E & a Salce Pty Ltd v Hadlow

Case [2025] FedCFamC2G 515

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

E & A Salce Pty Ltd v Hadlow [2025] FedCFamC2G 515

File number(s): ADG 166 of 2025
Judgment of: JUDGE BROWN
Date of judgment: 11 April 2025
Catchwords: BANKRUPTCY – Application to appoint controlling trustee prior to sequestration order being made – no act of bankruptcy established   
Legislation:

Bankruptcy Act 1966 (Cth) s 50

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 rr 1.06, 6.06 6.15

Cases cited:

Culleton v Balwyn Nominees Pty ltd [2017] FCAFC 8

Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118

Ewert v Martin [2018] FCA 1931

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

Division: Division 2 General Federal Law
Number of paragraphs: 44
Date of last submission/s: 10 April 2025
Date of hearing: 10 April 2025
Place: Adelaide
Solicitor for the Applicant: Wallmans Lawyers
Counsel for the Applicant: Mr Sankey
Counsel for the Respondent: The respondent did not appear

ORDERS

ADG 166 of 2025

IN THE MATTER OF CRAIG WESLEY HADLOW

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

E & A SALCE PTY LTD ACN 074 609 797

Applicant
AND:

CRAIG WESLEY HADLOW

Respondent

ORDER MADE BY:

JUDGE BROWN

DATE OF ORDER:

11 APRIL 2025

THE COURT ORDERS THAT:

1.The Application filed by the Applicant on 9 April 2025 is dismissed.

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

JUDGE BROWN:

INTRODUCTION

  1. The respondent to these proceedings, Craig Wesley Hadlow,[1]operates a pet supply business, known as Hadlow & Sons Pet Supplies, in suburban Melbourne.  He has not been served with the relevant application.

    [1]  Hereinafter referred to as “the respondent”

  2. As will be shown, the proceedings have been prosecuted with a great deal of expedition on the basis of an assertion that there is a risk of funds being dissipated and the interests of Mr Hadlow’s creditors, being frustrated.

  3. On 13 March 2025, the applicant in these proceedings, E & A Salce Pty Ltd,[2] obtained a judgment against Mr Hadlow, in the Magistrates Court of Victoria, at Heidelberg, in an amount of $56,288.17 together with costs of $2,969.28. Interest on this debt was calculated to be $400.96.

    [2]  Hereinafter referred to as “the creditor”

  4. A bankruptcy notice issued against Mr Hadlow, on the application of the creditor, in an amount of $60,001.65, on 3 April 2025, based on the failure of Mr Hadlow to satisfy the judgment debt made against him by the Magistrates Court.

  5. The notice required payment of the amount of $60,001.65 within 21 days of the…

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Details
AGLC
E & a Salce Pty Ltd v Hadlow [2025] FedCFamC2G 515
Case
[2025] FedCFamC2G 515
Decision Date

CaseChat Overview and Summary

E & A Salce Pty Ltd brought an application against Mr Hadlow for an order to appoint a controlling trustee before the sequestration order was made. The application was made under section 50(1) of the Bankruptcy Act 1966 (Cth). The applicant sought the appointment of Ms Victoria May Young, a registered bankruptcy trustee, to take control of Mr Hadlow's property. The case was listed for ex parte determination on 10 April 2025, after the applicant claimed urgency. The applicant argued that Mr Hadlow had not complied with a bankruptcy notice, and there was a likelihood he would commit an act of bankruptcy. However, the court found that there was insufficient evidence to establish that Mr Hadlow had not complied with the notice. The court also noted the fundamental significance of the change in status that bankruptcy entails and emphasised that proceedings should not be approached with undue haste.

The court considered the prerequisites for exercising the power under section 50(1) of the Bankruptcy Act 1966 (Cth). These include the debtor not complying with a bankruptcy notice and the creditor's petition being presented. The court found that these conditions were satisfied in this case. However, the court was concerned that the application was premature as there was no evidence that Mr Hadlow had not complied with the notice. The court also highlighted the Full Court's emphasis on the fundamental significance of the change in status that bankruptcy entails and the need for care in bankruptcy proceedings. The court concluded that there had been a great deal of haste in the application due to the applicant's desire to satisfy its judgment debt.

The court refused to make the order sought by the applicant and dismissed the application. The court found that the application was premature and that there was insufficient evidence to establish that Mr Hadlow had not complied with the bankruptcy notice. The court also emphasised the fundamental significance of the change in status that bankruptcy entails and the need for care in bankruptcy proceedings. The court concluded that the application was made with undue haste and that the applicant's desire to satisfy its judgment debt should not override the care required in bankruptcy proceedings. The court dismissed the application and made no orders for costs.

Orders

Orders of the court

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Background

Background to the litigation

In addition, evidence provided by the creditor, through its solicitor, Mr Sankey, is that Mr Hadlow operates his business through rented premises and owns two motor vehicles of undisclosed value. Mr Sankey has not been able to locate any other items of property owned by him.BACKGROUND The applicant commenced these proceedings on 9 April 2025 and requested that they be listed as a matter of urgency. This request was acceded to and the case was listed for possible ex parte determination, as was sought, on 10 April 2025. The application is made pursuant to the provisions of section 50(1) of the Act, which reads as follows:(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. The applicant seeks that Victoria May Young, who is a chartered accountant and registered bankruptcy trustee, be appointed to take control of Mr Hadlow’s property pursuant to section 50(1), notwithstanding the fact that she has not as yet been formally appointed as the trustee of his estate and no actual sequestration order has been made against Mr Hadlow. Necessarily, the making of such an order has the potential to affect not only Mr Hadlow but also Ms Cooper and necessarily will also have implications for the pet supply business, which they apparently operate together. In my view, it is a significant order to make in the absence of Mr Hadlow without him being given an opportunity to be heard by the court, particularly given the lack of evidence that the relevant bankruptcy notice has been served on Mr Hadlow. However, correspondence provided by the applicant’s solicitor, in these proceedings, Mr Sankey, indicates that Ms Cooper at least is aware of the debt owed to the applicant. This is because she has, ostensibly at least, made a tangential offer to satisfy the debt through the sale of the Kim Street property. In early February of 2025, prior both to the entry of the relevant judgment debt and the issue of the resulting bankruptcy notice, Ms Cooper engaged in correspondence with Glynis Doland, who is the agent of the creditor, E & A Salce Pty Ltd. The creditor indicated to Ms Cooper, in an email dated 5 February 2025, the terms on which it was prepared to settle the debt owed. It required payment of the sum of $1,500.00 by 13 February 2025; with a further sum of $3,000.00 to be paid on or before 20 February 2025; thereafter the remaining balance, which was to be capped at $56,288.17, was to be paid within 3 months from a redraw facility secured against the Kim Street property. Ms Doland indicated that she required Ms Cooper’s formal acceptance of this offer, in writing, on or before 13 February 2025 and concluded her correspondence with the following statement:Just to be very clear the above arrangement will not be deviated from and failure to make any payments when due will result in a Summons being issued for the full debt plus ongoing interest and substantial legal fees. All correspondence and any contact are to be with this office and not our clients under any circumstances.[5] [5] See Exhibit SES3 to the Affidavit of Shane Eamonn Sankey filed on 9 April 2025.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In Ewert v Martin[12] Derrington J said as follows:The section is, in some respects, an unusual provision. But in reality it is, in fact, a codified power of Court to protect the integrity of its own proceedings. In this respect it is not unlike many other powers exercised by Courts when the judgments or processes are sought to be undermined by litigants who seek to dispose of their assets before judgment can be enforced…However, before doing that it is important, to note that there are a number of prerequisites to the exercise of the power. The first is, of course, that the debtor has not complied with a Bankruptcy Notice and the creditor’s petition has been presented. These matters have been satisfied in this case. Secondly, the creditor must seek directions as to the approximate expenses likely to be incurred by the trustee pursuant to the appointment before sequestration, and that has occurred. Thirdly, a trustee should be nominated and an affidavit obtained consenting to act as such.[12] Ewert v Martin [2018] FCA 1931 at [18] – [19]CONCLUSIONS In the current matter, I have been provided with a bankruptcy notice, which was issued only 3 April 2025, which specifies a period of compliance of 21 days after service. Accordingly, in my view, there can be no evidence that Mr Hadlow has not complied with the notice and so the condition contained in section 50(1A)(c) satisfied. At best, the respondent has been assessed as being likely to commit an act of bankruptcy prospectively. I am concerned that this application is therefore premature. In the case of Culleton v Balwyn Nominees Pty Ltd, the Full Court emphasised the fundamental significance arising from the change in status, which is wrought upon a person rendered bankrupt and the fact that such a change in status was very often replete with connotations of moral and public failure.[13] It is not a process to be approached in an atmosphere of expediency. The Full Court said as follows:Whilst it is legitimate for a creditor to proceed in bankruptcy for the purpose of recovering a debt that does not mean that bankruptcy should be viewed in its essential character as part of the process of execution of judgment debts. It is the changing of the status of an insolvent person.[14][13] See Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8 at [40].[14] Ibid at [44]. In all the circumstances of the current matter, I am concerned that there has been a great deal of haste because of the applicant’s desire to have its judgment debt satisfied, which has the potential to negate the care which all bankruptcy proceedings require given their potential significance for the individuals concerned. Rule 6.06 of the Rules requires personal service of all applications starting a proceeding. However, pursuant to the provisions of Rule 6.14 (1) provides: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.

Ratio Decidendi

Legal Principle Established

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