assignment of debt vic

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The Enforcement of Assigned Debts

In the realm of financial recoveries, the assignment of credit contracts in default is a well-established practice. Banks and financial institutions frequently assign defaulting credit card and personal loan accounts to debt collectors in an effort to streamline their cost-effective recovery processes. At RCR Lawyers, we recognize the importance of understanding the legal intricacies surrounding the assignment of debts, and we are here to provide you with valuable insights and guidance.

Assignment of Debts: The Legal Framework

Under the Property Law Act 1974 (Qld), specifically in Section 199, provisions are made for the assignment of debt at law. This allows for the transfer of debt ownership from the original credit provider (the assignor) to the new owner (the assignee). However, it’s crucial to note that this assignment must be absolute, and written notice must be given to the debtor. Importantly, the debtor’s consent is not a prerequisite for this assignment.

Once a debt is assigned, all rights and responsibilities vested in the original credit provider are now transferred to the new owner. This transfer grants the assignee the authority to collect on the debt as if they were the initial credit provider. This includes the ability to charge interest as per the original contract terms and to initiate legal proceedings to recover the debt.

The National Credit Code: A Comprehensive Framework

The National Credit Code, a crucial component of the National Consumer Credit Protection Act 2009 (Cth), extensively addresses the assignment of debt. It outlines the responsibilities of all credit lenders, providing a comprehensive framework for debt assignment and recovery.

Debtor Confusion and Legal Challenges

For debtors, the collection of assigned debts can often lead to confusion. While written notice of the assignment is a requirement, this notice extends only to the last known address (or last provided address) of the debtor. Many debtors are not familiar with the concept of debt assignment and often have not scrutinized the details of their credit contracts. As a result, an assignee who initiates legal proceedings to recover an outstanding balance may encounter significant obstacles.

In legal matters related to assigned debts, the case of Clark v Gallop Reserve Pty Ltd [2016] QCA 146 serves as an illustrative example. In this case, the validity of the Westpac Bank Corporation’s Deed of Assignment was challenged, as it did not explicitly include the judgment debt in the description of the outstanding debt owed to Westpac.

Philip McMurdo JA, in his judgment, emphasized that the wording “Westpac assigns to the Transferee all of Westpac’s full, absolute and entire legal and beneficial interest, right and title in and to the Westpac Debt, the Westpac Finance Documents, and the Westpac Guarantees” was sufficient to encompass the judgment obtained by Westpac before assignment. This exemplifies the court’s acknowledgment of the validity of the debt assignment and the assignee’s right to enforce the judgment debt.

Enforcement Options for Assignees

Once a debt has been validly assigned (following the absolute written assignment and proper notice to the debtor’s last known residence), and there are no offsetting claims available to the debtor, the assignee is entitled to pursue legal steps to recover the outstanding debts. These enforcement options may include:

• Commencing legal proceedings
• Obtaining judgments
• Enforcing judgments through methods such as statutory demands, bankruptcy notices, creditors’ petitions, warrants for property seizure and sale, garnishee orders, and more.

The RCR Recovery Team possesses extensive knowledge of various enforcement methods applicable in all Australian jurisdictions, particularly in the recovery of assigned debts. We are also well-equipped to provide guidance on the assignment of debts and the obligations that arise once such assignments occur.

If you have any inquiries or require further information on this topic, please don’t hesitate to contact RCR Recoveries at 07 3009 8444. Our legal team is ready to assist you with any questions or concerns you may have regarding the assignment and recovery of debts, ensuring that you have the necessary support to navigate these complexities with confidence.

At RCR Lawyers, we are dedicated to empowering you with the knowledge and guidance you need to effectively manage and recover assigned debts while upholding the highest legal standards.

If you have any queries in relation to the above, please contact RCR Recoveries on (07) 3009 8444 . Alternatively, you can contact us online or email us at [email protected] . 

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Assignment of debts, statutory demands and offsetting claims

It is not uncommon for a creditor (assignor) to transfer their right to receive payment of a debt (assignment) to a third party (assignee). The assignee will then seek payment from the debtor.

The assignee of the debt can issue to the debtor company a statutory demand for the payment of the debt if the debt exceeds the statutory minimum, which is currently $2,000.

For the assignee issuing the statutory demand, there will be threshold issues as to whether notice of the assignment has been given to the debtor and whether appropriate details of the assignment are contained in the statutory demand.

Assignee has the same rights and obligations as the assignor

The assignee of the debt takes the assignment subject to the rights and obligations of the assignor.

This was demonstrated in the recent decision of Mascarene Pty Ltd v Slater [2016] VSC 395 relating to a building dispute.

In Mascarene a judgment debt was assigned and the assignee issued a statutory demand.

The Court held that the assignee was not prevented from seeking payment of interest as it had the same rights as the assignor, as if the assignment had not taken place.

However, the assignee also took the assignment subject to the obligations that would have applied to the assignor in respect of the debt.

In seeking to set aside the statutory demand the debtor company claimed it had an offsetting claim against the assignor for reinstatement costs relating to building works.

Although the assignee was not a party to the building contract and not personally liable for the reinstatement costs, the debtor company was successful in claiming the setoff and reducing the amount of the statutory demand by the amount of the reinstatement costs.

It is clear that an offsetting claim cannot be sidestepped by assigning the debt.

The assignee of a debt receives the benefit of the debt subject to the rights of the assignor but also subject to the assignor’s obligations in respect of the debt.

A statutory demand can be issued in respect of an assigned debt however the assignment does not prevent the debtor company from disputing the existence or amount of the alleged debt or seeking to raise an offsetting claim.

If you would like more information about these issues, please contact Graham Roberts on +61 7 3231 2404.

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Bankruptcy & Insolvency News SLF Lawyers News Is Your Notice Assignment of Debt Valid? May 25, 2020

A creditor (assignor) can transfer their rights to receive and seek payment of a debt to a third party (assignee). Once the transfer of their rights has occurred, the assignor can then seek payment of that debt from the debtor. Once assigned, the assignee has the legal right to such debt and has the power to give a good discharge of it  without the concurrence of the assignor. [1]

There are two factors that an assignee must consider before attempting to recover a debt from a debtor:

SERVICE OF THE NOTICE

The assignee must issue a notice of assignment of debt (“ Notice ”) to the debtor at the debtors last known residential address. This is where the confusion and issues around the service of the Notice can occur by the debtor. Generally, a bank will assign the debt to a collection company after years of attempting collection/locating debtor. It is at this stage that the debtor may have moved residential addresses and may not receive the Notice. The assignee is required to comply with section 347 of the  Property Law Act 1974  (Qld), whereby service of any notices must be made to the person’s last known place of abode.

STATUTE OF LIMITATIONS

An assignee must ensure that they are within the statue of limitations to legally commence recovery of the debt. The purpose of a statute of limitations is to limit the delay for creditors to take action against a debtor for outstanding monies. The limitation period for a contract debt is six (6) years, calculated from the point of breach. Where an assignee has been assigned a debt, the point of breach will commence from the date the debt was assigned to the assignee. However, in some circumstances, where a debtor acknowledges the debt or makes a payment in respect of the debt, the point of breach starts from the date of acknowledgement or the last payment made by the debtor.

SLF Lawyers specialises in legal recoveries and various enforcement options and can assist in providing advice with respect to ensuring the Notice has been issued correctly.

If you have any questions, please contact Partner – Mark Smith of SLF Lawyers Brisbane on (07) 3839 8011.

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In a civil matter, a judicial officer may make a decision, known as a judgment, telling one party - the debtor - to pay the other party - the creditor - money. If the debtor does not pay, the creditor can apply to the Magistrates’ Court to enforce the debt. 

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You can only apply for enforcement if an order has been made in your favour.

The Magistrates’ Court does not automatically enforce civil judgments. If you are the creditor and want to enforce a judgment, you must apply first. 

Court can be a complex and costly process and you should seek legal advice before starting an enforcement action. You may also wish to speak to the other party and try to resolve the dispute. 

There are five civil enforcement actions that can be applied for in the Magistrates’ Court:

• summons for oral examination
• warrant to seize property
• attachment of debt
• attachment of earnings order
• instalment order .

A judgement from another jurisdiction must be registered with the Magistrates’ Court before enforcement can start.

See the registration of interstate judgments and registration of VCAT monetary orders pages for more information.

All court fees paid for enforcement action may be added to a debt and is recoverable from the debtor .

Penalty interest rates

The Parliament of Victoria fixes an interest rate on all outstanding civil judgments enforced in the Magistrates’ Court.

The interest rate is calculated on the money ordered to be paid, usually backdated to the date the complaint was filed. 

Interest will apply until the outstanding debt is paid in full. 

This is not a full list of legislation associated with this topic. See the Victorian Government's legislation website for more information .

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Assignment of debts, statutory demands and offsetting claims

Contributor.

It is not uncommon for a creditor (assignor) to transfer their right to receive payment of a debt (assignment) to a third party (assignee). The assignee will then seek payment from the debtor.

The assignee of the debt can issue to the debtor company a statutory demand for the payment of the debt if the debt exceeds the statutory minimum, which is currently $2,500.

For the assignee issuing the statutory demand, there will be threshold issues as to whether notice of the assignment has been given to the debtor and whether appropriate details of the assignment are contained in the statutory demand.

Assignee has the same rights and obligations as the assignor

The assignee of the debt takes the assignment subject to the rights and obligations of the assignor.

This was demonstrated in the recent decision of Mascarene Pty Ltd v Slater [2016] VSC 395 relating to a building dispute.

In Mascarene a judgment debt was assigned and the assignee issued a statutory demand.

The Court held that the assignee was not prevented from seeking payment of interest as it had the same rights as the assignor, as if the assignment had not taken place.

However, the assignee also took the assignment subject to the obligations that would have applied to the assignor in respect of the debt.

In seeking to set aside the statutory demand the debtor company claimed it had an offsetting claim against the assignor for reinstatement costs relating to building works.

Although the assignee was not a party to the building contract and not personally liable for the reinstatement costs, the debtor company was successful in claiming the setoff and reducing the amount of the statutory demand by the amount of the reinstatement costs.

It is clear that an offsetting claim cannot be sidestepped by assigning the debt.

The assignee of a debt receives the benefit of the debt subject to the rights of the assignor but also subject to the assignor's obligations in respect of the debt.

A statutory demand can be issued in respect of an assigned debt however the assignment does not prevent the debtor company from disputing the existence or amount of the alleged debt or seeking to raise an offsetting claim.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Annulment of Bankruptcy where assignment of debt in doubt

Articles , Restructuring + Insolvency

Aug 19, 2016

A recent Federal Court decision highlights the importance of those receiving an assignment of a debt to properly document that assignment and to lead evidence of the assignment if a dispute as to the assignment arises in legal proceedings.

Assignment of debts

Creditors regularly assign their rights of debt to third parties.   This can often occur when one creditor sells a debt to another party.  When this occurs the creditor becomes the assignor, the third party receiving the benefit of the debt becomes the assignee, and the transaction is referred to as an assignment.

Once an assignment is completed, the assignee should have all the same rights and obligations as the assignor had in recovering the debt.  However, the assignee must adhere to certain statutory requirements in order for an assignment to be valid at law.

These rquirements are almost identical in each state (see for example s134 of the Property Law Act  ( Vic )  or s12 of the Conveyancing Act (NSW) ) and are broadly as follows:

• there must be an assignment;
• the assignment must be absolute;
• the assignment must be in writing under the hand of the assignor; and
• express notice in writing of the assignment must be given to the debtor.

Recent Case

In the recent decision of Ozdil v Vrsecky ,  Justice Jessup of the Federal Court of Australia in Victoria considered the issue of whether express notice of the assignment had been given.

In prior proceedings the assignee had been awarded a default judgement against the debtor. The debtor did not pay the default judgement and a bankruptcy noticed was issued and served. The debtor did not comply with the bankruptcy notice within the required time frame which constituted an act of bankruptcy.  As a result, the Court made a sequestration order against the debtor.

The debtor (now bankrupt) sought an annulment of her bankruptcy pursuant to section 153B of the  Bankruptcy Act   and sought to challenged the debt on the basis that she did not receive a notice of assignment of the debt from the assignor to the assignee.  She argued that, as a result of this failure of notice, she did not owe the debt to the assignee at all.

Importantly, the only evidence before the Court was an affidavit sworn by the bankrupt personally and the lawyers for the assignee did not cross examine the debtor in relation to the matters set out in her affidavit.

The assignee did not produce evidence addressing whether the notice of assignment was given to the debtor.  As his Honour could only address what evidence was before him, as the issue of the notice had never been judicially determined, a decision was made in the debtor’s favour and the bankruptcy was annulled.

It is unclear why the assignee chose not to lead evidence in this case of the notice of assignment or cross-examine the debtor.  The case stands as a warning that those seeking to enforce their rights arising from an assignment of a debt should ensure that they both meet all the legal requirements of an assignment and put on evidence of matters they wish the Court to consider should the validity of the assignment be challenged in legal proceedings.

For more information please contact us.

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- Assignment of Debt

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January 8, 2024 by Jean Kallmyr

Understanding Deed of Assignment

In the realm of legal transactions in Australia, a Deed of Assignment holds significant importance. This legal document serves as a powerful tool for the transfer of rights and obligations between parties. Whether in the context of real estate, intellectual property, or other contractual agreements, a Deed of Assignment plays a crucial role in facilitating the seamless transfer of assets.

Deed of Assignment

A Deed of Assignment is a legally binding document that allows one party, known as the assignor (the party relinquishing the rights, benefits, or obligations), to transfer specific rights, benefits, or obligations to another party, referred to as the assignee (the party receiving the assigned rights, benefits, or obligations).

This legal instrument is commonly employed when there is a need to assign contractual rights, such as in real estate transactions, business sale transactions, intellectual property transfers or the assignment of debts. The deed must be properly executed and delivered to be legally effective.

Key Clauses of Deed of Assignment

A clear and concise description of the intention to assign, the rights, benefits, or obligations being transferred should be outlined in the document.

In many assignments, there is a consideration involved, which refers to the value exchanged between the parties. This could be in the form of money, services, or any other agreed-upon consideration.

The assignor typically provides assurances that they have the legal right to transfer the specified rights and that these rights are free from any encumbrances, and the assignee normally guarantees to perform specific contractual obligations under the specified rights.

Covenants are promises made by one or both parties regarding their future actions. For example, the assignor may covenant that they will not interfere with the assigned rights after the transfer and the assignee covenants that it will take over the obligations of the assignor under a specific contract.

The indemnity clause outlines the responsibilities of the parties in case of any losses or liabilities arising from the assignment. For example, it specifies which party will bear the costs associated with legal challenges or disputes.

Common Uses in Australia

Real estate transactions.

Deeds of Assignment are commonly used in the transfer of property rights, for example, in the sale of off-the-plan properties or when a buyer wants to transfer their rights under a property contract to another party.

Intellectual Property

Artists, authors, or inventors may use Deeds of Assignment to transfer their intellectual property rights, such as trade marks, copyrights or patents, to another individual or entity.

Debt Assignment

Assignments of debts are also facilitated through Deeds of Assignment. This occurs when a creditor transfers their rights to collect a debt to another party.

Contractual Agreements

Businesses often use Deeds of Assignment to transfer contractual rights and obligations when there is a change in ownership or a need to delegate specific responsibilities, for example, the assignment of leases or supplier contracts.

The IP House Lawyers has assisted many of our clients in drafting, preparing and executing various forms of Deed of Assignment. Please contact us on the details below if you need any assistance in relation to drafting and preparing a Deed of Assignment.

For any further information or queries on the above content, please contact us.

Jean Kallmyr | Lawyer, The IP House Lawyers | t: 0435 799 831 | e: [email protected]

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Claire Darby | Managing Director/Lawyer, The IP House Lawyers | t: 0412 998 951 | e: [email protected]

The information and contents of this publication do not constitute any legal or financial advice. This publication is intended only for reference purposes for The IP House Lawyers’ clients and prospective clients.

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Creditors' options

Describes the steps a creditor can take to recover debt if the court makes a judgment against you.

On this page

Summons for oral examination, instalment order, attachment orders, creditor’s petition for bankruptcy (sequestration order), other support.

Once a judgment has been made in a creditor’s favour, the creditor (the person or organisation that is owed money) can apply to the court for one of the enforcement orders listed on this page.

Usually the action a creditor takes depends on whether the debt is 'secured' over some property (for example, a house or a car), which the creditor can take and sell to satisfy the debt, or unsecured. The secured creditor can also use remedies available to unsecured creditors, but only after the security has been sold and only for the amount still owing (if any) once the security has been sold.

This is a hearing to find out about your income, expenses, assets and liabilities. See Summons for oral examination .

This is a court order that requires you to pay the debt by instalments. You or your creditor can apply for this. See Instalment orders .

When someone owes you money, and you owe money to somebody else, the court can make orders about what happens to the money owed to you. This is called ‘attachment’.

For example, the court can 'attach' wages that you earn, or a debt that someone owes you.

Attachment of earnings

This court order tells your employer to pay an amount out of your wages to your creditor. Currently, in Victoria no more than 20 per cent of your after-tax pay can be taken out. If your only income is from Centrelink, you cannot be made to pay.

Attachment of debt

This court order tells a person who owes you money to pay that money direct to your creditor. An attachment of debt can be made against a bank account that you have savings in, but not against a Centrelink allowance or benefit.

Warrants are directions from the court to the sheriff or police to carry out court orders. If you receive a warrant, get legal advice quickly. See Warrants to seize and sell property .

If the court order is more than $10000, a creditor can ask for a court order for your bankruptcy. If the order is made, a bankruptcy trustee gets control of your debts and assets. The trustee has to work out if, and how much, your creditors can be paid.

Creditors will probably take this action if they believe you have valuable things or that you are avoiding a debt you can pay. Get other support for debt and financial issues . There are good reasons for you to apply for bankruptcy first.

Find out how you can get other support for debt and financial issues .

Updated 7 April 2022

IS YOUR ASSIGNMENT OF DEBT VALID?

Introduction

The judgment of Justice Jessup of the Federal Court of Australia in Ozdil v Vrsecky (Trustee) [2016] FCA 881 (“the Ozdil case”) highlights the importance of ensuring that a debt has been legally assigned, prior to commencing bankruptcy or other legal proceedings. The Applicant had her bankruptcy annulled after providing uncontested evidence that she was never served with a notice of assignment of a debt owed by her. This was despite not filing her application until 20 months after being declared bankrupt. The debt was assigned by Westpac Banking Corporation (“Westpac”) to Baycorp Collections PDL (Australia) Pty Ltd (“Baycorp”).

Relevant facts

Prior to bankruptcy, in July 2013 legal proceedings against the applicant were filed in the Federal Magistrates Court of Australia, where Baycorp alleged that:

• the Applicant entered into a credit card contract with Westpac. Westpac then extended credit to the Applicant on the basis she paid interest at the rate published by Westpac and make minimum monthly repayments to Westpac;
• the Applicant failed to make the minimum repayments to Westpac and owed $12,196 to Westpac;
• pursuant to a deed dated 27 May 2008, Westpac assigned the contract and the debt to Baycorp;
• notice of the assignment of debt was purportedly given to the Applicant on 6 May 2009;
• subsequently the Applicant reduced the debt by making some payments to Baycorp;
• Baycorp issued a notice of default to the Applicant on 20 May 2013, demanding payment of the debt, plus interest;
• between 6 May 2009 to 8 July 2013, interest accrued on the debt, bringing the Applicant’s indebtedness to $16,668 (“the outstanding amount”); and,
• despite the notice of default, the applicant failed or neglected to pay the outstanding amount.

The Applicant had 21 days to file a notice to defend Baycorp’s allegations, which she failed to do. On 5 August 2013 default judgment was entered for $16,558, plus costs (“the default judgment”).

On 21 November 2013 the Applicant was served with a Bankruptcy Notice which relied on the default judgment, plus post-judgment interest.

The Applicant failed to comply with the Bankruptcy Notice within the statutory time, thereby committing an act of bankruptcy on 12 December 2013. Baycorp then petitioned in the Federal Circuit Court for the Applicant’s bankruptcy. A Sequestration Order was made on 5 August 2014

The Applications

The Applicant sought an annulment of her bankruptcy pursuant to Section 153B of the Bankruptcy Act 1966 (Cth) (“the Act”). She also applied under Section 30(1) of the Act to set aside the bankruptcy notice that led to the Sequestration Order.

The Applicant made four allegations to support her applications. The only allegation considered by the Court was that she not served with a notice of assignment of debt from Westpac to Baycorp.

Justice Jessup upheld the Applicant’s allegation that she was not served with a notice of assignment from Westpac to Baycorp. Accordingly, His Honour held that the Applicant was entitled to challenge the reality of the debt relied upon and which, pursuant to Section 153B of the Act, gave rise to the following issues:

• what consequences did this have for the debt on which Baycorp sued the Applicant in the Federal Circuit Court; and,
• could the Applicant now challenge the Bankruptcy Notice and/or the sequestration order as a result?

Under Section 134 of the Property Law Act 1958 (Vic), the effective assignment of a debt requires “express notice in writing” of such an assignment to the debtor. All other Australian States and Territories have the same requirements, set out as follows:

• Section 205 of the Civil Law (Property) Act 2006 (ACT);
• Section 12 of the Conveyancing Act 1919 (NSW);
• Section 86 of the Conveyancing and Law of Property Act 1884 (TAS);
• Section 15 of the Law of Property Act 1936 (SA);
• Section 182 of the Law of Property Act 2000 (NT);
• Section 20 of the Property Law Act 1969 (WA); and,
• Section 199 of the Property Law Act 1974 (QLD).

It is possible that, in an application to set aside a Bankruptcy Notice, a Court can go behind the judgment upon which the Bankruptcy Notice was based, if it is shown that the debt relied upon did not in fact exist. However, different considerations apply when the Bankruptcy Notice has expired.

Justice Jessup followed Re Vella; Ex parte Seymour (1983) 67 FLR 287 (“the Vella case”), where the debtor had failed to comply with the Bankruptcy Notice within the specified time period. The debtor later applied to have the judgment set aside, on which the notice was based, and also to have the Bankruptcy Notice set aside. In the Vella case, the underlying judgment was set aside, but not the Bankruptcy Notice, the Court concluding that the debtor committed an act of bankruptcy by failing to either comply with the Bankruptcy Notice or take appropriate action under Section 41(6A) of the Act. The act of bankruptcy was therefore still valid.

Justice Jessup therefore concluded, for the same reasons outlined in the Vella case, that it was too late for the Applicant to challenge the Bankruptcy Notice served on her.

However, Justice Jessup considered that the Sequestration Order would not have been made, had the Court been aware that the Applicant had not been provided notice of the assignment of debt.

The Court was troubled by the fact that the Applicant did not contest the proceedings that resulted in the default judgment, or appear on the return of the creditor’s petition. The Applicant filed the current proceedings some 20 months after being declared bankrupt. In other circumstances, greater weight would have been placed by the Court on these factors. However, Justice Jessup concluded that proper legal notice of an assignment of debt struck so fundamentally at the intrinsic merits of the case for the sequestration of her estate, so as to persuade the Court to use its discretionary power to annul her bankruptcy.

Another consideration to keep in mind

Serving an appropriate notice of the assignment of debt is only one factor that creditors must consider when using legal proceedings to recover a debt. One must also consider statutory limitation periods. The two main limitation periods are:

• In most States and Territories, other than the Northern Territory where it is three years, the time limit to file legal proceedings to recover debts is generally six years from the date of last payment or when the debtor admitted the debt was owed, in writing; and,
• for most States and Territories, other than Victoria and South Australia, where the time limit is 15 years, where judgment debts are obtained, the time limit is 12 years from date of judgment.

All States and Territories require express notice in writing to the debtor of any assignment of debt. Financial institutions are usually well appraised of these requirements. However, private financiers may not be as well informed. The ability to provide documentary evidence that the notice of assignment was provided to the debtor is also very important.

When considering an application to annul a bankruptcy under Section 153B of the Act, the Court is not limited to considering the facts that were before the Court at the time that the Sequestration Order was made. The Court may also consider the true facts that existed at the time that the Order made.