CREDIT & Solicitors, TEL: 9231 5000 Level 3, 72 Pitt Street, FAX: 9231 5711 REF:BASICDEBTRECOVERY

CREDIT & BASIC DEBT RECOVERY SALLY NASH & CO., DX 128 SYDNEY Solicitors, TEL: 9231 5000 Level 3, 72 Pitt Street, FAX: 9231 5711 SYDNEY NSW 2000 REF:BASICDEBTRECOVERY

CREDIT & BASIC DEBT RECOVERY 30 November 2006 INTRODUCTION: 1.1 In the commercial environment, there are many instances where individuals, partnerships and companies ( the business ) will require credit to be provided to them, to enable them to buy goods or utilise services. 1.2 As an employee of a company which provides credit for goods, it is important that you conduct yourself in a professional manner in dealing with the different types of clients. The work you will be doing for your company will not only ensure the punctual payment of accounts, it may also lead to new customers wishing to open an account with your company, if they are confident that the company is a professional body. WHAT IS CREDIT? 2.1 Credit is the measure of the ability of a business to secure goods to be used commercially in exchange for a promise to pay at some specific future time. 1 WHY CREDIT? 3.1 Credit is necessary for many businesses because it allows them to buy goods, sell such goods and be able to pay for the goods, in many cases, after they have been on-sold. 3.2 In a commercial environment, many businesses would not be able to operate without the provision of credit. THE FIRST CONTACT: 4.1 In most cases, the first point of contact for a potential customer is the sales department. A business s representative may call the sales department seeking confirmation of the procedure to purchase goods and obtain credit. The sales department will then remain the central point of contact for all customers who are seeking to purchase goods on credit. 1 www.crfonline.org

-3-4.2 It is therefore imperative that the sales department is an excellent source of information regarding the extension of credit, to be able to give accurate information to the potential new customer, so that the credit department s job is made much easier in the long term. ASSESSING AN APPLICATION FOR CREDIT: 5.1 It is the usual procedure for a business wishing to obtain credit to complete a formal application for commercial credit, in writing. The Application for credit generally requires the business to give details such as:- o Date of the application; o Name of the individual, partnership or company; o Type of trading entity; o ABN/ACN of the entity; o Postal address and other contact details of the entity; o Contact person for payment; o Bank account details; o Estimated monthly spends; and o Credit references; 5.2 Many Applications for Commercial Credit, if it is an application on behalf of a company, will also require a Director or relevant officer to provide a Personal Guarantee & Indemnity ( PGI ) in favour of the supplier. The PGI will usually be attached to the Credit Application forwarded to the company and it is important that it is returned at the same time that the Credit Application is returned, and prior to credit being given. The relevant information which should be obtained in the PGI includes:- o Full name of the person giving the PGI; o Position of the person within the company; o Contact details for the person; o Drivers Licence Number; and

-4- o Date of birth 5.3 Once the Credit Application and any PGI has been returned, it is then the duty of the officer with responsibility for assessing Credit Applications to make enquiries with regard to the information provided to ascertain its validity. WHAT SEARCHES SHOULD BE UNDERTAKEN AND WHAT DO THEY SHOW? 6.1 Australian Securities and Investment Commission ( ASIC ) Search: o Initially, a search should be undertaken of the ASIC database to confirm that the business is either a registered company or registered business name in Australia. Such search will confirm the type of trading entity ie. sole trader, partnership, proprietary limited company, publicly listed company. o It will also advise you of the correct details of the registered office, the trading address, the relevant officeholders if a company and the registered proprietors if a business name. o If the entity is a company, the search will advise of any present or past applications which have been made against the company for the winding up of it. This may be important in determining whether the company is slow paying its debts. o If the entity is a company, the search will also advise of any fixed and/or floating charges over the company. A charge is a lending to the company by a financial institution or other source that will need to be repaid at some stage. It is similar to a mortgage over real property. 6.2 Credit Rating Search: o There are a number of credit reporting agencies ( CRA ) in Australia, the most well-known being Baycorp Advantage. The purpose of such agencies is to provide trusted and relied upon information and analytics for financial risk management decisions. o The most useful tool of a CRA is the database maintained by them with regard to businesses. It is easily accessible for a credit officer to contact a CRA and make enquiries with regard to a particular customer. Once the relevant identification name of the business is given, the credit officer can determine any defaults listed against the company for late payment, non-

-5- payment of judgments entered against them in Court proceedings. 6.3 National Personal Insolvency Index: o This is a search of the database maintained by the Insolvency and Trustee Service of Australia regarding bankruptcies in Australia. o If the prospective customer is an individual, such search is prudent, as it is an offence for an undischarged bankrupt to obtain goods on credit in excess of $3,000.00 without disclosing the fact that he or she is an undischarged bankrupt. o It is also prudent to undertake a search of any person who has given a personal guarantee in support of a company Credit Application also. This is because it may ultimately be he or she who becomes liable for the debt. 6.4 Credit Reference checks: o As the majority of Credit Applications will ask for the applicant to give credit references, it is important to make enquiries with the relevant referees provided. o Referees provided are generally trade references who have dealt with the business previously. When contacting another credit provider to request information, it is important that you clearly identify where you are calling from, the purpose of your call and the business you are requesting information about. o Some of the questions which ought to be asked include, but are not limited to:- i. How long has the business been obtaining goods or services on credit from them; ii. iii. iv. What is the monetary limit of credit provided to the business; What are the terms of payment between their company and the business; Are payments of accounts usually received with the trading terms;

-6- v. How far outside the trading terms are payments of accounts usually received if late; vi. vii. viii. What reasons are given for payment outside of trading terms; Who is the person that the company usually deals with on behalf of the business; and Has the company had to ever take legal action against the business in order to obtain payment of outstanding accounts; o Although it may sometimes be a timely and costly exercise to obtain credit reference checks, it is important to gauge the applicant s history with regard to payment of its invoices and to assist in ascertaining the risk of providing credit to them. o It is important to note the reputation of the trade referee providing the reference also. A negative trade reference from News Limited would be more damaging then a positive trade reference from a slow paying customer of yours. WHAT HAPPENS WHEN AN ACCOUNT IS NOT PAID? 7.1 It is almost expected when supplying goods or services on credit that there will be customers who are tardy in paying their accounts or do not pay at all. There are many reasons for this including, poor bookkeeping management, disputes with regard to the goods or services provided, problems with cash flow or a basic inability to pay their debts. 7.2 In order to successfully recover a debt, it is important that the debt recovery process be dealt with in a professional manner. 7.3 There are a number of steps that can be taken to recover the debt which will be outlined below. GUIDELINES FOR PURSUING OUTSTANDING DEBTS: 8.1 In October 2005, the Australian Securities and Investment Commission and the Australian Competition and Consumer Commission issued a joint publication titled Debt Collection Guideline for Collectors and Creditors. The guideline was developed to provide a useful guidance

-7- on appropriate conduct to anyone involved in debt recovery. A copy of the guidelines can be found on the ASIC website at www.asic.gov.au. 8.2 The guidelines provide a helpful insight into professional conduct in collecting debts and some of the main points are as follows:- o Contact with debtor s should be for a reasonable purpose only and you must establish that you are speaking with the relevant person who is liable for the debt; o Contact should be made at reasonable times of the day; o Contact should be made on reasonable intervals; o Contact should be made to the address of the debtor which is best suited. For example, a debtor who owes money for a personal loan should not be constantly contacted at work unless the creditor is given specific instruction to do so; o Privacy obligations; o Importance of record keeping; o Settlement negotiations; DEBT RECOVERY PROCEDURES NON-LEGAL: 9.1 Debt recovery for outstanding accounts usually commences within a companies credit department. A credit department will usually have a set of procedures which its employees are to follow. It is important that these procedures are followed to enable uniformity across the department and also to ensure that customers are aware of the way in which the company collects it outstanding debts. If one employee is seen to be more lenient than other employees, then a defaulting customer will take the attitude that debt collection is not taken seriously at the company which will lead to more outstanding accounts. 9.2 Generally, at the time of sale, a Tax Invoice is created for a customer and is forwarded to them at the time of the delivery of the goods. The Tax Invoice should set out the terms for payment of the invoice for example 30 days. 9.3 At the each of end month a Statement of Account will usually be generated and forwarded to the customer to enable payment of the account.

-8-9.4 It is common that a customer will pay the outstanding account in the 30-45 day period. Depending on internal company rules regarding payment of outstanding accounts, a 45 day payment will be acceptable. 9.5 Once outstanding accounts fall into the unacceptable time period, the first step is usually for a telephone call to be made to the defaulting customer. Such phone call should be cordial and request details as to why the amount remains outstanding and when it is anticipated that the amount will be paid. 9.6 It is essential that a file note or spreadsheet of all phone contact be maintained for a number of reasons. Firstly for reference to be made to it when dealing with the customer on further follow up contact; secondly, for other employees of your company to be able to ascertain what attempts have been made to recover the debt if they have subsequent dealings with the customer; thirdly, to be forwarded to legal representatives if the debt remains outstanding to be used in the litigation process. 9.7 If the debt continues to remain outstanding, it is a usual requirement of the terms and conditions of a company s terms of trade, that a written letter of demand be forwarded to the business and any guarantor. Such letter should clearly set out the amount outstanding, the period for which the debt remains outstanding, the timeframe which payment is expected and what steps will be taken to recover the debt if the amount is not paid within the given time period. 9.8 It is important to remember that if the debt is a company debt, separate letters should be sent to the company and each guarantor independently so that all parties are aware of the action that may be taken against them separately. 9.9 If a customer requests copies of documents which have already been provided to them, it is in the interest of settlement of the account that the documents be re-sent. 9.10 Depending on the company policy, offers for settlement should be given serious consideration. All circumstances surrounding the default should be given due consideration. If there is no previous history of default of payment, it may be prudent to accept an arrangement to ensure a continuing relationship with the customer. 9.11 The terms and conditions of sale will indicate to customers what interest they may be charged to them if they are in default of the payments terms. The customer should be advised when they are entering into a payment arrangement, or paying an outstanding account, what interest may be applicable.

-9-9.12 In the event that non-legal debt recovery is not effective, companies will have a procedure for referring accounts to either their in-house lawyers or their independent legal firms for recovery. DEBT RECOVERY BASICS IN STATE AND FEDERAL COURTS: 10.1 When providing instructions to legal representatives, it is important that precise information is given. You should clearly identify the debt that is due and owing and provide copies of relevant documentation. The Information that should be given includes the Credit Application and any Personal Guarantee; the date or dates when the debt was incurred; the basis of the debt, such as goods sold and delivered; copies of the outstanding Tax Invoices; copies of all correspondence with the debtor and copies of file notes of all discussions with the debtor in the debt recovery process. 10.2 It is important to advise the legal representative as to whether the debt is disputed to enable the legal representative to decide what the bets mode of debt recovery may be. 10.3 Set out at Schedule A is a Schematic Flow Diagram showing the procedure in the Courts for debt reocvery Letter of Demand: 11.1 The first step that a legal representative generally takes is to issue a letter of demand to the debtor. It may be that the company has already issued a letter of demand to the debtor, however, the effect of a legal letter of demand can be quite different. It is not uncommon for a debtor to take a legal letter more seriously as the ramifications can be quite serious if legal action is commenced against them. 11.2 The letter will put the debtor on notice that the debt us due and payable and sometimes provides you with the opportunity to negotiate an informal scheme for payment or ascertain for the legal representative whether there is going to by any dispute either regarding the quantum or the existence of the debt. Originating Process: 12.1 If there is no satisfactory response to the letter of demand, the decision must be made as to whether legal proceedings are to be commenced in the Courts. Such decision will usually need to be made by the Credit Manager.

-10-12.2 The choice of the Court in which to commence proceedings will be determined by the amount of the outstanding debt. In New South Wales, the three relevant Courts are:- o The Local Court with jurisdiction of up to $60,000.00; o The District Court with jurisdiction up to $750,000.00; o The Supreme Court with no limit on its jurisdiction. 12.3 The Originating Process for liquidated sums is a prescribed Statement of Claim. Since 2005, the Statement of Claim form has been the same in each jurisdiction, after the introduction of the Civil Procedure Act 2005 (NSW). 12.4 The Statement of Claim, usually contains the following:- o The formal requirements in relation to the names and addresses of the parties and registered offices of a defendant who is a company; o A statement of each of the causes of action, being the reason for the legal proceedings being commenced, and also details of the debt which is outstanding; o Details of any documents which are relied upon and the date which the document came into existence. This will prove the existence of an agreement between the parties for payment of the amount outstanding; o Interest and whether is claimed under the specific rules of the Courts or under an agreement between the parties. At the current time, interest is able to be claimed pursuant to the Civil Procedure Act 2005 (NSW) at the rate of 9% p.a. o It is also important that the Statement of Claim set out the date at which the debt was incurred. 12.5 An example of pleadings for a Statement of Claim for goods sold and delivered is set out in Schedule B. 12.6 The Statement of Claim will also set out the costs which a creditor is claiming. Such costs as claimed in the Statement of Claim, are set in accordance with a scale schedule which is determined by the Court in which the proceedings are commenced. If the proceedings become defended, costs are generally not on a scale, but rather are to be assessed. The Court scan assess them or send them for assessment to be assessed in the Supreme Court costs assessment section.

-11-12.7 A Statement of Claim, once issued by the relevant Court, must be served on each of the Defendants. It essential that service is effected in accordance with the relevant rules for service. The mode of service differs for each type of entity:- o Individuals service of the Statement of Claim need not be personal but must be in accordance with the rules. It may be served on any person over the age of 16 years at the usual residence or usual place of business of the Defendant, provided it is confirmed that the Defendant is usually resident at the address or is the master of the business at where the Statement of Claim is being served. o Business Name this can be by registered post to the registered business address. Service may also be effected by service on the registered proprietor of the business name and such mode of service will depend on whether the proprietor is a company or an individual; o Corporation service may be effected by posting by pre-paid ordinary post to eh company s registered office, which can be obtained from the ASIC search, or by delivery to the registered office; o Interstate service for all jurisdictions, service is permissible interstate provided that the Service and Execution of Process Act 1992 (Cth) is complied with. Such act requires that a form be served with the Statement of Claim explaining the Defendants rights with regard to defending the proceedings in the foreign jurisdiction. o Substituted Service each jurisdiction has a provision for service to be affected by way of substituted service for circumstances where the Statement of Claim cannot be served in accordance with one of the above methods. Substituted Service can only be affected with an order of the relevant Court and the Plaintiff must provide relevant evidence to the Court to suggest that the Statement of Claim is likely to come to the attention of the debtor is service is affected in that manner. Such service may be necessary in circumstances where a Defendant has security gate and access to the property cannot be gained. Default Judgment: 13.1 The Statement of Claim gives the Defendant 28 days after service of the document to pay the debt, come to an arrangement with the

-12- Plaintiff for payment of the debt by way of instalments, or file a Defence to the Claim. If the Defendant fails to do any of these things, the Plaintiff is entitled to apply for default judgment. 13.2 The steps for applying for default judgment involve an authorised officer of the Plaintiff swearing an Affidavit confirming that the debt remains outstanding. Such affidavit, along with a Notice of Motion and an Affidavit proving service, is filed in the relevant Court registry. The Motion is then processed and judgment is confirmed for the debt, interest and the scale costs. This then forms the judgment which can be enforced against the judgment debtor. Instalment Orders: 14.1 At ant time, subsequent to the entering of judgment, a judgment debtor may apply to the Court to pay the judgement debt by instalments. 14.2 The judgment debtor, whether an individual or a company, must complete an Affidavit setting out the assets and liabilities of the judgment debtor, along with the weekly income and expenditure. The judgment debtor must also indicate an amount that the judgment debtor feels it is able to pay either weekly, fortnightly or monthly to the judgment creditor. 14.3 An officer of the relevant Court will deal with the application in chambers and make a determination as to whether such instalment application is appropriate. The Court will decide:- o That the application is granted; o That the application is refused as the judgment debtor does not have the means to meet the proposed payments; o That the application is refused as the debt will take too long to pay off; o That the application is refused as the debtor can afford to pay more than what is being offered. 14.4 If an instalment order is made, the judgment creditor has the option to object to the orders by making an application to the Court. If there is an objection, the application will be listed before a Registrar of the relevant Court for each party to make submissions as the appropriateness of the order.

-13-14.5 It is usual that whilst an instalment order is in place, the judgment will be stayed, meaning that it cannot be enforced. 14.6 If the judgment debtor fails to make payments in accordance with the instalment order, the judgment creditor can file an Affidavit of Non- Compliance in the Court registry which will lift the stay and allow enforcement of the judgment debt. Defended Statement of Claim: 15.1 If the Defendant files a Defence to the claim within the 28 day period, the proceedings are known as defended proceedings. It is essential on the part of the Defendant that they set out full details as to why they say the amount is now due and owing. It is not merely enough for the Defendant to say that they do not owe the debt. They must set out details in response to each pleading made by the Plaintiff, disputing the liability or the quantum of the debt. 15.2 If a Defence is filed, the proceedings will be set down for directions hearing at which time, directions will be made for the filing of evidence and any other procedural matters will be dealt with. It is at this time a hearing date will also be allocated. 15.3 The hearing will differ in each of the different jurisdictions. o Local Court there are two divisions in the Local Court, being the Small Claims Divisions and the General Division. The Small Claims are for debts from $0.01 to $10,000.00 and the General Division is for debts from $10,000.01 to $60,000.00. The Small Claims Division is a less formal jurisdiction, where witness statements are exchanged and relied upon at the hearing. No verbal evidence under oath is given unless the Court specifically requires it to be. Submission are made on the written statements and the Court makes an award in favour of the successful party. A Small Claims award cannot be appealed. The General Division conducts hearings by way of arbitration or hearing. The evidence is the same for both, being sworn Affidavits and oral evidence. The difference is that an arbitration is before an Arbitrator who is a senior Solicitor or Barrister and the hearing is before a Magistrate. If either party is dissatisfied with the decision of the Arbitrator, they can apply for a re-hearing before a Magistrate. Any decision of the Magistrate can be appealed to the Supreme Court, however, there may be costs ramifications if the appellant is again unsuccessful.

-14- o District Court there are a number of lists within the District Court, to accommodate the different types of matters such Court will hear. Such lists include the Building and Construction list, the Commercial list and the General list. Mostly, matters involving liquidated sums for goods sold and delivered will be commenced in the General list as this is the most efficient and appropriate list. If a defence is filed to a claim, the matter will be listed for directions, at which time the parties are asked to agree to a timetable for the further conduct of the matter. The timetable will include direction such as to the issuing of subpoenas to obtain certain information and the filing of evidence. A hearing date will also usually be allocated at this time. The hearing in the District Court is before a Judge and will run very similar to the hearing in the Local Court, however, just prior to the hearing a Status Conference will be set to ensure that all parties have kept to the Court s timetable. In the event that there has been any default in the timetable, the defaulting party must show cause to the Court as to why their pleadings should not be struck out. It is therefore important that timetables are strictly adhered to. A decision of a Judge in the District Court can be appealed to the Supreme Court. o Supreme Court the procedure in the Supreme Court is very similar to that in the District Court, and again, there are a number of different lists and divisions the proceedings can be placed into. General debt recovery matters are usually in the Equity division of the Supreme Court. Directions hearings are held to establish timetables and hearings are before a Judge. The decision of the Judge is able to be appealed. WHAT HAPPENS IF THERE IS A JUDGMENT IN YOUR FAVOUR AND THE DEBT IS NOT PAID? 16.1 Obtaining judgment is only half the battle. Recovery of money is not easy if the debtor is not willing or able to pay. There are numerous methods for enforcing a judgment debt to effect payment. We briefly discuss a number of those methods below. Examination Notice: 17.1 Although this is not an enforcement method, it can be a useful tool if you know little or nothing about your debtor. An Examination Notice will allow you to obtain from a judgment debtor, information about its financial position with regard to assets and liabilities, income and expenditure.

-15-17.2 The Examination Notice is served on the judgment debtor or if a company, the Director of the judgment debtor. The Notice will request that the debtor provide answers to particular questions and also may request the judgment debtor to forward certain documents to the creditor. The judgment debtor has 28 days from the date of service within which to provide the answers or documents requested. 17.3 The judgment creditor may wish to ask the judgment debtor questions about:- o Current employment; o Current income; o Property owned in the judgment debtor s name, including real estate, shares, motor vehicles, art and jewellery; o Details of funds held in bank accounts and credit union accounts; o Current liabilities including mortgage repayments per month; o Number of dependants; o Weekly expenses such as petrol, food, fares, school fees, motor vehicle expenses, gas, electricity, water. 17.4 Such documents which you may wish to request are as follows:- o Recent bank statements evidencing bank balances for the last six months; o Cheque books; o Mortgage or charge documents; o Wage slips or group certificates for the 12 months prior; o Income tax returns for the past two years; o All partnership agreements; o Deeds or other documents evidencing the ownership of motor vehicles, real estate, shares, or any other property the judgment debtor may own such as jewellery or art;

-16- o Registration papers for motor vehicles or boats; o Insurance policy over goods or land; o Loan agreements and repayments books; o Lease agreements; 17.5 If the judgment debtor fails within the requisite time frame to provide a response to the Examination Notice, the creditor can apply to the Court for the issue of an Order for Examination which will require the person served with the Examination Notice to attend at Court at a designated time to answer questions which are put by the Solicitor for the judgment creditor. The examination is an informal procedure which is not conducted by the Court, unless the court directs it to be. 17.6 The information obtained from an Examination Notice or Order for Examination will assist in determining which enforcement procedure will be best suited to the judgment debt. Garnishee Orders: 18.1 If the creditor is aware of any debts due or accruing to the judgment debtor, they may wish to consider applying to garnishee them. Money owing by a third party to a judgment debtor may be attached by the service of a Garnishee Order for the benefit of a judgment creditor. 18.2 The most common garnishee which is served is that on a financial institution where the debtor holds an account. This is why it is relevant to obtain bank account details of the debtor on any Credit Application, and also to keep copies of payments made by the customer by cheque. 18.3 A Garnishee Order may also be served on a Contractor of the company for example if a customer is owed money for building a block of units, the garnishee can be served on the company that owes the customer that money. 18.4 If the Garnishee Order is not complied with, a Garnishee Summons may be issued to the garnisheed party to show cause why the payment has not been made. In these circumstances, the Court may give judgment in favour of the Judgment creditor against the party who has been garnisheed. 18.5 A further form of Garnishee Order is the wage garnishee which can be served on the employer of the judgment debtor. The amount to be paid

-17- under such Garnishee Order cannot exceed to the weekly compensation payment less $8.00, meaning that the judgment debtor is entitled to retain 80% of the minimum single weekly payment prescribed under the Workers Compensation Act 1987 and all amounts above that are paid to satisfy the Garnishee Order. Writ of Execution: 19.1 A further mode of enforcing the judgment debt against either an individual judgment debtor or a company judgment debtor is to issue a Writ of Execution. 19.2 A Writ of Execution is a direction to the Sheriff or Bailiff to attend at a given address and take into his possession items belonging to the judgment debtor, to be sold at public auction, for the benefit of the judgment creditor. A Writ of Execution, in general terms, last for one year. The Writ of Execution can be extended on application to the relevant Court, or a fresh Writ of Execution can be issued if a previous one has lapsed. 19.3 The address at which execution should be made is, if a company, the principal place of business and not the registered office. This can be ascertained from the ASIC search, from the white pages, or from details previously provided by the judgment debtor. 19.4 The usual address for execution of a Writ of Execution against an individual is the home address. 19.5 The only property which can be levied upon at the given address is property which is in the name of the judgment creditor. This can become problematic when a company is being sued and the majority of goods at the execution address are under lease hire. It may also be problematic if the judgment debtor is an individual and resides with family members. 19.6 The Sheriff has the power to execute on a wide range of goods such as furniture, motor vehicles, boats, household appliances, art, jewellery, stock on hand, general office equipment such as facsimile machines and computers and other goods found at the address belonging to the judgment debtor. 19.7 Once the Sheriff attends at the address and finds that there are goods owned by the judgment debtor, the Sheriff will tag such goods. The Sheriff will then send a notification to the judgment creditor advising of the goods found and requesting payment of further fees which may be required to be paid to continue with the execution. The standard fee is $50.00, however, if it necessary to tow a motor vehicle of boat, the fees

-18- can be around $900.00. If the fee is not paid, the Sheriff will withdraw his claim over the goods. 19.8 Once any required fees are paid, the Sheriff will send a final notice to the judgment debtor advising that if the debt is not paid by a certain date, the goods will be taken and sold at public auction. Such notification will include the original judgment debt, interest and the costs of the Writ of Execution. 19.9 After the goods have been taken, the Sheriff will proceed to sell the goods and any proceeds will be forwarded to the creditor, after the deduction of the Sheriff s fees. 19.10 It is common for the judgment creditor to receive a Notice of Non-Levy from a Sheriff listing reasons as follows:- o All property is jointly owned with the spouse or the business partner of the judgment debtor; o The person is no longer at the given address; o All goods are subject to a bill of sale, charge, or under lease hire; or o There are no goods at the address upon which levy can be made. 19.11 If a Notice of Non-Levy is received noting that the debtor has left the given address, enquiries ought to be made to establish a new address, as the Writ of Execution can be re-directed on the payment of a fee. 19.12 All Courts now permit land to be taken under a Writ of Execution, however, the Sheriff is required to exhaust attempts of execution against the personal property of the judgment debtor prior to proceeding against land. The judgment debt must also be in excess of $3,000.00. There is a detailed procedure for execution against land laid down in each jurisdiction which means in practice execution against land is quite often and expensive and difficult. Bankruptcy proceedings: 20.1 If the judgment debt is for a substantial amount and the judgment debtor is an individual, the judgment creditor is entitled to enter a Bankruptcy Notice against the Judgment debtor. Usually a Bankruptcy

-19- Notice will only be issued for debts in excess of $5,000.00, however, they can be issued for any debt over $2,000.00. 20.2 The Bankruptcy Notice is issued by the Insolvency & Trustee Service Australia ( ITSA ). It is not a Court issued document. The Bankruptcy Notice forms the starting point of proceedings for the bankruptcy of the debtor, which are proceedings commenced in the Federal Court of Australia or Federal Magistrates Court of Australia. 20.3 The Bankruptcy Notice is a very important document and the form must comply strictly with the rules governing same. A Bankruptcy Notice can be set aside if it does not comply with the rules. 20.4 The Bankruptcy Notice will attach to it a copy of the judgment awarded by the relevant Court. The judgment debtor has 21 days after service to comply with the Bankruptcy Notice, by either paying the debt as outlined, or by entering into an arrangement satisfactory to the judgment creditor. 20.5 If the judgment debtor fails to comply with the Bankruptcy Notice, an Act of Bankruptcy will be committed, entitling the judgment creditor to petition the Federal Court or Federal Magistrates Court for the making of a Sequestration Order. 20.6 The Creditors Petition is the formal document filed in the Federal Court or Federal Magistrates Court seeking orders for the bankruptcy of the judgment debtor. Again, the Creditors Petition must state that the judgment debtor owes in excess of $2,000,00 and must comply with the prescribed rules. The Creditors Petition must also be verified by a relevant officer of the judgment creditor who is able to confirm that they have checked the records of the judgment creditor and can confirm that the debt remains outstanding. 20.7 Once the Creditors Petition is filed and served personally on the judgment debtor, a hearing date is allocated before the Court. At such hearing, the creditor must prove certain facts, including service of the Bankruptcy Notice and Creditors Petition and also that the debt remains outstanding as at the day of the hearing. If the Court is satisfied with the creditors evidence, the Court will make a Sequestration Order, appointing a Trustee to attend to the affairs of the judgment debtor. 20.8 The Trustee basically takes on the position of the judgment debtor, therefore if the judgment debtor is the half-owner of real estate property, the Trustee will therefore be entitled to take the judgment debtor s place as the registered half-share owner. The Trustee will also make investigations with regard to payments the judgment debtor may have made to other creditors prior to bankruptcy and also income

-20- which the judgment debtor is to receive during the time of his or her bankruptcy. 20.9 Once a Sequestration Order is made, the judgment creditor has no entitlement to pursue the debt against the judgment debtor. A Proof of Debt is lodged in the estate of the debtor, with the Trustee, and the creditor will be paid a dividend if the Trustee is able to realise assets for the benefit of all creditors. 20.10 The period of bankruptcy is 3 years from the date of the filing of the Statement of Affairs, which is a document the bankrupt is required to file pursuant to the Bankruptcy Act, which sets out details of his or her assets and liabilities. If the judgment debtor fails to file same, the bankruptcy will continue until three years after the same is filed. 20.11 It is of note that the Courts do not see bankruptcy proceedings as a form of enforcement and therefore, the Court often encourage creditors to proceed on the Creditors Petition applications, rather than to adjourn them to evoke payment. Winding Up proceedings: 21.1 Similar to bankruptcy proceedings against individuals, winding up proceedings are proceedings brought against judgment debtors that are companies. As with bankruptcy proceedings, winding up proceedings will generally only be brought against a company where the debt is in excess of $5,000.00, however the minimum debt is $2,000.00 only. 21.2 The process of corporate insolvency, where a judgment debt exists, is usually by the issue and service of a Statutory Demand for payment. Such demand will set out details of the judgment including the amount, additional interest which may have accrued, the date of the judgment and the jurisdiction in which judgment was obtained. The Statutory Demand is issued pursuant to Section 459E of the Corporations Act 2001 (Cth). 21.3 Again, the Statutory Demand is not considered to be a means of enforcing a debt by the Court, however, on many occasions, a company will tend to comply with the requirements of a Statutory Demand as the consequences of not complying is presumed insolvency. 21.4 A Statutory Demand is not issued through the Court, and no fee is payable. The form of the Statutory Demand, as with the Bankruptcy Notice, is prescribed by the relevant rules, and must be strictly complied with.

-21-21.5 The Statutory Demand must be served on the registered office of the company and the company has 21 days within which to comply with the Statutory Demand, by either paying the debt as outlined, by entering into an arrangement satisfactory to the judgment creditor or by making an application to the Supreme Court or Federal Court to set aside same on the basis that there is a genuine dispute as to the existence of the debt. 21.6 If the judgment debtor fails to comply with the Statutory Demand, the creditor is entitled to presume that the company is insolvent and proceed to issue an Originating Process in the Supreme Court or the Federal Court seeking the winding up of the company and the appointment of a Liquidator. 21.7 Again, the Originating Process must state that the judgment debtor owes in excess of $2,000,00 and must comply with the prescribed rules. The Originating Process must also be verified by a relevant officer of the judgment creditor who is able to confirm that they have checked the records of the judgment creditor and can confirm that the debt remains outstanding and that the Statutory Demand has not been complied with. 21.8 Once the Originating Process is filed and served personally on the judgment debtor, a hearing date is allocated before the Court. At such hearing, the creditor must prove certain facts, including service of the Statutory Demand and the Originating Process, proof that the creditor has advertised that an application has been made of the winding up of the company and also that the debt remains outstanding as at the day of the hearing. If the Court is satisfied with the creditors evidence, the Court will make orders for the winding up of the company and appointing a Liquidator to manage the affairs of the judgment debtor. 21.9 The Liquidator has duties prescribed by the Corporations Act 2001 (Cth) to investigate the affairs of the company in Liquidation. The Liquidator will make investigations with regard to payments the judgment debtor may have made to other creditors prior to the Liquidation, property which the company may own, amounts which are due to the company by its debtors, details of loans the directors of the company may have taken from the company and evidence of whether the company may have traded whilst it was insolvent. 21.10 As with the Sequestration Order, once an order is made appointing a Liquidator the company, the judgment creditor has no entitlement to pursue the debt against the judgment debtor. A Proof of Debt is lodged in the liquidation of the company, with the Liquidator, and the creditor will be paid a dividend if the Liquidator is able to realise assets for the benefit of all creditors.

SCHEDULE B 1. The Plaintiff is a duly incorporated company and able to sue and be sued in and by its said corporate name and style. 2. On or about 1 January 2006, the First Defendant applied to the Plaintiff to supply it with goods on credit. 3. The Plaintiff duly granted the use of a credit account to the First Defendant. It was a term and condition of the account that the First Defendant pay the Plaintiff s Statements of Account within 30 days of issue. 4. During the period May and June 2006, the First Defendant ordered goods from the Plaintiff. The Plaintiff duly delivered the said goods. 5. The total costs of the goods was $22,500.00. The Plaintiff has rendered Statements of Accounts to the First Defendant but it has refused and/or neglected to pay them. 6. On or about 1 January 2006, the Second Defendant gave a written personal guarantee and indemnity to the Plaintiff. The Second Defendant agreed that should the First Defendant not pay its debts then he would pay them. 7. The First Defendant has not paid its debts and the Plaintiff sues the Second Defendant on his guarantee. 8. The Plaintiff claims:- (a) debt of $22,500.00; (b) interest at the rate of 9% p.a. from 1 August 2006 to 30 November 2006 being $676.85 and continuing at the daily rate of $5.55 pursuant tot section 100 of Civil Procedures Act 2005; (c) costs; (d) interest on costs.