E & a Salce Pty Ltd v Hadlow
[2025] FedCFamC2G 515
•11 April 2025
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
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”
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.
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”
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.
The notice required payment of the amount of $60,001.65 within 21 days of the date of service of the notice upon him. Axiomatically that period has not yet elapsed. In these circumstances, it does not seem to be the case that, in a formal sense, Mr Hadlow has committed an act of bankruptcy.
Section 40 of the Bankruptcy Act 1966 (Cth)[3]provides an exhaustive list of circumstances which constitute an act of bankruptcy. Of particular relevance in the following matter, is section 40(1)(g) which provides as follows:
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time specified in the notice; or
(ii) where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;[4]
[3] Hereinafter referred to as “the Act”
[4] See Bankruptcy Act 1966 (Cth) s 40(1)(g).
The power granted to the Official Receiver, to issue bankruptcy notices, arises pursuant to section 41(1)(a) of the Act, which reads as follows:
(1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a) a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least the statutory minimum’
At relevant times, the statutory minimum was $10,000.00.
I accept that the applicant was entitled to obtain a bankruptcy notice against Mr Hadlow. On the basis of this notice, apparently not as yet served on the respondent and prior to the expiration of the period specified for its satisfaction, on an ex parte basis, the applicant seeks that a trustee be appointed, albeit on a limited basis, to manage Mr Hadlow’s affairs.
In this context, the applicant seeks the dispensation of the Court’s rules regarding the service of initiating process on the respondent. The basis of this application is the creditor’s understanding that the respondent has placed a piece of real estate on the market. This property, if a sequestration order is made will fall within the estate to be administered.
Mr Hadlow is the joint registered proprietor, along with his de facto partner, Allison Faith Cooper, of the property concerned, which is apparently their home, located at 3 Kim Street, Diamond Creek, in the State of Victoria.
I have been provided with a title search in respect of the Kim Street property, which indicates that it is subject to a mortgage in favour of the Westpac Banking Corporation. What is the extent of the amount secured by that mortgage has not been made known to me.
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.
In response to this to this offer, Ms Cooper wrote to Ms Doland in the following terms:
Dear Glynis
Hope this finds you well
Due to the current circumstances and after much thought, we have decided to put our big home on the market and downsize, this way Salce will be paid out in full and we can basically start again!
Regards
Allison[6]
[6] See Exhibit SES4 to the Affidavit of Shane Eamonn Sankey filed on 9 April 2025.
This correspondence did not formally indicate Mr Hadlow’s acceptance of the offer of compromise put by Ms Doland. In addition, it would appear to be the case that neither of the instalments sought by the creditor were forthcoming. However, at the same time, the indication that our big home would be put for sale and the creditor paid out in full was an ostensibly reasonable response to the creditor’s correspondence.
Given this indication, solicitors acting for the creditor indicated to Mr Hadlow, in correspondence dated 18 March 2025, that it was willing to halt its proceedings against him pending the sale of 3 Kim Street, Diamond Creek. However, such a pause was conditional upon Mr Hadlow executing a charge against the property no later than 17 March 2025.
It would appear to be the case that the relevant deed of charge, sought by the creditor has not been forthcoming. However, it would also appear to be the case that an agent of Mr Hadlow did contact the creditor’s solicitors, on or around 18 March 2025, in respect of the matter and in the relevant correspondence informed the creditor’s solicitor that it would be kept informed about the house sale.
This precipitated the following response, dated 18 March 2025, from the creditor’s solicitors, which was addressed to Mr Hadlow:
I refer to the above matter and your client's request for us to halt proceedings so that your client can facilitate the unconditional sale of 3 Kim Street, Diamond Creek.
Our agreement to halt these proceedings for six weeks is conditional upon your client signing the Deed of Charge sent to you on 13 March 2025. Your client was allowed until 17 March 2025 to return the Deed of Charge, which has not occurred.
In good faith, we have been instructed to allow an additional seven (7) days for your client to return the signed Deed. Should your client not return the Deed by 25 March 2025, we are instructed to pursue bankruptcy of your client. No further allowances of time shall be given.[7]
[7] See Exhibit SES6 to the Affidavit of Shane Eamonn Sankey filed on 9 April 2025.
From the creditor’s perspective, this did not achieve its desired objective, namely the return of the executed Deed of Charge against the Kim Street property and the security of its interest. It was in this context that Mr Sankey was directed to apply for the relevant bankruptcy notice, so that what was foreshadowed in the letter of 18 March 2025, could occur.
In the meantime, as Ms Cooper foreshadowed, the creditor and its various advisors, have discovered that the Kim Street property has been placed with an agent for sale, in a price range between $1,050,000.00 and $1,150,000.00 with an inspection, which occurred on 5 April 2025. I have been provided with the internet advertising material in respect of the property.
It is the fact that the property has been placed for sale, when coupled with the failure of Mr Hadlow and/or Ms Cooper to respond in more concrete terms to the overture of the creditor and formally agree to charge the Kim Street property, which is apparently the catalyst for these proceeding to be dealt with on an ex parte and urgent basis.
THE ORDERS SOUGHT
The orders sought by the applicant can be summarised as follows:
·Pursuant to r. 1.06 of the Federal Circuit and Family Court of Australia (Division 2)(General Federal Law) Rules 2021[8] the requirement for this application to be personally served on Mr Hadlow be dispensed with and the application listed for determination in his absence;
·Ms Young be appointed to take control of Mr Hadlow’s property until such time as a sequestration order has been made against his estate or any relevant creditors petition dismissed;
·Ms Ward be indemnified in respect of her costs, which are to be paid out of Mr Hadlow’s property, but such fees are not to exceed $650.00 per hour;
·Ms Ward be authorised to open a bank account, in her name and that of Mr Hadlow, in to which monies relevant to Mr Hadlow’s estate can be deposited;
·The trustee’s appointment be limited to an inspection of the books of the pet supply business;
·The trustee be authorised to make payment to Mr Hadlow of reasonable living expenses, not exceeding $10,000.00, from his property, without further leave of the court;
·Mr Hadlow pay the costs of these proceedings.
[8] Hereinafter referred to as “the Rules”.
It is the primary submission of the creditor that, if the Kim Street property is sold, and its proceeds available to the respondent in liquid form, those proceeds may be dissipated to the prejudice of both the applicant, in these proceedings, and any other potential creditors.
In this context, in his written submission to the court, Mr Sankey has submitted as follows:
The Respondent (via his wife) has indicated an intention to sell the Property, and has taken material steps towards doing so (to wit, listing the Property for sale with Ray White Eltham, Victoria. Despite assurances provided by the Respondent, the Applicant has not been provided with any information regarding the proposed sale, including the proposed use or distribution of any sale proceeds.[9]
[9] See Outline of Submissions filed on 9 April 2025 at [8.8].
THE LEGAL PROVISIONS APPLICABLE
The legal principles applicable to an application under section 50(1) 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, after citing the leading authority of Deputy Commissioner of Taxation v Clyne:[10]
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.[11]
[10] Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118, 123 (Neaves J).
[11] Makinna Pty Ltd (in liq) v Trives [2016] FCA 1247 at [13] (Jagot J)
However, it should also be noted that section (50)(1) is subject to the provisions of section 50(1A) which reads as follows:
(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.
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.
In making such an order, the court is directed to take account of a number of matters contained in Rule 6.15. 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.[15]
[15] Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 6.15.
Clearly, no steps have been taken to serve the relevant application on Mr Hadlow and the proceedings arise when he may not even be aware that a bankruptcy notice has been issued against him. It would seem to me that the location of the respondent is readily ascertainable and there is no evidence to indicate that he is avoiding service.
More significantly, although the creditor may have its suspicions that there is something untoward about the prospective sale of the Kim Street property, the fact remains, Ms Cooper informed the applicant’s agent that this was what she and Mr Hadlow intended to do in order to satisfy the monies owed to the creditor. As such, it cannot be described as a surreptitious action on their part.
As a consequence of these considerations, I do not consider that it would be in the interests of the administration of justice to proceed without Mr Hadlow being given an opportunity to be heard. In addition, I consider that the application to appoint Ms Ward has been brought prematurely.
For all these reasons, I have reached the conclusion that the relevant application should be dismissed. Accordingly, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 11 April 2025
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