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Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related policy and law reform, in Australia and internationally. No legal advice is offered or given.

Reform of insolvency communications by email, and beyond

Corporate insolvency law in Australia concerning communications with creditors needs modernising, and well beyond what is available in 2020. 

When early cars, then termed locomotives, were first allowed on the road England’s ‘Red Flag Act’ of 1865 required a man with a red flag to walk ‘60 yards’ ahead to alert ‘the Riders and Drivers of Horses’ of the locomotive’s approach, probably shouting ‘locomotive coming’.[1]

We now have the modern danger of email. Section 600G of the Corporations Act allows a liquidator to notify creditors of a business in liquidation [of which there may be hundreds] by way of email but only if the creditor has first been warned on the impending danger of being emailed without notice and each individual creditor has nominated, perhaps by email or post, to accept the liquidator’s emails.

A judge however has made it easier by deciding that, if an application is made to the court, the Court can grant dispensation under the law, but all at some time and expense: Natkunarajah (Liquidator), in the matter of FLY365 Pty Ltd (in liq) [2020] FCA 419.

UK

The Insolvency (England and Wales) Rules 2016 also require consent but consent is deemed given

‘where the intended recipient and the person who is the subject of the insolvency proceedings had customarily communicated with each other by electronic means before the proceedings commenced’: r 1.45.

In other words, a UK insolvency practitioner can use the insolvent company’s or individual’s email data bases.

There are many other notification dispensations in the UK rules, including via websites.

Time

The 1865 locomotive also had a speed limit of 4 mph in the country and 2 mph in towns.

Similarly, s 600G(6) of the Corporations Act imposes a service speed limit – with service by email only occurring the day after the email is sent; [but in bankruptcy, it is served the very day of the email].

Reform

Australia’s insolvency laws should usefully be modernised and reformed, and beyond mere use of email.

[1] Formally, the Locomotive Act 1865.

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2 Responses

    1. My non-legal thoughts are no, not good enough. The recipient [creditor] must nominate an electronic address by which it may be notified of such notices or documents, being the ones listed in s 600G(1). It has to be a specific agreement to those notices.
      Very clunky.

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