Self representation services in the Federal and Federal Circuit Courts and How They Impact Creditors

With the increase in Default Judgments being awarded by state Courts, it has been viewed that an influx of bankruptcy and wind up proceedings in both the Federal and Federal Circuits Courts issued by creditors in attempts to enforce judgments is beginning to occur.

This influx has also seen a higher number of unrepresented litigants who are unaware of the legal proceedings and appearing at the hearing unprepared and unaware of the legal process causing unnecessary delays within the Court System.

In response to the high volumes of unrepresented litigants in insolvency proceedings, the Federal Government, in conjunction with the Courts and Justice Connect (a pro-bono service) have created a Self Representation Service to assist all parties involved with insolvency proceedings.

What is the Self Representation Service?

The Self Representation Service is essentially designed to work in a similar vein as how Legal Aid duty lawyers work in the Magistrates’ Court of Victoria.

The Self Representation service provides an in-Court pro-bono service providing access to lawyers and financial councillors for unrepresented litigants. The Service was launched in both the Federal and Federal Circuit Courts in both Melbourne and Sydney in August 2014 and allows for unrepresented litigants to gain independent legal and financial advice they might not otherwise have access to.

The Effect of the Service on creditors

Whilst on the surface, the service’s main aim is to assist unrepresented litigants on a pro-bono basis; the broader goal is to assist all parties who have commenced legal proceedings in Bankruptcy or Winding Up.

More often than not, lawyers when dealing with unrepresented litigants are forced into awkward situations where they are dealing with a litigant who is more often than not asking for advice on how to run their case. The service provided by Justice Connect removes the risk of solicitors for applicants finding themselves in situations whereby they may be in breach of their duty to the client.

The greatest advantage of the program for creditors is that it means matters can be dealt with in a timely manner. In the event that a Respondent makes an appearance at the first return date of a bankruptcy or wind up hearing, it is our experience that there is a fairly high chance they generally have no idea what the proceedings are about or how to deal with them. You can also almost guarantee that in most situations like this the Court will look to adjourn the matter (often for weeks at a time) to allow a Respondent to a) potentially seek legal advice and b) provide necessary affidavits as to their financial position to Applicants and supporting creditors.

The advantage of having lawyers and financial counsellors readily available means that the Court can stand the matter down and refer the Respondent to Justice Connect. Financial Counsellors in their initial consultation have been successful in various matters referred to them obtaining the Respondents financial details and determining their solvency. This in turn means they will either be able to put forward a potential payment plan (doing away with the often long winded process of awaiting liquidators and trustees to pay out a dividend from an estate or asset pool of a company), or even suggesting the Respondent go Bankrupt or have their company wound up.

The Counsellors are also able to assist Respondents in preparing necessary Affidavits of Financial Position that paint a better picture of a person or company’s solvency. Often we receive Affidavits from Respondents that are inaccurate or lack substantial detail. By  Respondents obtaining assistance from lawyers and counsellors, creditors are able to get a better understanding as to what is available in persons estate or company’s asset pool and make a more informed decision as to whether or not the expense of such proceedings are justifiable.

Issues raised by insolvency practitioners

Whilst the service to date has been relatively successful, there are still some issues that need to be ironed out. One glaring issue is that Counsellors have been known to cross the line from providing financial advice to providing legal advice. This presents a problem as it may potentially lead to Respondents receiving incorrect advice and potentially stalling proceedings. Questions have also been raised as to where a financial counsellor’s duty lies, as unlike legal practitioners, they have no duty to the Court. Given the service is in its infancy, you can expect that these issues will be addressed over time, however in the interim they are worth keeping an eye on.

Conclusion

Based on early results we have experienced with the Self-Representation Service currently running, it is clear that while some wrinkles need to be ironed out over time, on a whole the program is of great benefit to all parties involved. As mentioned above, the program is of great assistance to Creditors allowing for matters to be dealt with in a timely manner thus meaning a quicker payout and avoiding unnecessary costs. The program is due to be reviewed by the University of Melbourne later this year, and if the review yields positive feedback, then it is a safe bet that further funding will be provided to continue the service.

Author: Dylan Trickey, Lawyer

Published: February 2015