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Liquidator, Quia Timet Injunction, Estoppel and Trust Questions

Discussion in 'Commercial Law Forum' started by Rod, 28 May 2014.

  1. Rod

    Rod Well-Known Member

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    Hi guys,

    I'm new here and hoping someone can answer some questions I have :) . I've been doing a lot of research but not sure of a couple of things.

    Problem: My partner is owed about $10K by a business that has gone into liquidation. The liquidators are refusing to pay her the money.

    Background: My partner is a sole trader and does contract work for large companies. She started this about 2-3 yrs ago. She used another company as her agent to invoice her clients and to provide insurances for her. The company had her sign up as a beneficiary in a trust.

    This company recently went into administration then liquidation and the liquidator is saying they will not pay out the money for work my partner did. The liquidator is also saying she is not a creditor. The matter is complicated because of the trust and nature of the business relationship my partner had with the company.

    I'm wanting her to apply for an injunction to prevent the liquidator from disbursing her money till we get better organised and understand how we go about suing them and or the company.

    Questions:
    1. If my partner applies for a Quia Timet injunction against the liquidator and loses the request, can she be made to pay costs?
    2. How much would it cost to have a solicitor review the injunction we prepare and ensure it is properly formatted so the other party can't escape on a technicality?
    3. It appears from my untrained bush lawyer perspective my partner can sue using Estoppel, unjust enrichment and trust laws. Is there any other law that might be applicable?
    4. If we end up suing, is it against the liquidator as they now control the money? or against the company she signed up to as a beneficiary? Or both? I'm wary of trying to sue the company due to the restrictions on suing a company already in liquidation, even though she is not classed as a creditor.
    5. Is there anything else we can do, any other legal areas I can research?

    Side information:
    This experience is not pleasant and coming to grips with the law is not trivial. Even dealing with the courts is hard. The people at the court house didn't even know what a quia timet injuction was let alone point me to the correct form, let alone which court to use. One person at the department of justice said go to the Supreme Court of Victoria. After questioning someone at the Supreme Court they rather reluctantly agreed it could be done at a Magistrates court but I'd have to talk to them (the ones that don't know what to do).
     
  2. John R

    John R Well-Known Member

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    Hi Rod,
    I know an IT contractor that was recently in a similar position. From memory, the setup of the trust was similar to this ATO diagram. Is this similar to your partner's situation?

    1. If my partner applies for a Quia Timet injunction against the liquidator and loses the request, can she be made to pay costs?
    As a general rule, yes. Liquidators also generally have expensive taste in solicitors and barristers.

    In relation to your other questions, I don't have specialist knowledge in the relevant areas but the recent Supreme Court of NSW decision of In the Matter of ICS Real Estate Pty Ltd (in liquidation); and In the Matter of Independent Contractor Services (Aust) Pty Ltd (in liquidation) [2014] NSWSC 479 (29 April 2014) appears similar to your partner's circumstances and may serve as a basis for your further research.

    Please keep us updated.
     
  3. Rod

    Rod Well-Known Member

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    Hi John,

    The diagram is different for my partner. It is unlikely she has done anything to upset the ATO, unlike some of the IT contractors you refer to.

    Thanks for the link to the Supreme Court of NSW ruling. It reads very similar to my partners situation. It was interesting to read the liquidator may have an obligation to seek court guidance.
     
  4. John R

    John R Well-Known Member

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    Hi Rod,
    Just saw you on another thread - Any luck with the liquidator?
     
  5. Rod

    Rod Well-Known Member

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    Possibly. Looks like she and I have talked the liquidator into asking the court for a ruling. Largely based on the court case u referenced. Seems the liquidator was aware of this case but he never let on till we told him.

    Thanks :)
     
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  6. Tim W

    Tim W Lawyer

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    Thing about a quia timet injunction is that you will need to convince the court
    that you have a well founded fear of a wrongful act about to be committed.

    "Wrongful" does not normally extend to
    "placing the interest of an individual unsecured creditor ahead of the other creditors"
    especially when the work of receivers or liquidators is proceeding in the usual way,
    that is, not wrongfully, even if not the way you might like.

    In a receivership or liquidation, this kind of injunction is not typically a mechanism
    to give the applicant creditor priority over other creditors.

    Nor is it, at least in my opinion, the equivalent in equity of a Freezing ("Mareva") Order.
     
  7. Rod

    Rod Well-Known Member

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    Hi Tim,

    The underlying issue will now be dealt with in court. BTW, the wrongful act that we were alleging is about not paying out money so the need is to preserve the money until the court could decide on issue of trust monies. It was not going to be about priority of creditors as trust members should not be considered creditors :) A good case for the court to sort out.
     
  8. Tim W

    Tim W Lawyer

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    Have a read about a thing called Quistclose trust.
    Let us know if you think that's what she might be dealing with.
     
    Rod likes this.
  9. Rod

    Rod Well-Known Member

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    Reading trust law is like reading German for me. The occasional word/concept is recognisable. For years I thought there were only two types of law - common law and statute law. It is only recently I've found out there's a third type called equity.

    Some interesting reading about trusts and it will take me some time to try and get my head around it. Thanks for the reference.
     

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