What is a 139ZQ Notice?
A trustee in bankruptcy will utilise his/her powers pursuant to the Bankruptcy Act 1966 (Cth) (Act) in the administration of a bankruptcy estate in order to maximise the potential return to creditors.
One of these powers, and a handy tool for a trustee when seeking to recover a benefit received by a third party as a result of a transaction that is void as against the trustee, is a notice pursuant to section 139ZQ of the Act.
Section 139ZQ of the Act empowers the Official Receiver to exercise its discretion to issue a notice requiring the third party to repay the value of any property which has been acquired as a consequence of the transaction considered to be void against the trustee (139ZQ Notice). Such notice being issued is done upon the request of the trustee.
What is the effect of the 139ZQ Notice?
The effect of the s139ZQ Notice is significant and urgent legal advice is strongly recommended should one be received.
Once issued with a 139ZQ Notice, the individual has 60 days to comply with the 139ZQ Notice failing which:
The Automatic Charge
When a person is served, the Property is charged with the liability of that person to make payments as required by the 139ZQ Notice. The creation of the charge is automatic upon the 139ZQ Notice being issued. However, the charge will only arise where the 139ZQ Notice is validly given and the Official Receiver will provide a certificate to the trustee evidencing the charge for the purposes of registering the trustee’s interest over Property under subsection 139ZR(4) of the Act.
The Official Receiver will generally issue a certificate where the time for compliance with the 139ZQ Notice has elapsed. This charge will generally have priority over any other mortgage or charge in favour of an associated entity of the bankrupt and it is discharged when payment is made or the 139ZQ Notice is set aside or withdrawn.
What to do if you get a 139ZQ Notice?
It is open to the recipient of the 139ZQ Notice, to either repay the value of the property in accordance with the 139ZQ Notice or make an application with the Court to have the 139ZQ Notice set aside where there is a dispute as to the merits of the 139ZQ Notice.
Regardless of the action taken by the recipient, they must act within 60days of being served with the 139ZQ Notice otherwise they are considered to have committed an offence.
Importantly, don’t ignore it! As soon as you are served with a139ZQ Notice you should seek legal advice on what your options are in responding to the 139ZQ Notice. A 139ZQ Notice must be valid and there are certain requirements a trustee must satisfy in seeking to have the 139ZQ Notice issued by the Official Receiver. Your legal representative will consider whether the trustee has met those requirements and in circumstances where there is an error, you will be able to approach the Official Receiver and request withdrawal or amendment of the 139ZQ Notice.
If the 139ZQ Notice has been validly issued, consideration must be had for whether to apply to have the 139ZQ Notice set aside or if your best option is to negotiate with the trustee to settle the matter.
All of these options take time and where there is only 60 days to comply, your best course of action is to seek legal advice as soon as possible so your solicitors have sufficient time to consider your options and take action.
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