bad debts in aged care - what do you do? - etouches debts in aged care - what do you do? presented...
TRANSCRIPT
Bad Debts in aged care -
What do you do?
Presented by:
Alison Choy Flannigan Partner, Health, aged care and life sciences
(02) 9390 8338
Nicholas Heinecke Special Counsel, Health, aged care and life sciences
(02) 9390 8352
22 June 2016
4522725.1
Introduction
Resident/client debt management
Commercial debt management
Contracts and engagement terms
Providing security
Solvency
Debt recovery
Introduction
2
Enforceable contracts – capacity
Contracting – ensuring that payment obligations are clear Residential Aged Care: Resident Agreement
Home care: Home Care Agreement
Retirement Living: Retirement Village Contract and Disclosure Statements and lease/licence as relevant
Resident/client debt management
3
Residents Agreement - A resident agreement must be expressed in plain language and be readily understandable by the care recipient
Refundable Accommodation Deposits (RADs) and Daily Accommodation Payment (DAPS) Pre 1 July 2014 residents (with unchanged arrangements) can roll over
accommodation bonds unless they choose to opt in to new arrangements
Residential Aged Care
4
It’s all in the timing – the importance of the admission process Ensure that the contract is signed and payment arrangements are in
place (to the extent possible under law) before the resident moves in
A resident has 28 days from the date that they enter into the facility to decide how to pay for their accommodation. If they decide to pay a RAD, they have 6 months to pay. If they make a decision after those 28 days to pay a RAD, it is due when agreed between the provider and the resident. A resident must pay a DAP unit the RAD is paid.
The Service Provider cannot request a resident to pay a DAP more than one month in advance.
Residential aged Care
5
Securities Ways to assist with recovering payments Refundable accommodation deposits (RADs)
Pre-payment (permissible)
Authority to deduct regular payments from bank accounts
Access to pension payments
Bank guarantee or pre-payment of security or security such as a caveat or mortgage over real property (including real property to be sold)
Clauses which deal with late payment or clauses encouraging early payment (subject to regulated fee requirements)
Government subsidy – to an extent the government subsidy manages the risk, however, ensure that all your assessments and paper work re the resident/client and compliance is up to date and regularly reviewed
It’s all in the timing – the importance of the admission process Ensure that the contract is signed and payment arrangements are in
place before the commencement of the service/resident moves in
Residential aged care
6
What happens if they don’t pay?
Security of tenure User Rights Principles
When an Approved Provider may ask or require a care recipient to leave residential care services – includes when the Care Recipient has not paid any agreed fee to the approved provider within 42 days after the day when it is payable, for a reason within the care recipient’s control
The approved provider must not take action or make the care recipient leave the residential care service, or imply that the care recipient must leave the service, before suitable alternative accommodation is available
Must follow the notice requirements
Residential aged care
7
Home Care Agreements Must include a clear itemised statement of fees (if any) payable by the
care recipient and how those fees are calculated
What happens if they don’t pay?
Security of tenure The approved provider may cease to provide home care to the care
recipient only if the care recipient has not met his or her responsibilities as described in the ‘Charter of care recipients’ rights and responsibilities – home care set out in Schedule 2 of the User Rights Principles within the care recipient’s control – this includes the responsibility to pay fees as specified in the agreement or to negotiate an alternative arrangement with the provider if any changes occur in his or her financial circumstances
User Rights Principles 2014
Home care
8
Retirement Village Contract (NSW Standard Form) Allows for Entry payments and deposits
Sets out fee structure
What happens if they don’t pay?
Security of tenure Generally, the retirement village contract terminates and the right to
occupy terminates on the completion of the sale of the premises.
Section 134 of the Retirement Villages Act 1999 (NSW) – The operator of a retirement village may apply to the Tribunal (NCAT) for an order terminating the residence contract of a resident of the village who breaches any village contract between the resident and the operator.
The Tribunal can only make an order if:
The breach is to justify the termination ; or
Persistent breaches by the resident is such as to justify termination.
Retirement living
9
What is a enforceable contract?
Legal entities
Offer
Acceptance
Consideration
Intention to enter into legal relations
Execution – 127 Corporations Act or authorised representative
Note changes to Competition and Consumer Act – contracting with small businesses and unfair contracts
Look out for
Excessive rights to security and encumbrances in supply contracts
Other rights to delay payment by rejection of supplies and raise disputes
Word of advice:
You can negotiate changes to standard contract terms
Contracts and engagement terms
10
What are they:
Examples: PPSR
Guarantees
General Security Deeds and Specific Security Deeds (formerly known as Fixed and floating
charges and Fixed charges)
Land interests – mortgages on leases
Securities
PPSR - What is it? In operation since 2011 and replaced a number of State and Federal
registers
A simple and cheap method of registering a security interest
A “security interest” is an interest in personal property that in substance secures payment of a debt or other obligation regardless of the form of the transaction
Interests may be registered on goods, vehicles, registered intellectual property, accounts, shares, livestock - most things other than real property
Can be registered in respect of property of persons, companies, trusts, partnerships, associations, other entities
12
Personal Property Security Register
Why register an interest? Create priority
Can give a right to take possession of goods and accounts
Notifies all of the interest in property
PMSIs Purchase money security interests (PMSIs)
How does a PMSI arise
Contracts Take care when signing a standard form contract
Consider including a right to register interests in your contracts
13
Personal Property Security Register
Guarantees Director guarantees
Parent company guarantees
Bank guarantees
Land title Caveats
Require the grant of an estate or interest in land
Notify of an interest
Mortgages Mortgages over land and leases
Must be granted by an executed deed
Give priority and can grant a power of sale
14
Other options
Solvency Solvent vs insolvent:
“A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable”, section 95A of the Corporations Act 2001 (Cth)
Personal insolvency, is bankruptcy which requires an Act of Bankruptcy to occur and the vesting of the persons property with a trustee.
A bankrupt means a person:
(a) against whose estate a sequestration order has been made; or
(b) who has become a bankrupt by virtue of the presentation of a debtor’s petition.
15
Solvency
Make the debt “due and payable” With precise contract terms make a debt (being the agreed sum) due
and payable
In other circumstances, the debtor may need to be put on notice of a breach of contract, by notice demanding precisely when the debt is to be paid
Where the amount of the debt is to be determined, Court proceedings and judgment may be required to quantify the amount owing
Letters of demand Ensure that you have the documentation to support the claim, for
example enforceable contract
Purpose: set a deadline (reasonable) for payment of the debt
Particularise your claim, and reduce the scope for argument and dispute
Demands
16
What is statutory demand? Corporations Act 2001 (Cth) section 459E:
(1) A person may serve on a company a demand relating to:
(a) A single debt that the company owes to the person, that is due and payable and whose amount is a least the statutory minimum; or
(b) 2 or more debts that the company owes to the person, that is due and payable and whose amount is a least the statutory minimum.
Consequences of non compliance Deemed insolvency
Standing to apply to the Federal Court or Supreme Court to wind up the debtor company
Creditors Statutory Demands
17
Why issue a CSD? Get the attention of the directors
Process is quick (compared to court proceedings to prove a debt and then enforce)
Hard deadline, debtor must within 21 days either: Pay the debt
Secure the debt (to the creditor’s reasonable satisfaction)
Commence proceedings to set aside the demand
What to do if you receive a CSD?
18
Creditors Statutory Demands
Institutional debt collectors
Courts Local Courts
Small Claims Division
Judgments CSD (if against a company)
Garnishee orders
Sherriff enforcement
19
Other methods of enforcement
Aged Care and Debt Recovery
Questions? [email protected]
The contents of this publication is general in nature and should not be relied upon as legal advice. No reader should act on information contained within the publication without first consulting us.
20