Axess Debt Management Pty Ltd v Markovic

[2022] FedCFamC2G 197

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Axess Debt Management Pty Ltd v Markovic [2022] FedCFamC2G 197

File number(s):	ADG 3 of 2022
Judgment of:	JUDGE BROWN
Date of judgment:	3 March 2022
Catchwords:	BANKRUPTCY – creditor’s petition – application under s 50 of the Bankruptcy Act 1966 (Cth) – where a bankruptcy notice has been served and not complied with – where debtor has begun divesting himself of property – order to appoint a trustee to take control of the debtors property – matters to be considered.
Legislation:	Bankruptcy Act 1966 (Cth) s 50. Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) Div 6.4, rr 6.14, 6.15.
Cases cited:	ACM Group Ltd v Achram [2017] FCCA 2558. Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118. Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247. Plaster Plus (Australia) Pty Ltd v Zhou & Anor [2013] FCCA 1983.
Division:	Division 2 General Federal Law
Number of paragraphs:	19
Date of hearing:	3 March 2022
Place:	Adelaide
Counsel for the Applicant:	Mr Sankey
Solicitor for the Applicant:	Wallmans Lawyers
Counsel for the Respondent:	No appearance
Solicitor for the Respondent:	No appearance

ORDERS

ADG 3 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

AXESS DEBT MANAGEMENT PTY LTD

Applicant

AND:

DANIEL JOHN MARKOVIC

Respondent

ORDER MADE BY:	JUDGE BROWN
DATE OF ORDER:	3 MARCH 2022

THE COURT ORDERS THAT:

1.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 this Honourable Court otherwise orders.

2.The Section 50 Trustee be indemnified as to his reasonable costs and expenses for and against the Respondent’s property and/or any proceeds of sale, all of which be hereby charged for that purpose.

Substituted Service Orders

3.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) & section 309 (2) of the Act an order that personal service upon the Respondent of Creditor’s Petition ADG3 of 2022 (and all subsequently filed documents) along with copies of the Affidavits verifying the Petition and a copy of any consent to Act as trustee and a copy of this order, (collectively the documents) be dispensed with.

4.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:

(i)15A Aireys Street, AIREYS INLET VICTORIA 3231; and

(ii)BakerJones Lawyers (Attention: Jade Hopper) C/- Level 8, 160 Queen Street, MELBOURNE VICTORIA 3000

(b)causing the documents to be attached to an email and transmitted electronically to Jade Hopper via email address [email protected];

5.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 to be complied with has been conducted;

6.The Respondent pay the Applicant's costs of an incidental to this application;

7.Liberty to the parties and the Section 50 Trustee to apply for further orders at short notice.

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).

REASONS FOR JUDGMENT
EX TEMPORE

JUDGE BROWN:

INTRODUCTION

1. The reasons for judgment in this matter are being delivered orally following the hearing between the parties concerned. These reasons have been corrected of errors of expression and syntax in an attempt to make the orally delivered reasons amenable to being read.

2. This morning, I have before me an application in a case which relates to a creditor’s petition which was filed on 11 February 2022.  The applicant petitioner is Axess Debt Management Pty Ltd and the respondent is Daniel John Markovic. 

3. The petition is based on an unsatisfied bankruptcy notice, which was issued on 25 October 2021.  It relates to a final judgment debt granted in the applicant creditor’s favour on 15 September 2021. 

4. The bankruptcy notice required the payment of a sum of $53,183.57.  The bankruptcy notice is unsatisfied.  As a consequence, the applicant has filed the relevant petition, which is returnable on a date in April before the court’s registrar.  The petition is not yet served.

5. Issues have arisen in relation to the management of the estate if the petition is granted, and in particular, the petitioner has sought orders pursuant to section 50 of the Bankruptcy Act 1966 (Cth) (“the Act”).

6. Essentially, the applicant asserts that in the face of the unsatisfied bankruptcy notice, the respondent has divested himself of a significant item of property, which is prejudicial to creditors, including the applicant.

7. Section 50(1) of the Act reads as follows:

   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 orders in relation to the property.

   Similarly, with that application which was made on 3 March 2022, and requested to be listed urgently, are issues which relate to the service of that application on the judgment debtor. 

8. The applicant seeks leave that the court make an order for substituted service.  The court’s authority to make such an order arises under Division 6.4 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“the Rules”), in particular, rule 6.14 directs that if, for any reason, it is impractical to serve a document in a way required under this part, the court may make an order dispensing with service or substituting another way of serving the document. 

9. In making such an order, the court is directed to take account of a number of matters.  They include:

   •whether reasonable steps have been taken to attempt to serve the document; and

   •whether it is likely that the steps that have been taken have brought the existence and nature of the document to the attention of the person to be served;

   •and whether the person to be served could become aware of the existence and the nature of the document by means of advertising or another means of communication that is reasonably available; and

   •the likely costs to the parties serving the document, the means of that party, and the nature of the proceedings and any other relevant matter.[1] 

   [1]     Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 6.15.

10. The circumstances leading to the application for substituted service are detailed in an affidavit of a process server, Carl Drought, filed on 21 February 2022 and in an affidavit of the applicant’s solicitor which was deposed on 24 February 2022. 

11. The origin of these proceedings was in some civil proceedings in the Magistrates Court of Geelong, which were contested.  The respondent debtor had a solicitor who acted on his behalf.  That solicitor is Ms Jade Hopper of Baker Jones Lawyers.  The applicant’s solicitor, Mr Sankey deposes that he has been in correspondence with her as to whether she will accept service. 

12. So, on that basis, it is Mr Sankey’s position that it is probable that Ms Hopper has in some way communicated with Mr Markovic and he knows what is in prospect.  That contention is certainly supported by the affidavit of Mr Drought, who deposes that he travelled to an address of a property owned by the respondent located at 15A Aireys Street, Aireys Inlet in the State of Victoria. 

13. He went there but could not find Mr Markovic at the address.  As a consequence, he had a conversation with Mr Markovic on his mobile telephone, who stated his solicitor acts on his behalf and his solicitor had made him aware of the fact that legal documents would be attempted to be served upon him.

14. In this context, Mr Drought deposes that he had a conversation with Mr Markovic, in which the latter stated  that  he lives in Melbourne, “And you won’t catch me at Aireys Inlet, and I will not be accepting service.  Good luck.”  So that conversation confirms that Ms Hopper has been in contact with Mr Markovic, and he is - that is, Mr Markovic - is inclined to be uncooperative in respect of issues of service. 

15. From the applicant’s perspective, the urgency of the matter and the reason that the application for substituted service and orders under section 50 have been made, is that the applicant has become aware that following the service of the bankruptcy notice, a real property that the respondent has owned with a person who is believed to be either his partner, or de facto wife, or has been sold. It was sold on 15 December 2021 and transferred to two individuals.

16. For obvious reasons, the applicant fears that this is an attempt to divest the respondent of property so as to defeat the effect of any sequestration order that may subsequently be made.  On that basis, he seeks the appointment of Mr Ambrose to be a controlling trustee, so that he can expeditiously make inquiries as to what has occurred in respect of any proceeds of sale, and identify them, and also that he will act to protect another property which the respondent owns with his partner at Wendouree. 

    THE LEGAL PRINCIPLES APPLICABLE

17. The principles to be applied in these matters are relatively well-known. Section 50 is essentially a mechanism to protect the interests of creditors. The purpose of the section was discussed by Jagot J in a case Makinna Pty Ltd (in liq) v Trives,[2] where Her Honour said, after citing the case of Deputy Commissioner of Taxation v Clyne that:[3]

    The principles that apply to directions made pursuant to section 50 of the Act are clear. The section is a provision in aid of the creditors of a debtor who has committed an act of bankruptcy; it is an ancillary provision designed to enable appropriate steps to be taken to preserve and protect the debtor’s property in the event of a sequestration order being made.[4]

    [2]     Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247.

    [3]     Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118, 123 (Neaves J).

    [4]     Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247 at [13] (Jagot J).

18. I accept that it is not a provision to be utilised lightly but only in circumstances in which there is evidence available which indicates that the interests of creditors may be prejudiced because the recipient of a bankruptcy notice has divested property.[5]

    [5]     Plaster Plus (Australia) Pty Ltd v Zhou & Anor [2013] FCCA 1983 at [5] (Judge Burchardt), quoting Smith v Varley [2006] FMCA 1572 at [2] and [4] (Raphael J).

19. In my view, the circumstances of this case distinguish it from others, where there has been only the issue of a bankruptcy notice which has not been satisfied and not been served.[6]  In this case, the bankruptcy notice has been issued and remains unsatisfied. 

    [6]See ACM Group Ltd v Achram [2017] FCCA 2558 (Manousaridis J).

20. It has triggered a creditor’s petition, and, in those circumstances, it seems to me, on the balance of probabilities, likely that Mr Markovic is aware that his estate is likely to be sequestrated and he has taken a significant step of selling a piece of real property which is an action which may possibly affect the rights of creditors and, therefore, it is necessary to make some orders to preserve and protect the debtor’s property from further such divestment. 

21. In those circumstances, I am satisfied that it is appropriate to make an order for substituted service under the provisions of rule 6.14 of the Rules and, in the circumstances, it is appropriate that I make the order pursuant to section 50 of the Act.

22. In this context, I note that Mr Ambrose has appeared at court today and has indicated that he is willing to be so appointed, and the applicant has provided the usual undertaking in respect of costs. 

23. I will make the interim orders sought by the applicant and, in particular, I think it is the best means to bring the proceedings to the attention of the respondent to mail the relevant documents to the address in Aireys Inlet, which he owns, and also to his solicitor, Ms Hopper, who has been in communication with him and has indicated that she remains acting for the respondent.

24. So for all those reasons, I will make the orders as sought in the application and as formalised in the draft minute.

I certify that the preceding twenty four (24) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of Judge Brown.

Associate:

Dated:       22 March 2022