Contested Insolvency

Our client asked to intervene early in a bankruptcy process based on a judgment given in the Federal Court for a sum in excess of US$8.8 million.  Our client had been held liable for his company’s debt on the basis of a guarantee provided by him to underwrite an earlier settlement of its liability.

It is unusual to contest the issue of a Bankruptcy Notice which relies on a Judgment Debt but it was important to our client that we protect his reputation at an early stage.  We were asked to seek to have the Bankruptcy Notice set aside by the Federal Circuit Court rather than to contest the issues at the Creditor’s Petition stage.

Our team investigated every possible avenue to challenge the Bankruptcy Notice.  We twice successfully sought leave to amend our client’s grounds and, supported by highly experienced counsel (Geoffrey McDonald), we ultimately developed 12 grounds for setting aside of the Bankruptcy Notice (including arguing an “effective” stay, an abuse of process and/or breach of undertakings, ineffective service, invalidity of the form and an incorrect exchange rate).

Ultimately our client obtained a favourable judgment.  His Honour, Judge Manousaridis, declared the Bankruptcy Notice invalid on the basis it failed to comply with regulations (by using the incorrect telegraphic exchange rate).

We identified a number of anomalies in the regulations (some originating back to the change in currency from pounds to dollars in the 1960s).  The Judgment has been relied upon a number of times as a precedent in other cases before the Federal Court including the Nathan Tinkler bankruptcy proceedings.