Debt Collection

What are creditors' debt collection guidelines?

Debt Collection Guidelines

The Australian Competition & Consumer Commission (ACCC) & the Australian Securities & Investments Commission (ASIC) have published:

➲ Joint Debt Collection Guidelines.

Both the ACCC and ASIC enforce Commonwealth consumer protection laws, including laws relevant to debt collection.
The ACCC and ASIC have jointly produced this guideline which aims to assist creditors, collectors and debtors understand their rights and obligations, and ensure that debt collection activity is undertaken in a way that is consistent with consumer protection laws.
The guide was originally published in 2005 and has been updated to reflect significant changes to the law, such as the introduction of the Australian Consumer Law in 2011, the National Consumer Credit Protection Act 2009, and privacy laws and principles.

Source: ACCC Debt collection guideline for collectors & creditors

What constitutes "Hardship Notice"?

Hardship Notice

72 Changes on Ground of Hardship
(1) If a debtor considers that he or she is or will be unable to meet his or her obligations under a credit contract, the debtor may give the credit provider notice (a hardship notice), orally or in writing, of the debtor’s inability to meet the obligations.

As per s 72 (above) of the National Credit Code 2009 (Cth), a debtor who thinks they will be unable to meet their obligations under a credit contract can give notice to the creditor of their inability.

This notice can be given either orally or in writing.

When giving notice, the debtor is not obliged to frame the notice in a certain way, or to make use of a certain form, though it remains up for debate as to whether the words "hardship" or "hardship notice" have to be used for a debtor to properly give s 72 notice of hardship (see RHG Mortgage Corp Ltd v Saunders [2016] below).

The bar for giving notice has reduced somewhat since 16 May 2013, prior to which the debtor seeking to notice had to specify one of three ways in which they sought to have the credit contract changed.

Since the 2013 amendments, the debtor is no longer obliged to first propose how the credit contract should be changed.

It would now appear that a debtor need only give notice to the creditor, at which point it is now the creditor's duty to either:

1️⃣ Request further information from the debtor (including how the credit contract should be changed); or

2️⃣ If the debtor requested specific changes when putting the creditor on notice in the first place, to return to the debtor with a verdict as to whether the creditor has or has not agreed to the changes proposed.

The creditor must take do one of the above actions within 21 days of receiving the initial hardship notice from the debtor.

Failure to do so attracts a civil penalty for the creditor.

RHG Mortgage Corp Ltd v Saunders [2016] NSWSC 1037

Had the substantive issues in this matter been heard, perhaps it would have provided some precedent as to whether a debtor needs to use the word "hardship" to put a creditor on notice of hardship, or whether other words to the equivalent are sufficient.

Unfortunately, it would appear as though the matter settled after a couple of interlocutory hearings.

Nonetheless, Garling J. suggested here that the latter position (words equivalent hardship are sufficient) may well be an arguable position, though he went no further as to the merits of this argument, as it did not fall for determination.

Perhaps this suggestion could provide the basis for a future legal challenge?

Implied Hardship Notice?

What happens if I haven't given notice? Is there such a thing as an implied hardship notice?

The legislation mentions nothing of circumstances in which a creditor might be impliedly put on notice as to a debtor's hardship. As such, it would appear difficult to imagine a situation where a creditor might be impliedly put on notice of hardship.

The 2013 amendments to the National Credit Code 2009 (Cth) appears to have had the effect of reducing the task of the debtor to expressly put a creditor on hardship notice.

Even if the debtor offers no further information as to the circumstances of hardship or how they would like the credit contract amended, the onus is on the credit provider to request that information from the debtor once the debtor has given effective notice under s 72(1).

Whilst it is dangerous to make assumptions about the operation of the law, it seems unlikely that any court would read into the National Credit Code 2009 (Cth) the existence of an implied hardship notice.

The matter has not been brought before the courts, and as such, there is no guidance from case law.

Besides, the importance of time is well established in s 72.

It constitutes a breach of the law, amounting to 5000 civil penalty units, for a creditor to fail to return to the debtor with a verdict within the relevant time frame.

Given time is of the essence, an implied hardship notice is unlikely to sit well with the law here, as it is difficult to place a time regarding when notice may be said to have been given, where it may be given tacitly.

Is it too late for me to make / give Notice of Hardship?

Enforcement Proceedings and s 89A of the National Credit Code

From s 89A of the National Credit Code 2009 (Cth), it is evident that a debtor may make give notice of hardship even after a creditor has given the debtor a default notice.

89A Effect of hardship notices on enforcement
(1) This section applies if ...
(b) before or after the credit provider gives the default notice, the debtor gives the credit provider a hardship notice (the current hardship notice) under section 72; and

The effect of s 89A is to prevent creditors from initiating enforcement proceedings until 14 days after the creditor has responded to the hardship notice. Besides this, it affords a debtor the opportunity to give hardship notice to a creditor even after default.

Best case scenario, a creditor, upon examination of the debtor's circumstances, may consider that changing the credit contract as favourable over enforcement proceedings.

RHG Mortgage Corporation Ltd v Sava [2011] QSC 372

It would appear possible to give notice of hardship even subsequent to the commencement of enforcement proceedings. Atkinson J here notes that a judge hearing the matter previously adjourned the matter to allow the defendant to give a hardship notice to the creditor:

"Because there has not been any complying application, the obligations which inhere in the credit provider under s 72 (3) have not arisen.
This matter came to court on a previous occasion and it appears that the Judge hearing it adjourned it to allow Mr Sava, the defendant, to obtain legal advice with regard to making a complying application for hardship to the mortgagee/plaintiff or to the court under s 74" per Atkinson J.

Outside Options?

For a debtor unable to rely on the provisions relating to hardship notices, a debtor may consider making a claim on s 76, should it be possible to construe the terms of the credit contract as unfair in some way:

76 Court may reopen unjust transactions
(1) The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change.

Credits:

The above overview of the law pertaining to Hardship Notices under the National Credit Code was prepared by Suk Jae Chung | Practical Legal Training (PLT) Placement, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

Root Cause Analysis: Why Debt Collection?

Root Cause Analysis

In order to reduce the need to send Letters of Demand/Statutory Demands in the future, it is worthwhile to conduct a root cause analysis which might include the following questions:

✅ Did you perform reference checks on the Debtor?

✅ Did you perform a credit check before extending credit?

✅ If you are dealing with a company, did you obtain a personal guarantee from the company directors to support the account?

✅ Does your written agreement include a term granting you the right to secure a charge against the Debtor's current +/or future real and/or personal property?

✅ Do you have a written agreement with the Debtor, which includes payment terms, address for service, and the capability to serve notices via email/fax?

✅ Did you engage a lawyer to prepare your written agreement with the debtor or your standard terms of trade?

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

What types of NZ Court Judgments can be enforced in Australia?

What types of NZ Judgments can be registered for enforcement in Australia?

The following is a non-exhaustive list of the types of NZ judgments can be registered for enforcement via the Australian Courts:

✅ Money judgments;

✅ Non-money judgments (only if not excluded by the regulations);

✅ Judgments in criminal proceedings that involve an obligation to pay an Injured party compensation, damages or reparation;

✅ Judgments that involve a regulatory regime criminal fine;

✅ Judgments in Market Proceedings;

✅ Judgments registered under the Reciprocal Enforcement of Judgments Act 1934 (NZ); and

✅ Reseal of Probate (see below discussion).

The following NZ judgments cannot be registered for enforcement in Australia

❌ Orders under proceeds of crime legislation;

❌ In specified circumstances detailed in the regulations relating to orders in whole or in part made by a NZ Court under the Insolvency (Cross-Border) Act 2006 (NZ).

❌ Orders relating to the granting of probate or letters of administration - for orders of this type you will need to consider whether the relevant Australian State or Territory Probate Court will reseal the grant.

For more information, please see the discussion and example below.

❌ Guardianship orders;

❌ Non-money judgments (if excluded by the regulations);

❌ Orders relating to the welfare, control and care of a child;

❌ Judgments which are not final and conclusive (including freezing orders); and

❌ Judgments which are not enforceable in the original New Zealand Court or Tribunal.

Reseal of Probate

If a deceased had assets in different states of Australia or in certain countries, namely Commonwealth countries where the Queen is the head of state, then it is generally possible to have a Grant of Probate issued by a Court in one jurisdiction recognised in another state or country.

This process of recognising the grant made in the other state or country is called resealing the grant.

NSW Reseal of Probate example:

Not all Grants from other countries can be resealed by the Supreme Court of NSW.

The Probate Court will only reseal Grants made in countries of the "Commonwealth Realm" where the Queen is, or was at the time of the grant, Head of State.

Such countries include the United Kingdom (England, Scotland, Wales and Northern Ireland), New Zealand, Papua New Guinea and Solomon Islands.

Recent grants from the following countries cannot be resealed: Malta, South Africa, Pakistan, India, Sri Lanka, Fiji, Hong Kong or The Republic of Ireland.

If a grant cannot be resealed then it may be necessary to apply for a new Grant of Probate in NSW.

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

Can Foreign Court Judgments be enforced in Australia?

What types of Foreign Court Judgments can be registered for enforcement in Australia?

Superior Courts

The following is a list of the Foreign Countries extracted from the Foreign Judgments Regulations 1992 (Comm.) with arrangements as at 1 December 2021 to recognise Australian Court judgments which in turn may be recognised and capable of registration in Australian Courts:

Regulation 4 ➲ Schedule Superior Courts

1A

Province of Alberta, Canada

Supreme Court of Canada
Court of Appeal of Alberta
Court of Queen's Bench of Alberta

2

Bahamas, The Commonwealth of the

Court of Appeal
Supreme Court

3

Province of British Columbia, Canada

Supreme Court of Canada
Court of Appeal of British Columbia
Supreme Court of British Columbia

4

British Virgin Islands

Eastern Caribbean Supreme Court

5

Cayman Islands

Grand Court

6

Dominica,
Commonwealth of

Eastern Caribbean Supreme Court
Court of Appeal
High Court of Justice

7

Falkland Islands

Court of Appeal
Supreme Court

8

Fiji, Republic of

Supreme Court
Court of Appeal
High Court

9

France (French Republic)

Cour de Cassation
Cours d'Appel
Tribunaux de grand instance
Tribunaux de commerce
Cours d'assise
Tribunaux correctionnels

10

Germany, Federal
Republic of

Bundesgerichtshof
Oberlandesgerichte
Bayerische Oberste Landesgericht
Landgerichte

11

Gibraltar

Court of Appeal
Supreme Court

12

Grenada

Supreme Court (consisting of the:
Court of Appeal; High Court)

13

Hong Kong Special Administrative Region of the People's Republic of China, The

Court of Final Appeal
High Court
(consisting of the: Court of Appeal; Court of First Instance)

14

Israel, State of

Supreme Court
District Courts
Moslem Religious Courts
Druze Religious Courts

15

Italy (Italian Republic)

Corte Suprema di Cassazione
Corte di Assise
Corte d'Appello
Tribunale

16

Japan

Supreme Court
High Courts
District Courts
Family Courts

16A

Korea, Republic of

Supreme Court
Appellate Courts
District Courts
Family Court
Patent Court
Administrative Court

16B

Malawi

High Court
Supreme Court

17

Province of Manitoba, Canada

Court of the Queen's Bench of Manitoba

18

Montserrat

Privy Council
Eastern Caribbean Court of Appeal
High Court of Montserrat

19

Papua New Guinea

Supreme Court of Justice National Court of Justice

19A

Poland, Republic of

Supreme Court
Commercial Courts
Courts of Appeal
Provincial Courts

20

St Helena

Supreme Court

21

St Kitts and Nevis, Federation of

Privy Council
Eastern Caribbean Court of Appeal
High Court (Saint Christopher Circuit)
High Court (Nevis Circuit)

22

St Vincent and the Grenadines

Eastern Caribbean Supreme Court (consisting of the:
Court of Appeal,
High Court)

23

Seychelles, Republic of

Court of Appeal
Supreme Court

24

Singapore, Republic of

Privy Council: in respect of orders made on appeals from the Singapore Supreme Court and filed with the Court of Appeal of Singapore

Supreme Court of Singapore (consisting of the: Court of Appeal; High Court)

25

Solomon Islands

Court of Appeal
High Court

25A

Sri Lanka

Supreme Court
Court of Appeal
High Court
District Court

25AA

Switzerland

Bundesgericht
Kantonale Obere Gerichte
Handelsgerichte

25AB

Taiwan

Supreme Court
High Courts
District Courts

25B

Tonga

Court of Appeal
Supreme Court

26

Tuvalu

Court of Appeal
High Court

27

United Kingdom, The

Supreme Court of the United Kingdom
Senior Courts of England and Wales
Court of Judicature of Northern Ireland
Court of Session

28

Western Samoa

Court of Appeal
Supreme Court of Western Samoa

Note: The Eastern Caribbean Supreme Court is constituted by Statutory Instrument 1967 No. 223, as amended by Statutory Instrument 1983 No. 1108, of the United Kingdom.

The Court is differently described in the usage of the countries mentioned in the Schedule in relation to which it is listed as a superior court.

The description used by each of those countries is set out in column 3 of the relevant item in the Schedule.

✅ Reseal of Probate (see below discussion).

Inferior Courts

Regulation 5 Inferior Courts

(2)  Part 2 of the Act extends in relation to the following inferior courts of the United Kingdom:
                    (a)  County Courts (England and Wales);
                    (b)  County Courts (Northern Ireland);
                    (c)  Sheriff Courts (Scotland).
(3)  Part 2 of the Act extends in relation to the following inferior courts of Canada:
                    (a)  the Provincial Court of Alberta;
                    (b)  the Provincial Court of British Columbia;
                    (c)  the Provincial Court of Manitoba.
(4)  Part 2 of the Act extends in relation to the following inferior courts of Switzerland:
                    (a)  Bezirksgerichte;
                    (b)  Erstinstanzliche Gerichte;
                    (c)  Arbeitsgerichte;
                    (d)  Mietgerichte.
(6)  Part 2 of the Act extends in relation to each District Court of the Republic of Poland.

For NZ judgments

Please read our FAQ: What types of New Zealand (NZ) Court judgments can and cannot be registered for Enforcement in Australia?

Reseal of Probate

If a deceased had assets in different states of Australia or in certain countries, namely Commonwealth countries where the Queen is the head of state, then it is generally possible to have a Grant of Probate issued by a Court in one jurisdiction recognised in another state or country.

This process of recognising the grant made in the other state or country is called resealing the grant.

NSW Reseal of Probate example:

Not all Grants from other countries can be resealed by the Supreme Court of NSW.

The Probate Court will only reseal Grants made in countries of the "Commonwealth Realm" where the Queen is, or was at the time of the grant, Head of State.

Such countries include the United Kingdom (England, Scotland, Wales and Northern Ireland), New Zealand, Papua New Guinea and Solomon Islands.

Recent grants from the following countries cannot be resealed: Malta, South Africa, Pakistan, India, Sri Lanka, Fiji, Hong Kong or The Republic of Ireland.

If a grant cannot be resealed then it may be necessary to apply for a new Grant of Probate in NSW.

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

What is a "Charging Clause"?

What is a Charging Clause?

A "Charging Clause" may be included in an unsecured credit or loan agreement.

Think of it as your last line of defence.

In the event there is a default of the credit arrangement/loan, a "Charging Clause" grants the credit provider/lender the legal right (including the power of attorney) to immediately prepare, sign + register a charge against any property (real or personal) owned by the borrower.

Securing the Debt on the PPSR - Personal Property Security Register is Recommended

Our recommended approach (superior to a "Charging Clause") to document clearly up front (before advancing the funds) an enforceable personal property security capable of being registered on the PPSR - Personal Property Security Register is via our General Security Deed over Personal Property.

If the credit or loan is already secured by a mortgage or a registered security on the PPSR - Personal Property Security Register then a separate "Charging Clause" is not required as repayment of the loan has already been secured.

Why is a "General Security Deed" recomended?

If an debt is owed, then without a General Security Deed registered on the PPSR - Personal Property Security Register or at the very minimum a "charging clause" it can be costly + time intensive + risky to obtain repayment of the debt using standard Debt Collection tools such as a Letter of Demand, etc.

When a debt is unsecured, even if legal proceedings are successful and a Local Court or Tribunal money judgment is obtained there is still no guarantee that the money will be repaid.

The formal Court money judgment enforcement processes in Australia do not include the right to place a permanent charge against the borrower's property.

There is also the possibility that at the time the borrower defaults (or at the time a Court judgment is obtained) the borrower may not own any real or personal property, and might be unemployed so that a "Charging Clause" / Court money judgment is of little benefit.

Presuming this is not the case, and the borrower does own real or personal property, taking steps to register security against these assets, or if this is not possible, at the very least using a "Charging Clause" can greatly simplify, fast track and increase your prospects of making a full recovery of the debt owed.

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.