment of wages and employment entitlements is more complicated than non-payment of invoices for example.

We strongly recommend engaging a qualified solicitor to draft and serve a statutory demand.

Winding Up the Company

Non-compliance with a statutory demand raises the legal presumption that the company is insolvent.

With that legal presumption assisting, the employee to make an application to wind the company up in insolvency.

If the company has a liquidator appointed, then the eligible employee (and all of the eligible employees) will be entitled to the Fair Entitlements Guarantee.

Our lawyers can advise and assist with statutory demands, winding up applications, Fair Entitlements Guarantee claims, and the review of decisions in the Administrative Appeals Tribunal

DEDICATED TEAM – COMMERCIALLY FOCUSED – PROVEN RESULTS

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To contact the FEG Hotline:

Phone 1300 135 040

Mon – Fri, 9 am – 5 pm (AEST/ADST)

Email FEG@jobs.gov.au

How to Draft an Adjudication Response in Queensland

13/11/2019 By // by Wayne Davis

If you want to know how to draft and serve an adjudication response, then this article will provide you with useful information.

If you have been served with an adjudication application in Queensland, then you need to file and serve an adjudication response.

A respondent will need to do the following:

Identify the eligibility to give an adjudication response;
Immediately confirm the critical dates for submitting the response;
Understand how and where to submit the adjudication response;
Confirm if there are any jurisdictional issues which will need to be considered;
Understand if the payment claim includes items not allowed to be claimed;
Understand what is and is not allowed to be included in the adjudication response.
Prepare detailed submissions and evidence to support the payment schedule; and
Understand how to serve the adjudication response before time runs out.

If the respondent does not act within the required time, then the adjudicator may decide in favour of the claimant.

The claimant may then register the adjudication certificate and enforce the decision as if it were a judgment of the Court.

It is vital that you act quickly to draft and serve an adjudication response. To ensure that you give yourself the best chance, you should contact a lawyer immediately

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Eligibility to give an Adjudication Response

A condition precedent for eligibility to respond to an adjudication application if the giving of a payment schedule after being given a payment claim.

Section 82(2) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (“BIFA”) says:

… The respondent must not give an adjudication response if the respondent failed to give the claimant a payment schedule as required under section 76.

If a respondent did not give a payment schedule in answer to the payment claim, then a respondent will not be entitled to give an adjudication response.

What is an Adjudication Response?

Section 82(1) of BIFA says:

After being given notice of an adjudicator’s acceptance of an adjudication application under section 81, the respondent may give the adjudicator a response to the adjudication application (the “adjudication response”).

So, an adjudication response is a response to the adjudication application.

There are a number of things to consider when drafting and serving an adjudication response, namely:

Identify the critical dates; and
Know how to give the adjudication response;
Consider what can be included in the response and what cannot;
Consider any jurisdictional issues;
Prepare submissions;
Collate all of the evidence required; and
Submit and serve the adjudication response in the correct time.

These issues will be explained in more detail below.

Identify the Critical Dates

There are strict timeframes in which to file an adjudication response.

The adjudication response must be given to the adjudicator the later of 10 business days after receiving the application; or 7 business days after receiving the adjudicators acceptance.

For a complex claim, 15 business days or 12 business days respectively.

Section 83 of BIFA says:

(1) If responding to a standard payment claim, the respondent must give the adjudicator the adjudication response within the later of the following periods to end—
(a) 10 business days after receiving a copy of the adjudication application;
(b) 7 business days after receiving notice of the adjudicator’s acceptance of the adjudication application.
(2) If responding to a complex payment claim, the respondent must give the adjudicator the adjudication response within the later of the following to end—
(a) 15 business days after receiving a copy of the adjudication application;
(b) 12 business days after receiving notice of the adjudicator’s acceptance of the adjudication application.

What does it mean to “Receive” the Documents?

The time starts running from the date of “receiving” the above documents. But what does “receiving” mean in this context?

In CMF Projects Pty Ltd v Masic Pty Ltd & Ors [2014] QSC 209 Daubney J said at [25]:

… there is a distinction in BCIPA (now BIFA) between the notions of “service” and “receipt” of documents. The word “receive” … has been considered on numerous occasions … That subsection relevantly provides that an adjudication application must be made “within 10 business days after the claimant receives the payment schedule”. It seems now to be clear enough on the authorities that the word “receive” connotes that, whilst the document in question need not come to the attention of a particular person within the relevant office, it nevertheless does actually need to have arrived at, and thereby been received’, at the recipient’s registered office, or place of business, and be there during normal office hours.

So, the time for the adjudication response starts running from the time that the above documents arrived at the recipient’s registered office, or place of business, and be there during normal office hours.

Care should be taken when assessing the time the document was delivered and the time it was received.

For example, it could have been delivered yesterday afternoon, but only retrieved from the post box today.

The Form of the Adjudication Response

Section 82(3) of BIFA says:

The adjudication response—
(a) must be in writing; and
(b) must identify the adjudication application to which it relates; and
(c) may include the submissions relevant to the response the respondent chooses to include.

However, the respondent is restricted to only include reasons that were included in the payment schedule.

Failure to articulate reasons in the schedule may mean that the respondent will be unable to include them in the adjudication response.

Section 82(4) of BIFA says:

However, the adjudication response must not include any reasons (“new reasons”) for withholding payment that were not included in the payment schedule when given to the claimant.

What are “new reasons”?

In John Holland Pty Ltd v Walz Marine Services Pty Ltd & Ors [2011] QSC 39 Margaret Wilson J said at [27]:

… the issues to be decided by the adjudicator are defined in the payment claim and the payment schedule. The respondent must state its reasons for wholly or partially withholding payment in the payment schedule. While the parties may make submissions in support of their respective positions in the adjudication application and the adjudication response respectively, the respondent cannot use the adjudication response as a vehicle to advance reasons for withholding payment which it failed to include in its payment schedule.

There are a number of cases on this point and it has been enforced reasonably strictly to prevent unfairness.

In Wiggins Island Coal Export Terminal Pty Ltd v Monadelphous Engineering Pty Ltd & Ors [2015] QSC 307 Philip McMurdo J said at [55]:

The evident intent of [the section] is to prevent the unfairness to a claimant which could follow from a respondent being allowed to contest its alleged liability for a reason which it had not advanced ahead of the adjudication application.

However, an adjudication response can do more than simply mirror the payment schedule.

In Tqm v Dasein [2004] NSWSC 1216 McDougall J said at [30]:

… it would be open to a respondent to argue, either in greater detail or with perhaps more supporting evidence, reasons that had been advanced. If it were intended that an adjudication response should do no more than mirror, word for word, a payment schedule, then there is little point to the ability … for a respondent to lodge an adjudication response.

So, an adjudication cannot raise new issues, but can elaborate, provide greater detail, and provide supporting evidence to support the reasons contained in the payment schedule.

What can be Included in the Response

The adjudication response can include the following (amongst others):

An expert report supporting the respondent’s payment schedule;
Particulars and evidence (statutory declarations) in support of the submissions;
Particulars and evidence in relation to why the payment (or part of the payment) was withheld, (including offsetting claims);
Particulars and evidence identifying any non-contractual matters raised in the payment claim that should not be taken into account by the adjudicator; and
Particulars and evidence bringing attention to any jurisdictional issues.

An adjudication response can include information in relation to jurisdictional issues not contained in the payment schedule.

Jurisdictional Issues for Adjudication Response

The adjudication response can ask the adjudicator to consider the statutory requirements of BIFA, the payment claim and the adjudication application, namely:

Identify the reference date to which the payment claim applies;
Identify if the claim relates to an applicable construction contract;
Identify if the payment claim is valid;
Correct identification of the construction work and/or related goods or services; and
Have all of the time limits been correctly complied with.

If any of the above can be answered in the negative, then the adjudicator may not have jurisdiction to decide the claim.

Once all of the arguments and any jurisdictional issues have been identified; the respondent has prepared their Adjudication Response Submissions and collated all of their evidence, it is time to submit the adjudication response.

How to give the Adjudication Response

An adjudication response in Queensland must be submitted to the adjudicator within the timeframe above, and a copy of the response given to the claimant within two (2) business days.

The adjudicator is appointed by the Registrar and will have provided a copy of the adjudicator’s acceptance of the adjudication application, including contact details.

Once the adjudication response is given to the adjudicator, the response must be given to the claimant within two (2) business days.

Section 83(6) of BIFA says:

If the respondent gives the adjudicator an adjudication response under this section, the respondent must give a copy of the response to the claimant not more than 2 business days after giving the response to the adjudicator.

Service of the Adjudication Response

Section 102(1) of BIFA says:

A notice or other document that, under this chapter, is authorised or required to be given to a person may be given to the person in the way, if any, provided under the relevant construction contract.

Service is not limited to provisions of the construction contract however, section 39(1) of the Acts Interpretation Act 1954 (CTH) also applies to service of an adjudication response, which says:

If an Act requires or permits a document to be served on a person, the document may be served—
(a) on an individual—
(i) by delivering it to the person personally; or
(ii) by leaving it at, or by sending it by post, telex, facsimile or similar facility to, the address of the place of residence or business of the person last known to the person serving the document; or
(b) on a body corporate – by leaving it at, or sending it by post, telex, facsimile or similar facility to, the head office, a registered office or a principal office of the body corporate.

The expression “similar facility” has been held to mean email. In Penfold Projects Pty Ltd v Securcorp Limited [2011] QDC 77 Irwin DCJ said at [232]:

In my view in context, “or similar facility” is wide enough to extend to email. As such I consider s 103(2) of the BCIPA envisages email service of notices

So, the same principles would apply as in CMF Projects Pty Ltd v Masic Pty Ltd & Ors [2014] QSC 209 in that the adjudication response should be given to the claimant at the claimants registered office, or place of business, or place of residence, and be there during normal office hours.

A Respondent might also consider personal service and facsimile or email too, if the files are not too large.

Once served, the adjudicator can do a number of things.

Adjudication Procedures

Once the adjudication response is given to the adjudicator and served on the claimant, the adjudication can do a number of things, namely:

Ask for further written submissions;
Call for a conference between the parties; and
Carry out an inspection of any matter to which the claim relates.

If the adjudicator does not do any of the above, or request an extension of time, then they will need to decide.

The Adjudication Decision

The adjudicator must decide:

Whether they have jurisdiction and whether the application is frivolous or vexatious;
The amount of the progress payment, if any, to be paid by the respondent to the claimant;
The date on which any amount became or becomes payable;
The rate of interest payable on any amount; and
The fee and the percentage that each party is required to pay.

Further, the adjudicator’s decision must:

Be in writing; and
Include the reasons for the decision.

The adjudicator must decide the above within a strict timeframe.

Time Limits for Making the Adjudication Decision

The adjudicator must decide the adjudication in either 10 business days, or 15 business days for a complex claim.

Section 85(1) of BIFA says:

(1) Subject to section 86, an adjudicator must decide an adjudication application no later than—
(a) for a standard payment claim—10 business days after the response date; or
(b) for a complex payment claim—15 business days after the response date.

The “response date” is the day on which the adjudicator receives the response; or (if no response is given) the last day on which the respondent could give the adjudicator an adjudication response.

Section 86 of BIFA says that the adjudicator can request an extension of time for deciding adjudication application.

However, the claimant and the respondent must agree in writing.

Upon payment of fees, the adjudicator will provide a copy of the decision and reasons to the Registrar, the claimant and the respondent.

What Happens Next?

If everything goes right, then the adjudicator will decide that the amount payable is the amount contained in the payment schedule.

A good building and construction debt recovery lawyer will give you the best chance to defend an adjudication application and defeat an unfair payment claim.

Wage Theft – Underpayment of Wages

07/11/2019 By // by Wayne Davis

Wage theft is the non-payment of your legal entitlements by your employer, including award rates, penalty rates, wages, and overtime.

If your employer has stolen your wages then you may have a claim in the Federal Court, Federal Circuit Court, the District Court, or the Magistrates Court.

You can seek an order from your employer and also any person involved in the contravention.

There are processes that should be followed in different situations, and include negotiation, reporting to the Fair Work Ombudsman, mediation, conciliation, and filing a claim in Court.

This article will explain the requirements and the process of making a claim for wage theft below.

If you have not been paid your legal entitlements by your employer, including award rates, penalty rates, wages, and overtime – then you might have a wage theft claim against the employer

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What is Wage Theft?

The term wage theft can take a number of different forms, including:

Not being paid the correct hourly rates;
Illegal cash-back contracts;
Being paid cash-in-hand or off-the-books;
Non-agreed deductions from wages;
Unpaid overtime and penalty rates;
Illegal phoenixing;
Sham contracting arrangements; and
Non-payment superannuation.

We will detail these in more detail below.

Not Being Paid the Correct Hourly Rates

Probably the most common form of wage theft is not being paid the correct hourly rates.

For the most part, minimum hourly rates are prescribed by the relevant modern award. If you are not being paid the correct amount, then your employer is stealing your wages and you will have a claim.

Modern awards include all the information you need to understand your entitlements including information in relation to:

Types of employment and termination of employment;
Classifications and minimum wage rates;
Hours of work and related matters;
Leave and public holidays; and
Industry specific provisions.

The modern award defines the type of work classification and the minimum pay amount in relation to that classification.

Another common form of wage theft is an employer paying an employee at a level 2 rate, when the employee is doing level 4 work. If your employer is doing this then they are stealing your wages and you may have a claim.

Click to go to the list of Modern Awards here

Another way that an employer can steal an employee’s wages is by paying cash-in-hand.

Being Paid Cash-in-hand or Off-the-books

Although a seemingly good prospect, getting paid cash-in-hand or off-the-books can also result in wage theft.

Being paid cash-in-hand or off-the-books may mean that your employer is not paying superannuation, leave entitlements, and other entitlements, etc.

Also, because the non-payment of tax seems enticing, the employer may also pay you less than the minimum wage.

It is possible to be paid in cash, that’s not the problem, but the employer must still pay all of your entitlements and provide you with a payslip.

Being paid cash-in-hand or off-the-books can result in wage theft and you may have a claim.

Unpaid Overtime

Your Modern Award will provide for the amount of hours a full-time employee has to work per week and overtime rate of pay for hours worked outside of ordinary time.

These rates of pay are usually around 150% to 200% – aka time-and-a-half to double-time.

If your employer has not paid any overtime rates, then this is wage theft and you may have a claim.

Unpaid Penalty Rates

Also, your Modern Award will provide for the penalty rate that the employee is entitled for working on the weekend or on a public holiday.

These rates are usually between 125% to 250% – aka time-and-a-quarter to double-time-and-a-half.

If your employer has not paid any penalty rates, then this is wage theft and you may have a claim.

Find your penalty rate amount in your Modern Award here.

Illegal Cash-Back Schemes

In some instances, an employer may make an employee give back a percentage of their wages. This is sometimes known as a “Cash-back scheme”.

If this happens, then that money is treated like back-pay and can be claimed from the employer.

If your employer is making an employee pay “cash-back” then this is wage theft and the employee may have a claim.

Non-Agreed Deductions from Wages

An employer and an employee can agree that certain deductions can be made from the employee’s wages. An employer can only deduct money if:

The employee agrees in writing; and
It’s principally for the benefit of the employee; and
It’s allowed by a law, a court order, the Fair Work Commission, a modern award, or registered agreement.

Any deductions that are not agreed or are not for the benefit of the employee are wage theft and the employee may have a claim.

Illegal Phoenixing

Phoenixing is a term used to describe the act of transferring business assets to another company, continuing to trade in the new company, and leaving debts and liabilities in the old company – including employee wages and entitlements.

Usually, the old company will go into liquidation with a very slim chance of getting any money.

If your employer does this then this is wage theft and the employee may have a claim.

An employee may be entitled to the Governments Fair Entitlements Guarantee (“FEG”).

Click to learn more about the FEG here.

Sham Contracting Arrangements

A sham contract is when an employer tries to disguise an employment relationship with a contractor relationship, and incorrectly classifies an employee as an independent contractor.

An employer may try to pay an employee as a contractor so that the employee will lose their entitlements, including superannuation and leave entitlements.

Whether someone is an employee, or a contractor depends on a number of different complex factors and is usually determined by the Court.

However, if an employee is a party to a sham contract then this may be wage theft and the employee may have a claim.

Non-payment of Superannuation

Unfortunately, another common form of theft (albeit, not wages per se) is the non-payment of superannuation.

Most employment relationships require the employer to contribute a minimum of 9.5% of your wages into a superannuation account.

Every dollar that goes into superannuation now will be worth a lot more by retirement age, so it is very important that an employer pays this entitlement.

If your employer has not paid, or underpaid, your superannuation then the employee may have a claim.

Can I Make a Claim for Wage Theft?

If you fit into any of the categories above, then it is likely that you will be able to make a claim against your employer for unpaid wages and entitlements.

Obviously, each claim is different and will depend on the particular work, the Modern Award, and the employment contract.

Making a Claim for Wage Theft

The starting point for any claim for wage theft is section 45 of the Fair Work Act 2009 (CTH) (“FWA”).

Section 45 of the FWA says:

A person must not contravene a term of a modern award

A modern award sets out the minimum employment terms and conditions.

These minimum employment terms and conditions include:

Wages and pay;
Employment allowances;
Staff breaks – duration and time;
The hours of work;
Any overtime payable; and
Any penalty rates payable.

Note: Section 45 of the FWA is a civil remedy provision.

Section 539 of the FWA outlines the Civil remedy provision, the person, the Courts, and the maximum penalty.

The table in subsection (2) of this section says that a breach of section 45 of the FWA applies to an employee and an employer (amongst others).

It also defines the Courts which have jurisdiction as the Federal Court; the Federal Circuit Court; and an eligible State or Territory court.

The Wage Theft Process

The process for making a wage theft claim for unpaid entitlements is:

Work out exactly what the employee is owed;
Try to negotiate with the employer to reach a settlement;
Report the employer to the Fair Work Ombudsman (“FWO”);
Commence legal action in the Court with jurisdiction;
Sometimes the Court will order mediation or conciliation;
Obtain a judgment against the employer;
Enforce the judgment.

This is an over-simplification of the process, but this is essentially what an employee will need to do.

We will explain the process in more detail below.

Work out Exactly what the Employee is Owed

It is important to work out exactly how much money the employee is owed.

Correctly calculate the exact amount (or as reasonably close as possible). This will include:

The minimum rate of pay calculated at the correct level;
Any allowances allowable;
Any leave loading that has accrued;
Any leave payments that have not been paid;
Any overtime that has not been paid;
Payment of the correct penalty rates;
Any additional tax and superannuation; and
Any entitlements in the award, employment contract or other agreement.

Once the employee has a figure calculated, it is best practice to approach the employer, or engage a solicitor to approach the employer, to attempt to reach a settlement.

Negotiate with the Employer to Reach a Settlement

Most good lawyers will attempt to resolve wage theft claims without going to Court. Going to Court can be stressful and costly for both parties, so there is a real incentive to try to reach an agreement by negotiation.

Litigation lawyers are skilful negotiators, and it is well worth engaging a litigation lawyer to negotiate on your behalf. Reaching a settlement will involve a compromise by both parties.

Read our article here about Settling Litigation Early.

If the employer is being unreasonable and refusing to settle, then the employee can refer the matter to the Fair Work Ombudsman (“FWO”).

Report this Employer to the Fair Work Ombudsman

The Fair Work Ombudsman is there to provide help and assistance in relation to:

Wage theft – disputes relating to pay, penalty rates, any loadings and allowances;
Ending employment – giving notice, employees final pay and redundancy packages;
Leave entitlements including annual leave, sick leave, maternity leave and parental leave;
Any sham contracting arrangements; and
Anything covered by an award, enterprise agreement or other registered agreement.

The FWO will then attempt to resolve the dispute with the employer by negotiation in an attempt to reach a settlement.

If no settlement can be reached informally, then the FWO can refer the matter to a mediation.

A mediation is usually a telephone conference where the employee and the employer work with a skilled mediator to help the parties in dispute to come to a reasonable agreement to resolve the wage theft dispute.

This mediation can last up to two (2) hours.

If the parties agree on a resolution, then that agreement can be documented by way of a formal agreement.

The mediator may assist by drafting a deed of settlement outlining the terms of the agreement, time for compliance, and anything else of concern.

If the matter does not settle at the mediation, then the employee must take legal action to recover the unpaid wages.

Commence Legal Action in the Court with Jurisdiction

Legal action for wage theft can be broken down into two (2) separate parts, namely:

Claims under $20,000.00; and
Claims over $20,000.00.

Small Claims Under $20,000.00

A claim under $20,000 is called a small claim.

Section 548 of the Fair Work Act 2009 (CTH) (“FWA”) confers jurisdiction on the Magistrates Court or the Federal Circuit Court if it relates to an amount that an employer was required to pay to, or on behalf of, an employee; and it is for an amount of $20,000 or less.

There are advantages and disadvantages in commencing action in this small claims jurisdiction.

Basically, he court is not bound by any rules of evidence and procedure and may act in an informal manner; and without regard to legal forms and technicalities. This makes the process easier.

However, a party to small claims proceedings may be represented in the proceedings by a lawyer only with the leave of the court. This means that if leave is not given, then the employee may have to appear on their own.

In Queensland this small claim in commenced in the Magistrates Court by way of Employment Claim.

Queensland Industrial Relations Commission (QIRC) for a compulsory conciliation hearing in the first instance.

Once claim is filed, the Court will refer the matter to the Queensland Industrial Relations Commission (“QIRC”) for a compulsory conciliation hearing. If the matter does not resolve by way of conciliation, then the proceeding will progress.

In the Federal Circuit Court a small claim is commenced by way of Form 5 – Small claim under the Fair Work Act 2009.

We strongly advise seeking legal advice before filing the small claim.

However, just because the amount is less than $20,000.00 that allows an employee to proceed as a small claim, but it does not compel an employee to. An employee can commence as if it were a claim over $20,000.00.

Claims Over $20,000.00

Claims over $20,000.00 can be commenced in the Federal Court, the Federal Circuit Court, or an eligible State or Territory court.

Section 543(1) of the FWA says:

The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.

Section 543(2) of the FWA says:

Without limiting subsection (1), orders the Federal Court or Federal Circuit Court may make include the following:
(a) an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;
(b) an order awarding compensation for loss that a person has suffered because of the contravention;
(c) an order for reinstatement of a person.

Section 545(3) of the FWA says:

An eligible State or Territory court may order an employer to pay an amount to, or on behalf of, an employee of the employer if the court is satisfied that:
(a) the employer was required to pay the amount under the FWA or a fair work instrument; and
(b) the employer has contravened a civil remedy provision by failing to pay the amount.

Remember section 45 of the FWA is a civil remedy provision.

Therefore, the Federal Court, and the Federal Circuit Court have jurisdiction to make an order awarding compensation for loss that an employee has suffered because of the contravention of section 45 of the FWA, or the contravene of a term of a modern award.

Further, eligible Queensland State Courts also have jurisdiction to hear claims for wage theft and can make an order the employer to pay an amount to the employee for unpaid wages.

But what is an eligible State or Territory court?

Eligible State Courts for Wage Theft Claims

Section 12 of the FWA defines “eligible State or Territory court” to mean one of the following courts:

(a) a District, County or Local Court;
(b) a Magistrates Court;

So, for a proceeding for unpaid wages, the matter can be commenced as a general claim in the Magistrates Court and the District Court.

Jurisdiction of the State Courts

The State Courts have a monetary jurisdiction in the following amounts:

The Magistrates Court – up to $150,000.00;
The District Court – from $150,000.00 to $750,000.00.

It would not be usual for an employee to be owed more than $750,000.00 in stolen wages.

Is the Business Owner Liable for the Debts?

Yes. The director of the company or the any person involved in the contravention can be personally liable for the contravention.

Section 550(1) of the FWA says:

A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.

It then goes on to define what being “involved in a contravention” means. Section 550(2) says:

A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.

In Fair Work Ombudsman v Quincolli Pty Ltd & Anor [2011] FMCA 139 Driver FM said:

The authorities show that in order for a person to have accessorial liability under … 550 of the Fair Work Act, he or she must be a knowing participant or in other words:
a. must have knowledge of the essential facts constituting the contravention;
b. must be knowingly concerned in the contravention;
c. must be an intentional participant in the contravention based on actual not constructive knowledge of the essential facts constituting the contravention – although constructive knowledge may be sufficient under s.728(2)(c) in cases of wilful blindness; and
d. need not know that the matters in question constituted a contravention.

So, if these things can be proven, then the employee may obtain judgment against the person (or people) involved in the contravention.

Once an employee commences legal action in the Courts against the company, the business, and against a person involved in the contravention, the objective is to obtain from the Court a judgment or enforceable money order against them.

Once you are given judgment, and the debtors still do not pay, you can enforce that order over the property of the enforcement debtors.

Enforce the Wage Theft Judgment

This website has a lot of information of enforcement.

If you have judgment on a company, then you can:

Enforce with an enforcement warrant; or
Serve a statutory demand.

If you have a judgment against a person, then you can:

Enforce with an enforcement warrant; or
Serve a bankruptcy notice.

Read the articles below in relation to enforcement of money orders.

Moving Forward – Wage Theft

Employees have a right to claim their wages for up to 6 years after the amount became due and payable. This is the limitation period and it cannot be extended.

If you have a claim for wage theft, or unpaid entitlements then contact us today.

If you have not been paid your legal entitlements by your employer, including award rates, penalty rates, wages, and overtime – then you might have a wage theft claim against the employer

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Legal Proceedings for Debt Recovery

03/11/2019 By // by Wayne Davis

Legal proceedings for debt recovery include:

Trying to resolve the debt dispute without litigation;
Starting legal proceedings for debt recovery;
Obtaining a judgment or enforceable money order; and
Enforcing that judgment over the property of the debtor.

However, debt recovery action in Court or QCAT should be a last resort. Legal proceedings for debt recovery can be costly and time consuming.

But in a lot of cases when the debtor is being unreasonable then a creditor may have no option but to commence debt recovery action.

This article will explain the option available in debt recovery matters, alternative dispute resolution options, options for legal proceedings for debt recovery, enforcement options, and attempt to explain debt recovery law and debt recovery legislation available in Queensland.

If you need to start legal proceedings for debt recovery then it is important to get it right and you should contact a lawyer

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The Debt

The first thing to consider when thinking about legal action for debt recovery is the debt.

When commencing legal action for debt recovery, different rules and jurisdictions apply to different amounts of debt, which allow for different types of debt recovery action.

Jurisdiction

In Queensland, the jurisdiction of QCAT and the Courts are:

Debts up to $25,000 – QCAT Minor Civil Disputes;
Debts up to $150,000 – Magistrates Court;
Debts from $150,000 to $750,000 – District Court; and
Debts over $750,000 – Supreme Court.

Each of the above have both advantages and disadvantages, so it is important to speak to your lawyer before commencing legal action for debt recovery.

Legislation

Different industries have different pieces debt recovery legislation used for the recovery of debts and can be treated differently, for example:

Building and construction debts – The Building Industry Fairness (Security of Payment) Act 2017 (QLD) can be used to issue payment claims and subcontractors’ charges.
Body Corporate debts – The Body Corporate and Community Management Act 1997 (QLD) can be used along with whichever module your scheme falls under, to recover unpaid body corporate levies.
Company Debts – The Corporations Act 2001 (CTH) can be used to recover debts from a company by issuing creditor’s statutory demands and winding up the company in insolvency.

Plus, there is other industry-specific legislation, so it important to ensure that you fully understand your rights and liabilities under debt recovery law in relation to debt recovery in certain industries.

The Contract

Next, the contract has some important factors to consider when thinking about legal proceedings for debt recovery. Different contract clauses can make it easier to recover your debt, and also can help you to recover more costs and outlays.

Some good contract clauses include:

Charging clauses or other security;
Personal guarantees from directors;
PPSA charging clauses; and
Default terms clauses.

I will explain these in more detail below.

Charging Clauses or other Security

A charging clause in the contract requires the debtor to give security for the debt with an equitable interest in real property or land elevating the creditor to the status of a secured creditor.

A charge over property is essentially a guarantee that in the event of a default, the creditor’s equitable interest in the debtor’s real property is realised and the debtor can take steps to satisfy the debt as equitable mortgagee.

This charge is a charge over company property (if any) but can also be a charge over the director’s personal property.

Personal Guarantees from Directors

A personal guarantee from a director of the debtor company means that in the event of a default by the company, the director will be personally liable to pay the debt.

This clause is a must if you are offering credit to a corporate client for a number of reasons.

First, it means that if the company trades as a $2 shell and have no assets to satisfy your debt, then a creditor can attack the director’s personal assets.

You can also charge property with the Personal Property Securities Act 2009 (Cth) (“PPSA”)

PPSA Charging Clauses

The PPSA allows a creditor to charge (secure) the debt over the personal property of the debtor. This is distinct from real property or land as mentioned above.

A secured creditor, secured with a charge over the personal property is allowed to seize collateral, by any method permitted by law, if the debtor is in default under the security agreement.

Typically, a car finance company will charge the car. Then upon default of the finance agreement they are able to take possession of the vehicle.

Some challenges can arise from a PPSA charge, so it important to get your contract drafted correctly.

Default Terms Clauses

Lastly, some carefully drafted contract terms will allow you to recover more in costs and interest from the debtor. Some good terms to consider are:

Costs – Usually the costs of legal proceedings are scale costs and don’t cover the actual legal costs of debt recovery action. However, carefully drafted clauses allowing for legal costs can allow a creditor to recover more costs in relation to debt recovery and collection.
Interest – The legislative allowance for interest in Queensland is 4% above the cash rate at the Reserve Bank of Australia. So, if the cash rate is 1.25% then you are only able to claim 5.25% interest. An interest clause will allow you to recover more in interest in the event of a default.
Liquidated Damages – in some instances you will be able to claim liquidated damages, meaning a daily fixed amount (say $50) for every day that the debtor is in default. Care must be taken to ensure that this amount is a genuine pre-estimate od damages, and not a penalty for default.

If you need new or updated contract terms then contact us.

Once you have given thought to the parties, the debt, and the contract, you are now in a better position to commence legal proceedings for debt recovery.

Start Legal Proceedings for Debt Recovery

A typical debt recovery scenario should look something like this:

Send a letter of demand;
Try alternative dispute resolution;
Debt recovery action in Court or QCAT;
Enforcement of the judgment or money order.

We will explain this process in more detail below.

Letter of demand

In a lot of instances, a debt dispute can be resolved by a well-worded letter of demand.

A letter of demand should clearly identify the debt, outline the debtor’s obligation to pay, and clearly set-out the creditor’s rights according to debt recovery law.

Once a debtor realises that a lawyer is involved, and that they may have to pay thousands of extra dollars in legal costs and interest, then it may incentivise them to pay.

Read about letters of demand here – Letter of Demand

If a letter of demand doesn’t work, then another non-legal option would be to attempt alternative dispute resolution.

Alternative Dispute Resolution (ADR)

There are a number of different alternative dispute resolution methods, including:

Negotiation with the debtor;
Attending a mediation with the debtor;
Attend an expert arbitration with the debtor;
Determination by an expert;
BIFA adjudication; and/or
Conciliation

Each of the above can apply in different circumstances and may not be suitable for all debts.

We will explain in more detail below.

Negotiation

Although it sounds counter-intuitive, good litigation solicitors do all we can to not litigate unless we absolutely have to.

The first skill in ADR is trying to negotiate with the debtor or the debtor’s solicitor, in an attempt to reach a resolution without having to legal proceedings for debt recovery.

As with any negotiation we need to have leverage. A good negotiator has ways of successfully getting leverage to increase the chances of a swift and just resolution to debt disputes.

Contact our lawyers to help and assist with negotiation payment of a debt.

If the negotiations break down, then the parties could agree to attend a mediation.

Mediation

A mediator is a third-party, usually a barrister, who guides the parties through a structured process in an attempt for the parties to reach a resolution.

The end result of a mediation is for the parties to sign a legally enforceable deed of settlement, which will outline the steps required by each party to finalise the dispute.

The deed will also include clauses upon breach by either party and will likely foreshadow debt recovery action upon default.

Attending a mediation can save considerable time, legal fees and court costs.

Arbitration

Arbitration is a type of ADR outside of the courts which allows the parties to obtain a legally binding decision.

Arbitration is only available in certain circumstances and in certain types of matter and is not available to all debt recovery or commercial disputes. Further, the parties will have to agree to arbitration and agree to be bound by the decision.

Section 1 of the Commercial Arbitration Act 2013 (QLD) defines the types of disputes to include:

Relationships of a commercial nature include, but are not limited to, the following transactions – any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road.

During the arbitration, the parties present their arguments and evidence to an independent arbitrator who essentially acts as a judge and creates a binding determination, called an award.

Expert Determination

Similar to arbitration, expert determination is a process in which the parties in dispute agree to have their dispute determined by an independent third-party, or expert.

In most cases the expert is a person with technical experience, such as an engineer, construction expert, or accountant, etc.

Parties to disputed commercial contracts will sometimes include a clause requiring the parties in dispute to refer dispute to an expert for determination rather than going to Court.

Alternatively, the parties in dispute may agree to enter into a stand-alone expert determination agreement to save the expense and time of going to Court.

Again, the determination is binding on the parties.

BIFA Adjudication

If a dispute arises under the Building Industry Fairness (Security of Payment) Act 2017 (QLD) (“BIFA”) then BIFA has the option of having the building and construction dispute determined by an adjudicator.

A BIFA adjudication is a fast and cost-effective way of resolving building and construction disputes without resorting to the Court.

Once a decision has been made, the adjudicator will issue an adjudication certificate which can be registered in the Court and enforced as if it were a decision of that Court.

Time Limits

Very strict time limits apply to BIFA claims, so it is vital that you act now to protect your rights.

Read more about making payment claims – How to Make a BIFA Payment Claim

Read more about making adjudication applications – How to Make an Adjudication Application

Conciliation

Debt recovery claims for unpaid wages and entitlements may require the parties to attend a conciliation.

This process helps the parties in dispute to identify the salient issues and assists with identifying the terms of settlement in an attempt to reach a resolution.

The terms of the agreement are then recorded in a legally enforceable deed of settlement.

The conciliator does not act as a judge for the parties.

Get Help with Dispute Resolution

If you need help and assistance with any of the alternative dispute resolution processes above, then please get in touch with our solicitors.

Useful link to the Queensland Law Society – https://www.qls.com.au/For_the_community/Alternative_Dispute_Resolution

If the matter fails to resolve by way of ADR, then a creditor may have not any choice but to take legal action to recover the debt.

Legal Proceedings for Debt Recovery

The most common ways to start legal proceedings for debt recovery are:

Commence debt recovery action in QCAT;
Commence debt recovery action in the Court with jurisdiction;
Serve the debtor company with a statutory demand.

We will explain these and the QCAT procedures & Court procedures in more detail below.

Commence Debt Recovery Action in QCAT

The Queensland Civil and Administrative Tribunal (“QCAT”) is essentially Queensland’s “small claims Court”.

QCAT is a no-costs jurisdiction, so you will not be able to claim your legal costs, save for a few legislated items except in exceptional circumstances, but this is at the discretion of the tribunal.

The pros of commencing proceedings in QCAT are:

It is a lot less expensive than commencing in the Court;
The process can be a lot quicker than the Court;
QCAT is designed for self-represented people.

The cons of commencing proceedings in QCAT are:

The minor debt jurisdiction is mostly a no costs jurisdiction. This means that you will not be able to recover your costs save for a few designated items;
Legal representatives do not have an automatic right of appearance. This means that if you want us to appear at a QCAT hearing, you will need the leave of the tribunal, which is not always given.

QCAT has strict requirements in relation to what types of cases they hear, so I would need more information from you to be able to advise you if QCAT has jurisdiction.

QCAT Procedures

If a creditor is owed a debt of $25,000 or less, then they can apply to QCAT for minor civil dispute resolution.

Debt recovery action is started in QCAT by making an application for minor civil dispute.

After the application is served on the debtor, they have 28 days to file a response to a minor civil dispute.

If they don’t file a response, then the creditor can obtain a decision in default.

The QCAT member might also order that the matter proceed by way of mediation. If the matter does not settle at the mediation, then the legal proceedings for debt recovery in QCAT will proceed to a hearing.

If you want to claim costs, or you require a more judicial process, then you can commence legal action in the Court with jurisdiction.

Commence Debt Recovery Action in the Court

We can commence legal action in the Court with jurisdiction.

An action for debt recovery is commenced by claim and statement of claim. The cause of action will usually be a breach of contract (amongst others).

Once a claim and statement of claim is filed and served on the debtor, they have 28 days to file and serve a defence.

If they do nothing, then we can make an application to the Court to get default judgment, which is a Court order ordering the defendant (debtor) to pay the claimed amount, being the outstanding fees, costs and interest at a rate of 4% above the RBA Cash Rate, from when the debt was due and payable.

Court Procedures

If the debtor does file a defence (and counterclaim – if any), then we will need to draft and serve a reply to the defence and an answer to the counterclaim (if needed).

Based upon the strength of the respective cases and evidence, the matter will likely resolve by negotiation, or by one party getting summary judgment.

It is unusual for a debt recovery matter to proceed all the way to a trial.

However, if both parties object to any resolution in the proceeding, then ultimately the matter will go to a trial for a Magistrate or Judge to decide.

If you have a debt owed by a company, then you might be able to serve a creditor’s statutory demand for payment.

Serve the Debtor Company with a Statutory Demand

If an insolvent debtor company has assets, then a creditor can serve that company with a statutory demand for payment.

Failure to comply with a statutory demand allows a creditor to commence proceedings to wind up the debtor company.

All assets, bank accounts etc. are frozen and realised to satisfy the debts owed to the creditors.

The liquidator is also able to void certain transactions, or in some cases make the director(s) personally liable for the debt.

If the debtor company does not respond, then it is presumed to be insolvent and a creditor can take steps to wind it up in insolvency.

Once served, the debtor company will have 21 days to do any of the following:

Pay the amount claimed;
Secure or compound for the debt;
Request that the demand be withdrawn; or
Make an application to the Court setting aside the demand.

If they pay, or reasonably secure or compound (enter into an arrangement to pay) for the debt, then the demand is extinguished.

If the debtor company has grounds to set the demand aside, then before making the application, they may simply request that the demand be withdrawn.

If they ask that a creditor withdraw the demand, and a creditor does not, then a creditor may be liable to pay the costs of the application to set the demand aside if they are successful.

Read our complete guide to statutory demands – Guide to Statutory Demands

Setting Aside the Statutory Demand

A debtor company has four (4) main grounds for setting aside the statutory demand, they are:

There is a genuine dispute as to the existence or amount of the debt; and/or
They have a genuine offsetting claim; and/or
There is a defect in the demand which is likely to cause substantial injustice; and/or
Some other reason.

The bar for setting aside a statutory demand is quite low.

All that a debtor needs to do is prove to that any of the above exist, and the demand will likely be set aside.

If the demand is set aside, then the Court may order that you pay the debtor company’s costs of the application.

Read our complete guide to setting aside a statutory demand – Guide to Setting Aside a Statutory Demand

In a lot of cases it is better to get a judgment or enforceable money order in the Court or QCAT first, and then use a statutory demand to enforce that judgment or money order.

Enforcement of the Judgment or Money Order

The end result of legal proceedings for debt recovery is to obtain a legally enforceable judgment or money order from the Court.

If the judgment debtor still refuses to pay the judgment debt, then a judgment creditor will need to enforce the judgment over the property of the judgment debtor.

There are a few different enforcement options, namely:

Enforce the judgment debt in the Court; or
Enforce the judgment debt with insolvency.

We will explain these in more detail below.

Enforcing the Judgment in the Court

The options for enforcing the Judgment in the Court are:

Summon the judgment debtor to an enforcement hearing to attempt to extract information regarding their financial position; and/or
Apply to the Court for the issue of one of the various types of enforcement warrant.

Summon the Debtor to an Enforcement Hearing

This enforcement option is strictly an information gathering exercise.

If the judgment debtor provides documents showing any assets they own, the equity in those assets, and details of any debts owed to them, this method of enforcement has achieved its purpose, being gathering information to use to request an enforcement warrant.

This can include bank statements, mortgage payout figures, etc.

The first step is to give the judgment debtor a written notice requiring them to complete a sworn statement of financial position. They have fourteen (14) days from receiving the notice to complete and return it.

If the creditor is not satisfied with the contents of the completed statement of financial position, or the debtor does not return one at all, a creditor can then apply to the Court for an enforcement hearing summons order.

An enforcement hearing summons order is a Court order requiring a debtor to complete a statement of financial position (if they have not done so), produce substantial documents regarding their financial position, and appear in Court for the purpose of being cross examined about their financial position. However, in our experience, debtors rarely voluntarily reveal to the Court what assets they own that can be seized.

If a debtor is served with an enforcement hearing summons order at least fourteen (14) days before the date set for the enforcement hearing, but does not attend the hearing, the Court may issue a warrant for their arrest.

You do not need to summon the debtor to an enforcement hearing if you have details which are sufficient to issue an enforcement warrant.

Read our article on Enforcement Hearings and Statement of Financial Position

Either way, once you have the information, you can ask the Court to issue an enforcement warrant.

Issuing an Enforcement Warrant

There are a number of different types of enforcement warrants that can be issued by the Magistrate Court to enforce the Judgment, they are:

Enforcement warrant for seizure and sale of property;
Enforcement warrant for redirection of earnings;
Enforcement warrant for redirection of debt;
Enforcement warrant for regular redirections from financial institutions;
An order for payment by instalments.

We will explain these in more detail below.

Enforcement Warrant for Seizure and Sale of Property

To issue a warrant for seizure and sale of property, the Court will need evidence showing what property is owned by this debtor and the equity in that property.

We can conduct a title search, but we will likely need a payout figure from the mortgagor.

Read our article on Enforcement Warrant for Seizure and Sale of Property

Enforcement Warrant for Redirection of Earnings

To issue a warrant for redirection of earnings the Court will need to be provided with evidence of

Whether the enforcement debtor is employed, and the enforcement debtor’s employer has been identified;
Whether the enforcement debtor has sufficient means of satisfying the order after deducting, the necessary living expenses of the enforcement debtor and the enforcement debtor’s dependants; and
Any other known liabilities of the enforcement debtor.

We can usually ask for payslips etc at the enforcement hearing.

Read our article on Enforcement Warrant for Redirection of Earnings

Enforcement Warrant for Redirection of Debt

A warrant for redirection of debts allows the creditor to enforce an enforceable money order over any debts owed to the judgment debtor by a third person.

When the Court issues the UCPR enforcement warrant for redirection of debts, it then needs to be served on the third person who owes the debt to the judgment debtor.

Enforcement Warrant for Regular Redirections from Financial Institutions

A warrant for regular redirection from financial institutions is a warrant directed toward a third person (the financial institution) for a redirection of a regular deposit paid by a fourth person.

Regular payments to the judgment debtor under a retainer for example.

Read our article on Enforcement Warrant for Redirection of Debt

An Order for Payment by Instalments

An order for payment by instalments is just that, and order that the debtor pays in instalments.

The breach of this order means that the judgment debtor has breached a court order.

If the court enforcement option is not likely to yield and positive results, then we can apply that the judgment debtor be made bankrupt or wound up in insolvency.

Enforce the Judgment Debt with Insolvency

There are a couple of different ways to enforce a judgment debt with insolvency, they are:

If the judgment debtor is a person – bankruptcy; or
If the judgment debtor is a company – winding up application.

We will explain the process of each in more detail below.

Bankruptcy

An application for a bankruptcy notice will cost a fee of $470.00 with AFSA and $33.55 for a bankruptcy search.

The requirements for a bankruptcy notice are:

There must be a judgment or final order of $5,000 or more, the execution of which has not been stayed.

Much like a statutory demand, if the judgment debtor does not comply with the bankruptcy notice within 21 days then they will have committed an act of bankruptcy, allowing a judgment creditor to present a creditor’s petition to the Federal Circuit Court.

Once bankrupt, all of the debtor’s property (excluding exempt property) vests in the bankruptcy trustee and can be sold to create a fund to pay the bankrupts creditors.

Winding Up Application

As mentioned above, failure to comply with the requirements of a statutory demand raises the legal presumption that the company is insolvent.

This legal presumption shifts the onus of proof on the debtor company to prove that they are not insolvent.

With this legal presumption of insolvency assisting, within three (3) months after non-compliance with the statutory demand, the judgment creditor can apply to the Court for an order that the debtor company be wound up in insolvency.

Winding-up Proceedings

The winding-up process is an originating application in the Federal or Supreme Court. The judgment creditor will need to file an application, affidavit of service of the statutory demand, and a further supporting affidavit:

Containing details of the failure of the company to comply with the Statutory Demand;
Stating whether and, if so, to what extent the debt, or each of the debts, to which the Statutory Demand relates is still due and payable at the date when the affidavit is made; and
Annexing a copy of the ASIC search of the company.

Once filed and sealed with the Court’s seal, the documents will need to be served on the debtor company.

Other steps to be taken include (amongst others):

Notification to ASIC of the winding-up application;
Obtaining consent of a Liquidator;
Publishing a notice of the ASIC Insolvency Notices website.

Once served, the debtor company can attempt to defend the winding-up action.

Liquidator

The role of the liquidator is to attempt to realise the company’s assets, and if possible, make a payment to the creditors.

The liquidator also has claw-back powers for voidable transactions. These include:

Transfer to defeat/defraud creditors;
Uncommercial transactions;
Unfair loans to a company;
Unfair preferences;
Unreasonable director-related transactions.

This may include any payments to associated companies/businesses.

If the liquidator finds any of these transactions, they will attempt to void that transaction and realise the asset or cash for the benefit of the creditors.

Once the order is made and the liquidator is appointed, the process can take 12 to 18 months to wind-up the company and organise its affairs.

The liquidator will report to the judgment creditor (and all creditors) at the start of the liquidation, at about three (3) months, and whenever they deem it necessary to do so.

Legal Proceedings for Debt Recovery Process

That’s basically it. The process is simply:

Try to resolve the dispute without litigation;
Start legal proceedings for debt recovery;
Obtain a judgment or enforceable money order; and
Enforce that judgment over the property of the debtor.

We would always strongly recommend that you use a debt recovery litigation lawyer who understands debt recovery law and debt recovery legislation to recover your debts.

Debt Recovery FAQ

Below are a number of frequently asked questions in relation to legal proceedings for debt recovery and debt recovery action.

Who is Liable for Joint Debts?

In most cases both parties in joint debts are jointly and severally liable. This means they jointly owe the debt, and they both individually owe the entire debt.

This means that a creditor can choose to enforce the debt over one or both of the debtors.

Am I Liable for my Partner’s Debts?

No, not usually. The only way that a person may be liable is if they have signed a joint loan agreement or a personal guarantee.

However, if you are using the item over which the money is owed, a car for example, then a secured creditor may repossess the item.

How do I find out if a Money Order has been Made Against Me?

The following Courts have an online search facility:

Federal and Federal Circuit Court – https://www.comcourts.gov.au/public/esearch
District and Supreme Courts – http://apps.courts.qld.gov.au/esearching/

If you think an order has been made against you in the Magistrates Court, then give them a call and they will tell you what has happened on that Court file.

What do I do if a Money Order has been Made Against Me?

Depending on what you want to do, you can attempt to pay the debt, or negotiate a repayment plan, or if you want to dispute the debt, then attempt to set aside the default judgment.

Care must be taken that the judgment creditor doesn’t start enforcement proceedings.

How do I Negotiate a Payment Arrangement?

We would always advise getting a solicitor to negotiate on your behalf.

Ultimately you need leverage. The more leverage you have in a negotiation, the better the outcome you will likely receive.

Do I need Legal Advice?

Yes. We would always advise that both creditors and debtors take legal advice before starting legal proceedings for debt recovery.

A solicitor may be able to save you money and protect your rights and interests.

If you need to start legal proceedings for debt recovery then it is important to get it right and you should contact a lawyer

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Can you Serve a Bankruptcy Notice by Email?

12/10/2019 By // by Wayne Davis

Can you serve a bankruptcy notice by email?

If a creditor has received a final judgment or final order the execution of which has not been stayed, and that judgment or order is more than the statutory minimum ($5,000.00), then the creditor can apply to the Australian Financial Security Authority for a bankruptcy notice.

Once the judgment creditor has the bankruptcy notice it needs to be served on the judgment debtor.

There are a number of different ways to serve a judgment debtor with the bankruptcy notice in the Bankruptcy Act 1966 (CTH) (“the Act”) and the Bankruptcy Regulations 1996 (CTH) (“the Regs”).

One question we get asked is “can you serve a bankruptcy notice by email?”

This article will explain if a bankruptcy notice can be served by email.

If you need to serve a bankruptcy notice then it is important to get it right and you should contact a lawyer

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What is a Bankruptcy Notice?

A bankruptcy notice is a formal notice issued by the Australian Financial Security Authority (“AFSA”).

It is a formal demand for payment:

From a human debtor (not a company);
Based upon a final judgment or final order of more than the statutory minimum ($5,000.00);
The final judgment or final order must not have been stayed; and
The final judgment or final order must not be more than 6 (six) years old.

A bankruptcy notice states that the judgment debtor must either pay, enter into an arrangement for payment, or apply to set the bankruptcy notice aside – all within 21 days after being served.

If they don’t do any of these things then they have committed an act of bankruptcy, allowing the judgment creditor to file creditor’s petition in the Federal Circuit Court.

Because the act of bankruptcy is calculated upon the date of service, it is important to get this date correct, and to be able to prove service.

How to Serve a Bankruptcy Notice

Regulation 4.02A of the Regs – Service of bankruptcy notices – says:

A bankruptcy notice may be served by any of the methods mentioned in regulation 16.01.

Regulation 16.01(1) of the Regs says:

(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
(a) sent by post, or by a courier service, to the person at his or her last-known address; or
(b) left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person’s name, at the last-known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.

Regulation 16.01(1)(e)(ii) says that a bankruptcy notice can be served by another mode of electronic transmission in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.

Obviously, the main thing to consider in this section, is when an email is received by the person and what does that mean?

Regulation 16.01(2)(b) says:

(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person …
(b) in the case of service in accordance with paragraph (1)(c), (d) or (e)–when the document is left, delivered or transmitted, as the case requires.

The cases on this point have discussed what this means.

When is an Email Received by a Judgment Debtor?

Regulation 16.01(1)(e)(ii) expressly states that a bankruptcy notice can be served by electronic mail (email). However, service is effected when the document is delivered or transmitted.

Obviously, these words have different meanings, so how have the authorities decided what “received” means in the context of service of a bankruptcy notice?

The main case on this point is American Express Australia Limited v Michaels [2010] FMCA 103 where Smith FM provides commentary on the authorities and says at [23]:

The specific provisions in Bankruptcy Regulations regs.16.01(1)(e) and (2)(b) appear to be self-supporting, and appear intended to identify a deemed time of receipt of service which is simple to establish, and which is rebuttable by the recipient. In my opinion, these provisions implicitly exclude the application of ss.14(3) and (4) of the Electronic Transactions Act in relation to findings as to receipt and time of receipt.

Smith FM then went on to say at [24]:

This conclusion still leaves the possible ambiguity of the word ‘transmitted’ in reg.16.01(2)(b), which must be solved by a consideration of the context and objects of the provision. Clearly, it is intended to assist the making of findings as to receipt of an emailed document, and to dispense with proof of actual receipt of the email, “in the absence of proof to the contrary”. It takes its flavour from the language of reg.16.01(1)(e), which it is intended to assist. That provision refers to a document “sent by” electronic transmission, referring to a mode of dispatch by a sender. Regulation 16.01(2)(b) appears to make an understandable assumption that electronic transmissions will normally reach the intended destination almost instantaneously. Considering all these points, and the general context of the regulation, I accept the submission of counsel for AMEX that reg.16.01(2)(b) raises a rebuttable presumption of receipt and time of receipt occurring when the email is transmitted by its sender, being when it is irretrievably sent by the electronic mail facility used by the person serving the electronic document.

American Express Australia Limited v Michaels [2010] FMCA 103 therefore says that in relation to regulation 16.01 of the Regs, an email is presumed to be received by the judgment debtor when it is transmitted by the judgment creditor, being when it is irretrievably sent by the email facility used by the person sending the bankruptcy notice.

This was followed in Noonan v BMW Australia Finance Limited [2013] FCCA 2222 when Judge Whelan said:

With respect to the provisions of Reg.16.01(1)(e) of the Regulations, Smith FM (as he then was) considered … that the provision was intended to identify a time of receipt which is simple to establish. It raises a rebuttable presumption that receipt, and time of receipt, occurred when the email is transmitted by its sender, being when it is irretrievably sent by the electronic mail facility used by the person serving the electronic document.

It was also followed in The Council Of The New South Wales Bar Association v Archer [2012] FMCA 81 Lloyd-Jones FM said:

In American Express Australia v Michaels [2010] FMCA 103 … [H]is Honour says that the presumption arises when the notice is transmitted, not when it is received.

The legal presumption that the bankruptcy notice has been served by email when it is transmitted or sent by the person sending is rebuttable. The judgment debtor will need to provide evidence that the bankruptcy notice was not delivered by email.

Regulation 16.01(2)(b) states that the bankruptcy notice is taken to have been served “absence of proof to the contrary”, meaning that the onus in on the judgment debtor to prove that he/she was not served by email.

The judgment debtor will need to adduce evidence of non-delivery and not non-receipt.

Proof of Non-Delivery or Non-Receipt

The authority case on this point is the Hight Court case of Fancourt v Mercantile Credits Ltd [1983] HCA 25. In Fancourt the High Court said:

Despite remarks in the judgments about non-receipt, it was non-delivery which was significant because the second limb of s. 26 of the Interpretation Act refers to proof of the contrary of delivery. As the present case shows, delivery may be different from receipt by the intended recipient and, provided that delivery is not disproved, the fact of non-receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of the post.

Fancourt was followed in relation to a bankruptcy notice and regulation 16.01(2) in Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321 where Sundberg, Finkelstein & Hely JJ said:

If, on the proper construction of reg 16.01(2), the words “proof to the contrary” permit proof that the document was not delivered, there is no such proof in the present case. It is clear from Fancourt that proof of non-receipt as opposed to non-delivery is not permitted … Thus on either view of reg 16.01(2), the primary judge correctly said there was no point in the appellant filing an affidavit of non-receipt.

Practically this makes a lot of sense. Debtors always say things like “we didn’t get the email” or “we didn’t get the invoice” or “we didn’t get the letter”.

So, to rebut the presumption that service was made, the judgment debtor will need to adduce evidence of non-delivery and not non-receipt of the bankruptcy notice.

Can we Serve a Bankruptcy Notice by Email?

Yes, we can serve a bankruptcy notice by email.

A bankruptcy notice is deemed served when it is transmitted by the sender, being when it is irretrievably sent by email, and proof of non-delivery is not adduced to rebut that presumption.

Best practice when serving a bankruptcy notice by email is to get a delivery and read receipt.

Delivery and Read Receipts

To get a delivery receipt or a read receipt you need to go to options in your Outlook, then tick the “request a delivery receipt” box and the “request a read receipt box”.

For a delivery Receipt you will either get a relayed response or a delivered response.

Relayed – Delivery to these recipients or groups is complete, but no delivery notification was sent by the destination server.
Delivered – Your message has been delivered to the following recipients.

Either way, you can annex these receipts to your affidavit as evidence of delivery.

You may not get a read receipt as it requires the judgment debtor to click to send the read receipt, but it does happen sometimes, so it is worth a go.

Serving a Bankruptcy Notice by Email

This article explains how to serve a bankruptcy notice by email.

Don’t just serve by email if there are other avenues open to you. If you can fax, then fax too. If you can get the judgment debtor personally served, or you know where the judgment debtor lives, then serve him or her there too.

A judgment creditor will need to prove service of the bankruptcy notice in order to establish that the judgment debtor committed an act of bankruptcy. Failure to properly serve the bankruptcy notice can be a costly mistake – for this reason we always advise seeking legal advice.

If you need to serve a bankruptcy notice then it is important to get it right and you should contact a lawyer

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What is the Fair Entitlements Guarantee?

Why does the Fair Entitlements Guarantee Exist?

Who is an Eligible Employee?

Who is Not an Eligible Employee?

The Causal Link to the Insolvency Event

Making a Fair Entitlements Guarantee Claim

Time Limits for Fair Entitlements Claim

Seeking an Internal Review of the Decision

Seeking a Review by the Administrative Appeals Tribunal

Can an Employee Wind Up a Company?

Serving the Employer with a Statutory Demand

Defect in the Demand Causing Substantial Injustice

Winding Up the Company

Eligibility to give an Adjudication Response

What is an Adjudication Response?

Identify the Critical Dates

What does it mean to “Receive” the Documents?

The Form of the Adjudication Response

What are “new reasons”?

What can be Included in the Response

Jurisdictional Issues for Adjudication Response

How to give the Adjudication Response

Service of the Adjudication Response

Adjudication Procedures

The Adjudication Decision

Time Limits for Making the Adjudication Decision

What Happens Next?

Further Reading

What is Wage Theft?

Not Being Paid the Correct Hourly Rates

Being Paid Cash-in-hand or Off-the-books

Unpaid Overtime

Unpaid Penalty Rates

Illegal Cash-Back Schemes

Non-Agreed Deductions from Wages

Illegal Phoenixing

Sham Contracting Arrangements

Non-payment of Superannuation

Can I Make a Claim for Wage Theft?

Making a Claim for Wage Theft

The Wage Theft Process

Work out Exactly what the Employee is Owed

Negotiate with the Employer to Reach a Settlement

Report this Employer to the Fair Work Ombudsman

Commence Legal Action in the Court with Jurisdiction

Small Claims Under $20,000.00

Claims Over $20,000.00

Eligible State Courts for Wage Theft Claims

Jurisdiction of the State Courts

Is the Business Owner Liable for the Debts?

Enforce the Wage Theft Judgment

Moving Forward – Wage Theft

The Debt

Jurisdiction

Legislation

The Contract

Charging Clauses or other Security

Personal Guarantees from Directors

PPSA Charging Clauses

Default Terms Clauses

Start Legal Proceedings for Debt Recovery

Letter of demand

Alternative Dispute Resolution (ADR)

Negotiation

Mediation

Arbitration

Expert Determination

BIFA Adjudication

Time Limits

Conciliation

Get Help with Dispute Resolution

Legal Proceedings for Debt Recovery

Commence Debt Recovery Action in QCAT

QCAT Procedures

Commence Debt Recovery Action in the Court

Court Procedures

Serve the Debtor Company with a Statutory Demand

Setting Aside the Statutory Demand

Enforcement of the Judgment or Money Order