Axess Debt Management Pty Ltd v Scullino
[2022] FedCFamC2G 963
Federal Circuit and Family Court of Australia
(DIVISION 2)
Axess Debt Management Pty Ltd v Scullino [2022] FedCFamC2G 963
File number(s): ADG 213 of 2022 Judgment of: JUDGE BROWN Date of judgment: 28 October 2022 Catchwords: BANKRUPTCY – creditor’s petition – application under s 50 of the Bankruptcy Act 1966 (Cth) – applicant petitioner also seeks a substituted service order – order to appoint a trustee to take control of the debtors property – matters to be considered Legislation: Bankruptcy Act 1966 (Cth) ss 50, 309
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 Div 6.4, rr 6.14, 6.15
Cases cited: Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118
Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247
Division: Division 2 General Federal Law Number of paragraphs: 27 Date of hearing: 28 October 2022 Place: Adelaide Solicitor for the Applicant: Mr Sankey, Wallmans Lawyers Respondent: No appearance ORDERS
ADG 213 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: AXESS DEBT MANAGEMENT PTY LTD
Applicant
AND: DOMENICO ANTHONY SCULLINO
Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
28 OCTOBER 2022
THE COURT ORDERS THAT:
Section 50 Order
1.There be an Order pursuant to section 50 of the Bankruptcy Act 1966 (Cth) 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 Bankruptcy Act 1966 (the Act) an order that personal service upon the Respondent of Creditor’s Petition ADG 213 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, (collectively the Documents) be dispensed with.
4.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:
(i)Xx xxx Close, xxxxx; and
(ii)Email transmission to xx@xx and xx@xx
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 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).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE BROWN:
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.
This morning, I have before me an application which relates to a creditor’s petition which was filed on 31 August 2022. The applicant petitioner is Axess Debt Management Pty Ltd and the respondent is Domenico Anthony Scullino (“Mr Scullino”).
The petition is based on an unsatisfied bankruptcy notice which was issued on 29 April 2022. It relates to a final judgment debt, which was granted by the New South Wales Local Court on 3 August 2021 in an amount of $20,786.37. The bankruptcy notice required the payment of a sum greater than that and remains unsatisfied. As a consequence, the applicant filed the petition which originally came before the Court on 25 October 2022 before Registrar Parkyn.
At that stage, the solicitors for the petitioner noted that the petition had not been served and the matter was relisted to 22 November 2022 at 9.30am. In the meantime, Axess Debt Management Pty Ltd has filed an Interim Application seeking orders in respect of substituted service of the petition and, more significantly, an order pursuant to section 50 of the Bankruptcy Act 1966 (Cth) (“the Act”).
Essentially, the applicant asserts that, in the face of the unsatisfied bankruptcy notice, there is a risk that Mr Scullino and his wife will potentially arrange their affairs and, more significantly, Mr Scullino’s affairs, so that the bankruptcy is frustrated. The application is supported by two affidavits of Axess Debt Management Pty Ltd’s solicitor, Mr Sankey, and I have read each of those documents.
The Court’s authority to make an order for substituted service arises under Division 6.4 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (“the Rules”). In particular, rule 6.14(1) directs that:
If, for any reason, it is impracticable 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.
In making such an order, the Court is directed to take account of a number of matters which are set out in rule 6.15 of the Rules and reads as follows:
(a)whether reasonable steps have been taken to attempt to serve the document; and
(b)whether it is likely that the steps have been taken have brought the existence and nature of the document to the attention of the person to be served; and
(c)whether the person to be served could become aware of the existence and nature of the document by means of advertising or other means of communication that is reasonably available; and
(d)the likely cost to the party of serving the document, the means of that party and the nature of the proceedings; and
(e)any other relevant matter.
Mr Sankey deposes in an affidavit filed 25 October 2022, that he engaged a process server in xx xxx xxxx on 26 September 2022, who was directed to attend upon the premises in xxxxx, xx xxx xxxx, where it is believed, by the applicant, Mr Scullino lives.
This follows Mr Sankey deposing that, he had a telephone conversation in respect of the creditor’s petition with somebody whom he believed was Mr Scullino. This person told him that the xxxxx address remained current for Mr Scullino.
Thereafter, the process server attended the xxxxx address on a number of occasions, being 1 October, 5 October, 8 October and 14 October 2022. On each occasion, the process server was unsuccessful in making contact with the respondent, calling cards were left and requests were made for Mr Scullino to contact the agent.
It is also reported that the agent spoke to a person who disposed he was not Mr Scullino, but that he was his brother. This person indicated to the agent, in response to the question, from the agent, of when would be a suitable time for him to contact Mr Scullino that maybe he does not want to be contacted and then closed the door.[1]
[1] See annexure SES4 to affidavit of Shane Eamonn Sankey filed 25 October 2022.
On 20 October 2022, Mr Sankey spoke with Mr Scullino by telephone and told him that there was a date for the hearing of the petition on 25 October 2022, that it was necessary for him to be served and that if he wished to avoid the incurral of costs, he should provide an address and time where he could be served or, alternatively, instruct his solicitor to accept service on his behalf.[2]
[2] See affidavit of Shane Eamonn Sankey filed 25 October 2022 at [15].
In this context, he indicated that he would engage his solicitor Mark to ‘look into this.’ Thereafter, Mr Scullino contacted Mr Sankey the following day and asked for the documents to be sent to him at an email address xx@xx. Mr Sankey duly emailed the documents.
Later, on the same day, he received an email and some phone calls from a person who identified himself as Mark Marando (“Mr Marando”) and indicated that he was a solicitor who was acting for Mr Scullino.
Thereafter, Mr Sankey engaged in what he characterised as somewhat abortive attempts to communicate with Mr Marando. In all these circumstances, Mr Sankey seeks orders for substituted service by way of electronic service and/or by registered express post to the xxxxx address.
In respect of this property, he has searched the title and has discovered that the property is registered in the joint names of the respondent and a person who is believed to be his wife, Julie Scullino (“Mrs Scullino”). Significantly, on the title there is a mortgage, but also a caveat in favour of a financier, Reliance Leasing Pty Ltd.
The basis of the caveat is that it secures an equitable interest as chargee pursuant to a Loan Agreement which was dated 8 October 2018, whereby Mr and Mrs Scullino were the borrowers and had charged their interest in the xxxxx property.
In all the circumstances, I am satisfied that it is appropriate to make an order for substituted service. I am satisfied that Mr Scullino knows of these proceedings, not only because of his conversations with Mr Sankey, but also because he has constructively received all the relevant documents in an electronic way. I am also satisfied that Mr Scullino is attempting to eke out time so that he can reduce the potential impact on him of the bankruptcy.
In addition, pursuant to section 309 of the Act, the Court is granted an authority to specify the matter of service of any relevant notice arising under the Act. Section 50 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 other orders in relation to the property.
In the current matter, Mr Sankey has deposed that Mr Ambrose has indicated a willingness to be appointed as the bankruptcy trustee if and when the relevant sequestration order has been made.[3]
[3] Affidavit of Shane Eamonn Sankey filed 25 October 2022 at [35]-[36].
In this context, I have been provided with an agreement between Mr Sankey’s firm and Mr Ambrose in respect of issues to do with the funding of these proceedings.[4]
[4] Annexure SES10 to affidavit of Shane Eamonn Sankey filed 25 October 2022.
The legal principles applicable to an application under section 50 are well known. It is, essentially, a mechanism to protect the interests of creditors. Jagot J discussed the purpose of the section in the case of Makinna Pty Ltd (in liq) v Trives,[5] after citing the leading authority of Deputy Commissioner of Taxation v Clyne:[6]
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.[7]
[5] Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247.
[6] Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118, 123 (Neaves J).
[7] Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247 at [13] (Jagot J)
In this particular case, Mr Sankey has deposed that the caveat in favour of Reliance Leasing Pty Ltd has recently been withdrawn. This occurred on 19 October 2022. He has searched the credit file held by a credit provider research organisation which indicated that the xxxxx property has been Mr Scullino’s address since April 2019 and a Commercial Credit Enquiry was made to Reliance Leasing Pty Ltd on 12 September 2022 after these proceedings were filed.
In all these circumstances, the applicant is concerned that the respondent may be divesting his interest in the xxxxx property by refinancing joint debts he holds with his wife into his name solely. Thereby diminishing his interest in the xxxxx property and reducing any interest a would-be trustee in bankruptcy might have against the property in the event of a sequestration order being made.
It is on that basis that he seeks the orders appointing Mr Ambrose as bankruptcy trustee and, as I say, Mr Ambrose has accepted the potential appointment and Axess Debt Management has provided him with an indemnity in respect of costs.
In all those circumstances, I am satisfied that I can make the order pursuant to section 50 of the Act and I will make the orders. Basically, I am satisfied that there is a risk that the potential creditors of Mr Scullino’s estate may be defeated if steps are not taken to prevent the potential refinancing of the property concerned.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of Judge Brown. Associate:
Dated: 29 November 2022
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