Common sense prevails
Individuals with assets exceeding their liabilities but with cash flow problems are at risk of bankruptcy. In the recent case of Hellier Capital Pty Ltd v Richard Albarran [2009] NSWSC 403 Justice McDougall rejected an application by a private equity firm to force an insolvency practitioner to pay a judgement debt of $1.6 million immediately or be declared bankrupt, displaying a common sense approach appropriate in the current economic climate.
Richard Albarran, an insolvency specialist and partner of Hall Chadwick, found himself in financial difficulty after the collapse of a property deal which he had personally guaranteed. Although Mr Albarran tried to find a buyer and rescue the deal, Hellier Capital retired him as the receiver and commenced proceedings against him to recover the debt owed to it.
Mr Albarran was initially permitted to repay the judgment debt of $1.6 million by way of instalments. Hellier Capital challenged that order.
Although “a successful party is entitled to the fruits of its success and to enforce the court’s orders”, Justice McDougall allowed instalment arrangements to continue. A number of factors, including evidence of a vindictive approach on the part of the creditor, influenced his decision.
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Mr Albarran had tried unsuccessfully to obtain finance even though he had assets in excess of $536,000 and an average yearly wage of $77,00;
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Mr Albarran could earn an income as a registered insolvency practitioner and a partner of Hall Chadwick and could pay the instalments;
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if declared bankrupt Mr Albarran would be unable to continue practicing as a registered insolvency practitioner;
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Mr Albarran could not earn an income other than as an insolvency practitioner;
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Mr Albarran had dependants; and
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there was a legitimate public interest in having trained people like Mr Albarran remaining available to perform insolvency work.
After carful consideration Justice McDougall concluded that as the debt would be repaid in full within 4 years as there is little to be gained by bankrupting Mr Albarran the instalment order and Mr Albarran’s registration should survive.
Amanda Abreu, Lawyer
