Avoiding BEC And Other Scams

November 24, 2020 Edward Dever

One of the more recent scams being perpetrated is the BEC or business email compromise scam where scammers intercept an email and change the banking details on the attached invoice. Their work is becoming more and more sophisticated.

It pays to check any new banking details with the supplier.

I double checked on two recent occasions and, fortunately, each one was ok. One was a law firm invoice where I was using the firm for the first time. The other was a series of strata levies with new banking details where the new font used on the notices made them look rather amateurish and was an immediate red flag.

It doesn't take long to check the banking details. Getting funds back is proving next to impossible and banks are denying liability.

In the article’s example, CBA and Bendigo washed their hands of the issue. AFCA and ASIC played ping pong, referring the complainant back to each other.

At some point, someone in government may suggest a form of deposit levy on the banks to establish a fidelity guarantee fund to deal with claims arising from BEC and other similar scams.

Tradies frustrated by banks as business email scam costs them $51,000

One of the scams that circulates periodically in the travel sector is the fake industry magazine or website ad scam.

I recall having a discussion with one group out of Europe threatening to sue because a manager had inadvertently signed their invoice for fake ads.

Given the complexities of enforcing foreign judgments in Thailand and the problems associated with civil litigation there, I welcomed the prospect of spending some quality time with them in court. Never heard from them again.

November 2020

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Why Smaller Companies Choose Formal Rehabilitation Proceedings

November 16, 2020 Edward Dever

The rehabilitation proceedings under Ch. 3/1 of the Thai Bankruptcy Act have generally been utilised by larger companies. Think TPI, NTS Steel and, more recently, Pace Development and Thai Airways.

Given costs and time frames involved, why would a smaller company choose this restructuring route?

First, an automatic stay applies.

Under S. 90/12, all existing court proceedings are stayed and no new proceedings may be commenced. Property essential to business operations cannot be recovered. This may be critical to survival of the business. For smaller companies, this means essential leased equipment or factories cannot be seized.

Second, formal proceedings offer a new investor a clean slate.

Under Ch. 3/1, all creditors must file claims for repayment which are dealt with under the plan. Any investor then has a clear understanding of the business's liabilities. This may favour a company acquisition rather than an asset acquisition where 7% VAT would apply.

Third, debt to equity conversions are permitted.

As a general rule, the Thai Civil and Commercial Code (for limited companies) and the Thai Public Limited Companies Act (for public limited companies) prohibit debt to equity conversions. The exceptions under S. 90/42 of the Bankruptcy Act allow for an easier clean up of the balance sheet, subject to sufficient creditor approval when voting on the plan.

Where existing management does most of the work, including acting as the planner, it may be possible to keep the rehabilitation costs as low as possible. Limited numbers of creditors and general consensus between debtor and creditors would also limited rehabilitation costs.

November 2020

Nok Air Enters Rehabilitation Proceedings

November 5, 2020 Edward Dever

Airlines are flavour of the month at Thailand's Central Bankruptcy Court.

The Court has now approved the rehabilitation petition of Nok Airlines PCL, the budget airline part owned by THAI. This follows THAI's entry into rehabilitation proceedings earlier this year.

On 4 November 2020, the Court approved the appointment of Grant Thornton Specialist Advisory Services, Nok Air CEO Wutthiphum Jurangkool and three other board members to prepare the rehabilitation plan.

Creditors may file claims for repayment of their debts within one month of the Planner's appointment being published in the Government Gazette.

Nok Air gets green light to restructure debt

November 2020

Angus, the $500,000 Dog, And His Epic Strata Struggle

October 21, 2020 Edward Dever

Pets in apartments is often the most contentious issue in strata living.

I recall one complex in Sydney where a cat was allowed to stay despite a prohibition on pets but not be replaced once it died. Some time later, a younger, slimmer version was being passed off as the original cat. (There is probably a market for identical replacement pets for strata purposes.)

The Qld Government is currently considering changes to make it more difficult for landlords to refuse requests for pets. The progress of these changes will depend on the State election results later this month.

The Seidler-designed The Horizon building in Darlinghurst, Sydney has been the setting for an almighty five year struggle between the owner of a dog (Angus) and the owners corporation with an estimated $500,000 of strata funds spent on legal fees. In the latest development, the NSW Court of Appeal has struck down their attempt to ban pets, finding that banning animals breaches strata scheme legislation which provides that by-laws can’t be “harsh, unconscionable or oppressive.”

The decision has broad implications for all strata schemes in NSW.

The Horizon is also well known for “the great kitty litter catastrophe of 2004” where a tenant hiding a cat put kitty litter down the toilet resulting in multiple apartments being flooded with sewage.

Cooper v The Owners – Strata Plan No 58068 [2020] NSWCA 250

Pets allowed in Darlinghurst's Horizon building after NSW Court of Appeal win

The curious incident of the dog in the Darlinghurst high-rise

Pet owners rejoice at new NSW strata model by-law

October 2020

When Equity Ranks Ahead of Debt

October 9, 2020 Edward Dever

One of the more interesting aspects of Thai Airways rehabilitation will be the issue of debt to equity conversions.

THAI's debt load is not sustainable. It was not profitable before Covid-19 hit and any restructuring will necessarily involve dealing with the debt burden.

In many of the larger past restructurings in Thailand, an informal rule applied - equity ranks somewhere above unsecured debt and often above secured debt. While contrary to Thai law, it is a principle adopted by numerous significant family-owned businesses.

In one meeting, a business owner tossed the keys to his steel mill across the table towards creditors seeking debt to equity conversions, simply saying much to their horror: "Ok, you run it then." They were probably the keys to one of his cars but the point was made.

THAI is controlled by the Thai Government. While the Finance Ministry recently reduced its stake so THAI was no longer a state enterprise, the shares were shuffled sideways to a government-related fund.

It is unlikely the Finance Ministry will agree to dilute its stake in THAI as part of the rehabilitation plan. THAI as a national airline will be seen as an important part of Thailand's image with the Government in firm control for better or worse.

October 2020

Covid-19 Land Tax Relief - How Qld and NSW Programs Differ

September 18, 2020 Edward Dever

Covid-19 has shown that Australia is a collection of States and Territories rather than one nation.

Australia has become a quagmire of different rules for travelling between States. We have seen different rules apply to similar events such as funerals depending on your State.

Land tax relief is another example of State differences.

In Qld, land tax relief is offered to landowners where the ability of the #tenant to pay rent is affected by Covid-19 (and their rent is reduced) and also where the landowner's ability to secure tenants has been affected by Covid-19.

Qld relief is self-assessed. (Subsequent auditing is likely.)

Qld is also extending the relief to the 2020-21 land tax liability (applications close on 26 February 2021).

(Qld Land Tax Relief Measures)

In NSW, relief is offered to landowners whose tenants can prove Covid-19 financial distress and have been provided rent reduction.

No relief is currently provided to landowners where their ability to secure tenants has been affected by Covid-19.

NSW is approval based rather than self-assessed.

Relief is currently limited to the 2020 land tax liability.

(NSW Land Tax Relief Measures)

Qld clearly has the more generous relief program at this point.

Update - 23 September 2020

NSW has now extended its Land Tax relief program until 31 December 2020.
Rental support measures in NSW to be extended for six months

September 2020

Thai Airways Rehabilitation Proceedings Recognised In Australia

August 31, 2020 Edward Dever

The recent Australian Federal Court judgment recognising the rehabilitation proceedings in Thailand of Thai Airways reveals several interesting facts regarding THAI.

- THAI's Royal Orchid Plus frequent flyer member details (1.398 million members) are not maintained in a single searchable data base. (Over 87,000 members are based in Australia.) This is extraordinary and likely due to a lack of foresight in upgrading the membership systems as membership grew. It highlights the difficulty of dealing with this group as part of the restructuring.

- In addition to Australia, THAI has sought and obtained orders for the recognition of the Thailand rehabilitation proceedings in Germany, Switzerland and Singapore. THAI has also sought recognition in Japan.

- Trading losses for the financial year to 31 December 2019 were the THB equivalent of AUD 567.7 million. Note this was before the onset of Covid-19 and the shutdown of flights.

- THAI's assets in Australia comprise primarily leased assets and cash.

Didyasarin v Thai Airways International Public Company Limited [2020] FCA 1154

August 2020

Thailand - From 40 Million Foreign Arrivals to Zero

August 10, 2020 Edward Dever

Clear signs of the carnage emerging from Covid19-related travel restrictions.

The closure of two long-standing inbound travel companies in Thailand, Asia World and CBS Travel Asia, is an indicator of the depth of financial calamity faced by destination management companies (DMCs) as a consequence of closed borders and zero tourists.

The comments by AWE sum up the predicament faced by many DMCs:

“Asia World has had no business for the past four to five months and no income because of Covid-19. It seems that tourists will not return to Thailand for a long time, which could be in 2021 or 2022, but nobody can be sure.”

The key to survival is summed up by Asian Trail's CEO:

“It’s all about cash,” said Laurent Kuenzle, CEO, Asian Trails. “Do you have enough to survive, not for three months but 1.5 years? Do you have savings or are you indebted? How much money can you save by reducing expenses, without destroying your company and without losing quality and trained manpower when tourists return?”

Expect more regional closures, particularly those DMCs without recourse to deep pockets to ensure survival.

Thailand’s 60th Tourism Anniversary Turns to Nightmare as Longstanding Travel Agencies Start Closing

August 2020

Nok Air Follows THAI Into Formal Rehabilitation Proceedings

July 31, 2020 Edward Dever

Thai-based airline, Nok Air, has announced it will follow Thai Airways International into formal rehabilitation proceedings.

Nok Air is part owned by THAI (around 13%) and has been unable to fly its 18 international routes due to Covid19 and its domestic routes in 23 provinces are running at around 30% of its normal schedule.

Nok Air claims that only 200 customers are still awaiting refunds.

"Nok Air insisted on Thursday its business would be able to return to solvency despite the airline following Thai Airways' lead and filing a business rehabilitation request with the Central Bankruptcy court."

Nok Air will be just fine, insists CEO

July 2020

Will Diminishing Income Returns Affect Residential Property As An Asset Class?

July 15, 2020 Edward Dever

Even before Covid-19, lockdowns and social distancing hit our shores, income returns from residential investment properties were looking suspect.

Flat wage growth has limited the ability to raise residential rents. Not applicable in all property markets but as a general principle.

Meanwhile, costs such as rates, water rates, strata levies and land tax continue their relentless march north.

Then add Covid-19 to the mix.

Investors need to continually focus on cost efficiencies to maintain returns.

The linked articles below highlight one opportunity for cost efficiencies.

Professor Fels calls it the Loyalty Tax. I often refer to it as the Lazy Investor Levy.

Insurance companies rely on customers being lazy and not shopping around for a better deal. Investors who rely on their agents to renew their insurance are unlikely to be getting the best deal.

There are significant cost savings, particularly on landlord protection insurance. Your own insurance company will often offer you a better deal online than in your renewal notice.

In terms of cost savings, it is the ultimate low hanging fruit.

NSW regulator tackles $3.6b in hidden insurance fees

Lifting the lid on home insurance price gouging

July 2020