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How to extricate myself from legal case

Discussion in 'Accounting, Tax & Legal' started by handyandy, 3rd Aug, 2007.

  1. handyandy

    handyandy Well-Known Member

    Joined:
    6th Jun, 2006
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    Location:
    Sydney Nsw
    Hi All

    My old operating company a Unit trust with a corporate trustee is second ranking in a suit brought by an ex client against the company for who we were delivering a service.

    This unit trust and trustee are being wound up with no assets in either since about May 2007.

    I am currently defending my position simply by have appointed a solicitor who then liases with the solicitor representing the main defendant. so far it has gone to court twice and posibly a third time.

    Today a bill arrived for +$4k and this is for something we are not directly defending.

    When I spoke to my solicitor about a month ago I mentioned that I really wasn't interested in defending beyong the 6 months for assets to be affectively be disbursed. hey mentioned that we couldn't just follow that course of action.

    The question is what are our options as I really don't see any reason to spend this sort of money for no advantage the litigant is a company in admin so there will be no costs to the recovered.

    Cheers
     
  2. Rob G.

    Rob G. Well-Known Member

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    Might not hurt to get a second opinion - but don't get your current Solicitor offside (if you have one) !

    Also, did you have Director's insurance whilst with the prior company ? Often the company pays this.

    **Generally** the biggest legal exposure for small business directors is trading while insolvent and having to be guarantor for business liabilities.

    This is a complex area of overlapping laws for which you will need to rely on YOUR legal advisor to act in YOUR best interests. If the current solicitor is acting primarily for your previous company then this may not be YOUR best interests ?

    Good luck,

    Rob

    (PLEASE do not use this as a substitute for appropriate legal advice for your particular situation.)
     
  3. handyandy

    handyandy Well-Known Member

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    Possibly need to clarify the situation.

    Company A needed to control a situation to control lots of company B's who use Company A's facilities. There is no direct relationship between A and B as Company A provide facilities to yet another group of companies who use B's to move things.

    Enter my Company, lets say 'C' who proposes a solution to which Company A agrees but my company must engage all Company B's as customers. A parrallel could be Ticketec who provide booking facilities for shows but is not related to the shows and only has the audience as a customer.

    Anyway it is one of the companies 'B' (who is a signed up customer of company 'C') who is suing Company 'A' for the charges levied by company 'C' on the basis that company 'A' has no right to engage company 'C' to perform the said function.

    So this 'B' company is suing 'A' and has nominated company 'C' as second defendant. Both 'A' and 'C' have their own solicitors but its 'A' who's running the defence. There are no further funds in Company 'C' (a Unit Trust with corporate trustee) and it no longer operates.

    I hope this explains the situations as I can't divulge any names etc as they may be searched.

    Cheers
     
  4. Rob G.

    Rob G. Well-Known Member

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    Sorry, I read the thread title as if you were attempting to extricate yourself personally - which is not necessarily the same objective as wanting to extricate Company C from what appears to be a Contract Law and possibly a Trade Practices Act issue.

    All the more reason for me not to comment ...

    Rob
     
  5. Denis

    Denis Well-Known Member

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    Handandy
    l had a situation a few years ago where l was an innocent third party who acted in good faith to get all parties together to appease a landlord.
    When it all fell over, the landlord's solicitor issued proceedings against nine companies and individual Directors.
    Because l was the party who was seen to have the money to cough up, they went harder at me.I had never signed a document, but merely written a letter stating my intentions if a new lease could me drawn.
    My solicitor told me l was on safe ground but that l had to fight it in case things went awry.
    After much frustration, the case was dropped on the doorstep of the court.
    I was exonerated as was always going to be the case.
    AND for my troubles $4,500 in legal fees.
    I don't know if you have any choices in these matters, without knowing all the details.Good luck.

    Regards

    Denis
     
  6. handyandy

    handyandy Well-Known Member

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    Thanks Guys

    Sorry I should have said 'How to extricate my company and myself out'.

    Basically my question is still the same as my business has now not operated since late '05 as I lost the right to the arrangement (there was never a contract). There was an agreement in place between 'C' and 'B' in a similar arrangement as ticketec, we sold entry tickets to be acted on by 'A' what 'A' actually did was up to 'A'.

    Anyway, not withstand the substance or lack of substance of the case I am just looking for some 'experience/opinion' as to my plan to simply wind up my structure to avoid any further involvement or any future Vexatious litigation.

    My thinking is that with if I wind up my structure I would avoid any future involvement but what are my options with my current involvement. Can I simply deregister the trustee and trust notify the court and is that the end of the matter or can the litigant bring further actions such as liqudation proceedinds or what? Or do I need to adminstration/liqudate my own structure as it owes another company of mine money to get ahead of this whole legel process? As mentioned the solicitor I am using is not long on options and simply wants to appear in court/fight the case rather than giving me options on how not to be involved.

    The original reason for responding to this case was that we still had money (that was owed to other of my companies) in its bank account which I am told we now have to wait 6 months to avoid having it clawed back.

    So am I being stalled by my solicitor just so they can charge more fee's. Obviously I can go and see an other solicitor to seek a second opinion but at this point I feel I really don't have a sufficient grasp on my options.

    Cheers
     
  7. Denis

    Denis Well-Known Member

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    handyandy
    From my experience, the appointment of administrator/receiver will not extricate you personally if you are a director and there is an action that can be taken against you.It will put a stop to what money the company may have to pay out, but not you personally.
    Additionally, an administrator/receiver will want a guarantee of $2-3000 for the simplest of winding up procedures.
    Regards

    Denis
     
  8. NickM

    NickM Co-founder Staff Member

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    Handy Andy, from what i see you are not being pursued individually, just the entity ?
    i would without hesitation liquidate the trustee and have a solicitor wind up the trust. (yes 2-3K to put it to bed)
    Mail will be returned to sender.

    NickM
     
  9. handyandy

    handyandy Well-Known Member

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    Well the final wrapup.

    Case is dismissed with cost awarded.

    So for my effort we were awarded $2000 but unfortunately the company suing us was in Admin so obviously no money there. Thus far it has cost me about $4500, so an absolutely waste of time.

    The other cost that are still to follow is to wind up the unit trust and also the trustee company. Unfortunately we used the same corporate trustee for our SMSF so am in the middle of transferring all the SMSF assets to the new trustee.

    Cheers
     
  10. Rob G.

    Rob G. Well-Known Member

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    Why terminate the unit trust ? You could change trustee.

    Where using a corporate trustee for a SMSF, it is best not to use that company for other purposes. Alternatively make the members trustees (if more than one member) unless you have a specific reason to have a corporate trustee.

    Check out the thread:

    http://www.invested.com.au/5/changing-trustee-smsf-17918/#post35711

    Cheers,

    Rob
     
  11. handyandy

    handyandy Well-Known Member

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    Location:
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    If I was still running a business then I would have kept it going. Now we only have our various investment structures going which were all set up whilst operating our business so really don't have a use for the unit trust.

    It mat be some time before I find another business thus not much point in paying the ongoing cost and admin task in keeping the trust.

    Our SMSF has been in operation since '94 so will keep it going with corporate trustee. At the time didn't give the common trustee much thought now we have different trustees for each structure.

    Cheers