Solicitors await 'fake debt' ruling
Mr Voitin, Mr Nixon and Ms Sowersby have been accused of using fraudulent judgments of up to $35 million to generate debts owed by financially troubled, rich Australians.
It is alleged the fake debts were then used to force through personal insolvency arrangements under part X of the Bankruptcy Act that paid genuine creditors just cents in the dollar.
Farmer David Cross has brought a Federal Court lawsuit alleging the personal insolvency arrangement of contractor Giuseppe Rullo is part of the scam.
"It really goes to the manner in which part X agreements are administered in the commercial world," Mr Cross' counsel, Mark LaPirow, told the Federal Court on Thursday.
"The administration of the system really depends on people doing what the act requires and making truthful disclosure," he said.
The court heard documents relating to a purported business deal between Mr Rullo and Athena Commodities & Trading, a Hong Kong company of which Ms Sowersby is a director, were riddled with inconsistencies. Under the deal, Mr Rullo promised to raise $1.5 million to fund horticultural investment in NSW and Victoria.
If he did not raise the money by a certain date, he was to be liable for the whole amount.
However, three documents gave three different fund-raising deadlines: March 31, 2010; March 31, 2011; or June 1, 2012.
Justice Jennifer Davies is to hand down her ruling on Friday afternoon.
Frequently Asked Questions about this Article…
The article reports allegations that solicitors John Voitin and Simon Nixon, together with Clare Sowersby, operated a fraud ring that used fraudulent court judgments — reportedly worth up to $35 million — to create fake debts owed by financially troubled wealthy Australians. Those alleged fake debts were then used to drive personal insolvency arrangements that paid genuine creditors only cents in the dollar.
According to the article, fake debts and fraudulent judgments can reduce recoveries for genuine creditors and erode confidence in how insolvency arrangements are administered. If fake debts are used to prioritise certain outcomes, genuine creditors and investors could receive only a small fraction of what they are owed, which undermines trust in the legal and insolvency systems that protect lenders and investors.
A Part X personal insolvency arrangement is a procedure under the Bankruptcy Act used to administer agreements between debtors and creditors. The article says the alleged fraud used fake debts to force Part X arrangements, and the case raises questions about how Part X agreements are administered and the importance of truthful disclosure when those arrangements are put in place.
Farmer David Cross has launched the Federal Court lawsuit. He alleges that the personal insolvency arrangement of contractor Giuseppe Rullo was part of the scam involving fraudulent judgments and fake debts.
The court heard that documents for a purported deal between contractor Giuseppe Rullo and Athena Commodities & Trading (a Hong Kong company of which Clare Sowersby is a director) contained multiple inconsistencies. Rullo had supposedly agreed to raise $1.5 million for horticultural investment in New South Wales and Victoria and would be liable for the full amount if he failed to raise it, but three documents listed three different fundraising deadlines: March 31, 2010; March 31, 2011; and June 1, 2012.
The article identifies Athena Commodities & Trading as a Hong Kong company involved in the purported business deal with Giuseppe Rullo. Clare Sowersby is named as a director of that company in the court material presented.
Mark LaPirow, counsel for David Cross, told the Federal Court that the administration of Part X agreements in the commercial world depends on people doing what the Bankruptcy Act requires and making truthful disclosure. His comments emphasised that the system relies on accurate and honest documentation.
The article says Justice Jennifer Davies was scheduled to hand down her ruling on Friday afternoon. The piece does not report the outcome, only that the decision was imminent at the time of publication.
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