Development project - failed and repossed; what to do next?

From the op's point of view this is not a development but just a loan of money to someone - who in turn is doing a development.

 

Rule #1 is never go into partnership. You can be liable for all the debts and get none of the income / gain.

You wouldnt buy shares in companies if they made shareholders liable for all losses so why would you do this just because its property ?

 

Was the money loaned to the accountant (personal name) or to a company owned by the accountant? I.e., The name on the loan agreement?
Marg

 

It needs legal advice to determine what has occurred and remedies.

eg : If it a unsecured loan then the accountant may have breached a number of credit or even professional laws.eg who drew up the loan agreement ? Who facilitated it ? Does Corporations Law apply ? Consumer law ? Credit laws. Trust law, Professional services laws ? Professional Indemnity ? Was it an insured service ? Was a crime involved ? Fraud ? deception.....

Plenty of legit schemes marketed by professionals has been found to be fraud....Want to buy a painting for your SMSF ? Hang on who owns it. You or the other twenty SMSFs ?

 

So what's the solution?

 

Work out what happened first and then decide.

 

Solution = Arrange a time for the solicitor.

I recently saw a interesting case recently involving a incomplete land contract. Client didnt serve notice on developer who hasnt completed and sunset clause is long gone...as this notice could be construed as rescinding. So the person isnt a proven creditor as they dont have a "debt"...They have a potential claim if the contract is never completed.. Here is the kicker. Proven creditors may only get their deposit back. Liquidator may complete open contracts and hence client may suffer no loss !!

To me this demonstrates risks when you dont seek legal advice. The legal advice was not to trigger a recovery as this can infer contract termination and other party can rescind. And thats what they did.

 

Hi Marg, the money was loaned to a company owned by the accountant. I've seen the agreement my cousin signed. It's just basically a "loan of funds", there's no mention of a development project

 

This is correct. It's a loan of money to a "trusted" party. My basic understanding is, it doesn't matter what the accountant puts the money into. The loan is still the loan.
And yes, as another post mentioned, it looks like it was unsecured

 

Then the money is owed by that company, not the accountant personally.

If that company is put into liquidation......
Marg

 

And there is no capital loss for a failed loan v's failed shareholding in a company.. The accountant gave bad advice on how to invest in his venture !

 

The OP should get proper legal advice on this as even though the money has gone into a company the agreement may still be with the individual. They may also be able to sue the individual directly by other means. He may also be able to sue the accountant in their professional capacity if this investment was advised by them.

Also the tax treatment will depend on exactly what has happened so he should seek tax advice - but not from that bloody accountant!