It seems there’s nothing like putting the frighteners on a recalcitrant debtor to ensure compliance with an existing repayment agreement and pleasingly, the Federal Circuit Court endorses such intimidation when the motives are pure and in line with the Act.
“While, of course, from time to time, remarks have been made by Courts exercising jurisdiction under the Act about the propriety or otherwise of simply using Court processes as a tool of enforcement, the fact is that it happens every day in the Courts exercising bankruptcy jurisdiction.“ Federal Circuit Court judge Tony Young.
In the recent decision of Cooper (Trustee), in the matter of Bobos v Bobos [2023] FedCFamC2G 396, Federal Circuit Court judge Tony Young describes how Oracle Insolvency Services founder Nick Cooper threatened a debtor subject to a Personal Insolvency Agreement (PIA) with bankruptcy if the dilatory debtor didn’t comply.
The commencement of proceedings to terminate the PIA and seek sequestration came about after Cooper’s patience was extinguished following 12 to 18 months of forbearance and indulgences afforded to the debtor, one Nicholas Bobos, in the form of extensions to the deadlines for instalment payments under the PIA.
The threat did the trick but when Cooper applied to have his costs of the withdrawn applications paid out of the funds he held as trustee of the PIA Bobos objected, arguing that the applications brought by Cooper amounted to an abuse of process, which is of course no way similar to missing agreed deadlines to make repayments. The judge however was pragmatism personified.
“While, of course, from time to time, remarks have been made by Courts exercising jurisdiction under the Act about the propriety or otherwise of simply using Court processes as a tool of enforcement, the fact is that it happens every day in the Courts exercising bankruptcy jurisdiction,” he said.
“It appears to me that the trustee was entitled to commence its proceeding …. and while its main motive was, no doubt, to enforce compliance with the PIA, I am not satisfied that there was an ulterior motive or an improper use of the Court processes which constitutes an abuse of process as was argued by the respondent.
” … the trustee has used the processes available to him under the Bankruptcy Act 1966 (Cth) (“the Act”) – that is, in effect, the threat of a bankruptcy or sequestration order – to ensure that the debtor pays the amount due under the PIA.”
I would have thought that the PIA obligations upon its Trustee would have necessitated the making of such and application.
The Costs order is however somewhat unusual. The burden of the costs as taxed would normally fall outside the administration of the PIA as against the Debtor: Footes Case