Litigation: 23 March 2019
There are few things more satisfying in litigation than obtaining a judgment in your favour and few things more disappointing than finding one's polite requests for payment of the judgment sum ignored. The law provides various means of enforcing judgments, some of the most useful among which are the bankruptcy regime for individuals and the statutory demand and liquidation regime for companies. These methods tend to obtain payment where there is money to pay.
But what if the judgment debtor is neither a private individual nor a company registered under the provisions of the Corporations Act 2001? In particular, what if the judgment debtor is a trade union?
Section 116 of the Corporations Act expressly forbids the registration of a trade union under that Act. A union, however, is a body corporate with the power to sue and be sued in its own name by operation of section 27 of the Fair Work (Registered Organisations) Act 2009 (Cth).
Part 5.4 of the Corporations Act provides for the winding up of an insolvent 'company' (with a small 'c'), which is defined in section 9 as including 'a Part 5.7 body'. A 'Part 5.7 body' is defined in section 9 as including 'a partnership, association or other body (whether a body corporate or not) that consists of more than 5 members and that is not a registrable body'. Therefore, even though a trade union is not registrable under the Corporations Act, as long as it has more than 5 members, it is a Part 5.7 body.
Section 583 of the Corporations Act provides that a Part 5.7 body may be wound up under Chapter 5 with such adaptations as are necessary, in situations including (s 583(c)(i)) where the body is unable to pay its debts.
Section 585 provides that a Part 5.7 body is unable to pay its debts in circumstances including where: '(a) a creditor, by assignment or otherwise, to whom the Part 5.7 body is indebted in a sum exceeding the statutory minimum then due has served on the Part 5.7 body, by leaving at its principal place of business in this jurisdiction €¦ a demand, signed by or on behalf of the creditor, requiring the body to pay the sum so due and the body has, for 3 weeks after the service of the demand, failed to pay the sum or to secure or compound for it to the satisfaction of the creditor.'
The statutory demand regime under Part 5.4 allows a Court to assume a company to be insolvent if it has not, within 21 days of receiving a statutory demand, either applied to have the demand set aside or paid or secured or compounded the debt to the satisfaction of the creditor.
Therefore, a form of statutory demand modified as necessary, can suffice to create a presumption of insolvency if a trade union does not pay a judgment debt (or any other debt concerning which there is no genuine dispute), and the provisions for winding up in insolvency under Part 5.4 of the Act can then be invoked. This provides a strong incentive for trade unions to pay their debts.
If you are owed a debt by a trade union or any other body that might be a Part 5.7 body, please call Ed Clark or Sandra McColl.