Ambrose (Trustee), in the matter of Starr (Bankrupt)
[2024] FedCFamC2G 593
•28 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Ambrose (Trustee), in the matter of Starr (Bankrupt) [2024] FedCFamC2G 593
File number(s): ADG 233 of 2024 Judgment of: JUDGE STREET Date of judgment: 28 June 2024 Catchwords: BANKRUPTCY - application to appoint a trustee to take control of the respondent’s property pursuant to s 50 of the Bankruptcy Act 1966 (Cth) – bankruptcy notice served Legislation: Bankruptcy Act 1966 (Cth)
Bankruptcy Regulations 2021 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)
Civil Procedure Act 2005 (NSW)
Cases cited: Deputy Commissioner of Taxation v Clyne [1983] FCA 193; 50 ALR 118
Ewert v Martin [2018] FCA 1931
Division: Division 2 General Federal Law Number of paragraphs: 12 Date of hearing: 28 June 2024 Place: Sydney Counsel for the Applicant: Mr S Sankey Solicitor for the Applicant: Wallmans Lawyers Respondent: No appearance ORDERS
ADG 233 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF BENJAMIN DAVID STARR, BANKRUPT
BETWEEN: LEE ROBERTSON
Applicant
AND: BENJAMIN DAVID STARR
Respondent
ORDER MADE BY:
JUDGE STREET
DATE OF ORDER:
28 JUNE 2024
THE COURT ORDERS THAT:
1.An Order pursuant to Section 50 of the Bankruptcy Act 1966 (Cth) (the Act), that COLIN LOUIS AMBROSE (hereafter, the Section 50 Trustee) be appointed to take control of the Respondent’s property and such control to continue until the making of a sequestration order or dismissal of the creditor’s petition.
2.The Section 50 Trustee be indemnified as to his reasonable costs not exceeding $650 per hour plus GST and expenses for and against the Respondent’s property and/or any proceeds of sale, all of which be hereby charged for that purpose.
3.The Section 50 Trustee is authorised to make payment to the respondent of reasonable living expenses, reasonable medical expenses and if requested, legal expenses, which legal expenses are to not exceed $10,000 from the debtor’s property, without further leave of the court.
4.The Court confirms service of the interim application upon the respondent by the steps taken by the applicant.
Substituted Service Orders
5.Pursuant to Rule 6.14(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (hereafter, the Rules) and section 309(2) of the Act, an order that personal service upon the Respondent of:
(a)The Creditor’s Petition ADG 233 of 2024 (and all subsequently filed documents);
(b)Copies of the Affidavits verifying the Petition and this Application; and
(c)A copy of the Consent to Act as Trustee
(collectively, the Documents), be dispensed with.
6.Unless or until an address for service or notice of appearance is filed for or on behalf of the Respondent and otherwise pursuant to Rule 6.14(2) of the Rules and section 309(2) of the Act, an order that, in lieu of personal service, the Documents in each instance be marked ‘Private and Confidential’ and served upon the Respondent by:
(a)Pre-paid express post to: xx xx Road, xxxx; and
(b)Email transmission to: xx@xx.
7.Pursuant to Rule 6.14(3) of the Rules and Section 309(2) of the Act, service of the Documents be deemed good and sufficient service of the Documents upon the Respondent on the second business day after the last method of service complied with has been conducted.
8.The Respondent pay the Applicant's costs of and incidental to this application.
9.Liberty to the parties and the Section 50 Trustee to apply for further orders at short notice.
THE COURT NOTES THAT:
A.The official receiver will be notified of the appointment under these orders within two (2) days.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE STREET
This is an application under s 50 of the Bankruptcy Act 1966 (Cth) (“the Act”), for the appointment of a trustee to the property of the debtor, prior to the hearing and determination of the Creditor's Petition.
Section 50 of the Act provides as follows:
Taking Control of debtor’s property before sequestration
(1)At any time after a bankruptcy notice is issued, or a creditor's petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:
a.direct the Official Trustee or a specified registered trustee to take control of the debtor's property; and
b.make any other orders in relation to the property.
(1A) The Court may give a direction or make an order only if:
a.a creditor has applied for the Court to make a direction; and
b.the Court is satisfied that it is in the interests of the creditors to do so; and
c.the debtor has not complied with the bankruptcy notice.
(1B) If the Court directs a trustee to take control of the debtor's property, the Court must specify when the control is to end.
(2)Without limiting the generality of subsection (1), the Court may, at any time after giving a direction under subsection (1), summon the debtor, or an examinable person in relation to the debtor, for examination under this section in relation to the debtor.
(3)A summons to a person under subsection (2) shall require the person to attend:
a.at a specified place and at a specified time on a specified day; and
b.before the Court, the Registrar or a magistrate, as specified in the summons;
to be examined on oath under this section about the debtor and the debtor's examinable affairs.
(4)A summons to a person under subsection (2) may require the person to produce at the examination books (including books of an associated entity of the debtor) that:
a.are in the possession of the first - mentioned person; and
b.relate to the debtor or to any of the debtor's examinable affairs.
(5)For the purpose of the examination under this section of a person summoned under subsection (2), subsections 81(2) to (17), inclusive, apply, with any modifications prescribed by the regulations, as if:
a.a sequestration order had been made against the debtor when the Court gave the direction under subsection (1) of this section;
b.the examination were being held under section 81; and
c.a reference in those subsections to a creditor were a reference to a person who has a debt that would be provable in the debtor's bankruptcy if a sequestration order had been made as mentioned in paragraph (a) of this subsection.
The principles applicable to s 50 of the Act are ones, in substance, to enable the preservation of the debtor's property, pending the determination of the making of a sequestration order: See Neaves J in Deputy Commissioner of Taxation v Clyne [1983] FCA 193; 50 ALR 118 at [123].
The first step that must be taken before such an order can be made is that there must be a creditor who has applied for a direction, which has occurred in the present case, in accordance with s 50(1A)(a) of the Act.
The second step is that the Court must be satisfied that it is in the interests of the creditors to make the order, in accordance with s 50(1A)(b) of the Act. In the present case, there is evidence that has been adduced that the real property owned by the debtor is the subject of a contract for sale. The debtor has suggested that the property has been taken by the bank. Whether there is any equity is not a position which has been disclosed by the debtor, but it is apparent that he is dealing with the only real asset that might be available to the creditor. In all the circumstances of the present case, the Court is satisfied that it is in the interest of the creditor for an order to be made under s 50 of the Act, prior to the hearing of the Creditor’s Petition on 13 August 2024.
In relation to s 50(1A)(c) of the Act, the third step is that the debtor has not complied with the bankruptcy notice. The affidavit of the applicant dated 25 June 2024 identified there was a bankruptcy notice that was served upon the debtor on 29 May 2024, that affidavit of which has been read. That bankruptcy notice issued on 29 May 2024, on its face, appears to comply with the requirements under s 41 of the Act. The bankruptcy notice identified a final judgment amount and calculated interest in accordance with s 101 of the Civil Procedure Act 2005 (NSW), which sought a total debt, after allowing for a payment made, in the sum of $10,781.18, which is an amount for which a sequestration order can be made: See Reg 10A of the Bankruptcy Regulations 2021 (Cth). In that bankruptcy notice, was attached a judgment from the Local Court of New South Wales dated 10 January 2022, which identified an order sum of $10,048.93 and appears, on its face, to be a final judgment. The evidence supports a finding by the debtor to comply with the bankruptcy notice.
The Court should have regard to, as suggested by Derrington J in Ewert v Martin [2018] FCA 1931 where her Honour at [18], that there needs to be a direction in respect of the appropriate expenses likely to be incurred by the trustee, pursuant to the appointment. In the present case, the Court has inserted an hourly rate in accordance with the professional rates ordinarily charged plus GST.
There has obviously been compliance with the provision of the nomination of a trustee. The Court has also received into evidence the trustee's Consent to Act as Trustee dated 25 June 2024, under s 50 and, indeed, the trustee has attended the hearing today.
The Court also is required to specify when the control of the debtor’s property is to end. The Court has made amendments so that the order, under s 50, will end on the making of a sequestration order or on the dismissal of the Creditor’s Petition. That order obviously does not preclude an application in a proceeding with a supporting affidavit by the party who has not yet been heard, to seek to set aside the order if proper grounds can be made out.
The Court is satisfied, from the email communications that have been tendered into evidence, that the steps taken by the creditor are likely to have brought the interim application dated 27 June 2024 to the attention of the debtor, and the Court has confirmed service of the interim application on the debtor.
The Court is also satisfied that it is appropriate, in these circumstances, to make orders in relation to substituted service under r 6.14(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), by the steps proposed by the creditor. This is in circumstances where it is apparent from the email response from the debtor, that he is receiving communications from that email address. The Court notes that the debtor did suggest that he is no longer living at xxxxx property, and that he was homeless and he has also identified that he is suffering from mental health issues and may, or may not, be seeking treatment in that regard. Those are not matters that, in the circumstances of this case, weigh against the making of the proposed orders provided by applicant, including the orders for substituted service, given the steps that have been taken and that the only divisible property likely to be the subject of any funds for distribution to the creditor, is the subject of a current sale transaction, the details of which the debtor has refused to provide.
It is for these reasons the Court makes orders, in substance, in accordance with the short minutes of order that have been handed up to the Court.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the oral published Reasons for Judgment of Judge Street. Associate:
Dated: 8 July 2024
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