PROBLEMS WITH BUYING PROPERTY WITH OTHER PEOPLE

Company insolvency is always a vexed question for the directors. If they determine that the company cannot meet its debts and is insolvent, they have to decide whether to wind up the company. But there is an alternative which is not used frequently enough. That is, a deed of company arrangement. We are familiar with the Chapter 11 procedure in the United States where great companies have been allowed to trade out of their difficulties. There is a procedure in Australia which has some similarities to that philosophy that it may be better to keep a company going. Under our Corporations Act, the directors can appoint an administrator, who will investigate and report to the creditors as to the state of the company and whether there is a reasonable prospect of its trading out of its financial predicament. That proposal is the voted on by creditors. The creditors are given the advice whether they will be better off by accepting the arrangement or whether the company should be wound up. These arrangements are not always welcomed by creditors, especially if there have been untoward activities by the directors which will go un-investigated if the arrangement is accepted. Also, because the arrangement proposal can be whatever the administrator thinks appropriate, it may mean that some creditors can be required to accept a reduced amount and/or paid over an extended period. Any creditor who feels that the arrangement is unfair can apply to the Court to have it terminated. The Court will require credible evidence of wrongdoing before intervening.

The lesson is that all is not lost when a company experiences financial difficulty. Winding up the company is not the only option.

Often in a dispute, the parties negotiate a settlement. Sometimes the terms are not written down and signed. Csontos v QT Hotels & Resorts was a case which dealt with that point. Csontos has brought a claim of unfair dismissal. In a conciliation meeting, the defendant made an offer which the plaintiff verbally accepted. The money agreed was paid, but the plaintiff later said that he did not accept the amount and wanted more. He said that he had not thought that he was bound by his acceptance of the amount until he signed a document to that effect. He failed because it was held that he well knew that when he agreed to the offer, he was settling his claim in total.

It is very important to be aware in settlement negotiations, just what the outcome will be if an offered amount is verbally accepted. 

Often when I am acting for a defendant in civil Court claims, the issue arises whether the claim has substance and if the defendant wins, can the plaintiff pay any costs which are awarded? If the plaintiff is a company, I will investigate whether it has assets which could be realised to meet such costs at a future date. Usually, any application to the Court that security for costs should be ordered is made at the earliest time. Such an application often can be met by a director of the plaintiff company going guarantor. If however the Court is satisfied that security for costs (such as paying an amount in the Court Registry or providing a bank guarantee) should be ordered, then the usual practice is that the claim is stayed until the costs have been secured.

So the lesson is that, if your company commences a claim, it can expect the question of security for costs being raised. If you are defending a claim, ask whether security for costs is appropriate.

Neighbourhood disputes can be difficult to resolve. Generally, we have a “live and let live” attitude to neighbours. In Steer v McLellan, the aggrieved neighbour sought an injunction from the Court to, among other things, re-position the neighbour’s barbeque away from the boundary and to stop their dogs dropping faeces close to the boundary, as the smells were causing offence. After hearing much conflicting evidence (as you would expect), the Court refused to grant an injunction for the simple reason that it would be near impossible to frame the wording of an injunction in such a way that it could be enforced. When are barbeque smells reasonable; when are dog droppings inoffensive? In the absence of a total ban on the neighbour having barbeques and dogs, the Court’s hands were tied.

The granting of an injunction is a serious step, because a breach is a contempt of Court which can result in imprisonment. The wording of an injunction therefore must be precise because the person injuncted must know exactly what he is prohibited from doing.

So the best advice still remains to talk to your neighbours and try to resolve what is causing the problem.