Enterprise and Management Pty Ltd v Tomasevich
[2015] FCCA 922
•15 April 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ENTERPRISE & MANAGEMENT PTY LTD & ANOR v TOMASEVICH | [2015] FCCA 922 |
| Catchwords: BANKRUPTCY – Application for substituted service of bankruptcy notice under s.309(2) of the Act – whether there are abnormal difficulties in serving the bankruptcy notice on the debtor – whether it is likely the debtor will be informed of the bankruptcy notice if it is delivered to the offices of the lawyer who represented the debtor in the proceedings that resulted in the judgment on the basis of which the bankruptcy notice was issued – order for substituted service made. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41, 43, 43(1), 43(1)(b), 309(2) |
| Battenberg v Restrom [2006] 149 FCR 128 Commonwealth Bank of Australia v Oswal [2013] FCA 391 |
First Applicant: Second Applicant: | ENTERPRISE & MANAGEMENT PTY LTD GUY SHUTE |
| Respondent: | MATTIE TOMASEVICH |
| File Number: | SYG 132 of 2015 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 11 March 2015 |
| Delivered at: | Sydney |
| Delivered on: | 15 April 2015 |
REPRESENTATION
| Second applicant in person and on behalf of all applicants. |
ORDERS
Pursuant to s.309(2) of the Bankruptcy Act 1966 (Cth) instead of effecting personal service on Mattie Tomasevich of bankruptcy notice BN 174224, bankruptcy notice BN 174224 be delivered to a person apparently over the age of 16 at the offices of Clamenz Lawyers inside an envelope addressed as follows:
Clamenz Lawyers
Level 24, 1 Alfred Street
Sydney NSW 2000Attention: Mr Dev Menon
The applicants have liberty to apply to the Court in relation to any issue that may arise in connection with the service of bankruptcy notice BN 174224 as required by order 1.
The applicants include in the envelope referred to in order 1 a sealed copy of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 132 of 2015
| ENTERPRISE & MANAGEMENT PTY LTD |
First Applicant
GUY SHUTE
Second Applicant
And
| MATTIE TOMASEVICH |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an ex parte application by Enterprise & Management Pty Ltd (EMP) for orders relating to the service of a bankruptcy notice issued against the respondent, Ms Mattie Tomasevich.
In its application EMP claims orders that the bankruptcy notice be served on Ms Tomasevich by its being served on solicitors that had previously acted for her, and also by the bankruptcy notice being emailed to a number of email addresses apparently belonging to Ms Tomasevich and to friends and relatives of Ms Tomasevich. At the hearing before me on 11 March 2015, however, Mr Shute, a director of EMP, indicated that EMP was applying for an order that the bankruptcy notice be served on Ms Tomasevich at an address in Mumbai, India.
At the hearing, Mr Shute agreed that the affidavit material on which EMP relies for the orders it seeks indicates Ms Tomasevich has decamped to India, she holds no assets in Australia, and she otherwise does not carry on any business and is not a partner of a partnership conducting a business in Australia. I indicated to Mr Shute that this might mean that if a bankruptcy notice were issued and served on Ms Tomasevich, the Court may not have jurisdiction under s.43 of the Bankruptcy Act 1966 (Cth) (Act) to make a sequestration order on the basis of Ms Tomasevich’s not complying with the bankruptcy notice. That, in turn, night be a reason for not making an order authorising or permitting service of the bankruptcy notice outside Australia. I indicated to Mr Shute that I proposed to reserve my judgment on EMP’s application, and deliver my reasons for judgment at 9.30 am on 17 March 2015.
On 13 March 2015 Mr Shute wrote to the Court’s Registry requesting that I adjourn the delivery of my judgment for two weeks to enable Mr Shute to obtain legal advice. On 13 March 2015 I adjourned the date on which I would deliver judgment to 15 April 2015. I also ordered, however, that the matter would be listed for directions on that day if Mr Shute were to file any additional evidence and submissions by 31 March 2015. Mr Shute did not do so. He did, however, with my leave, file an affidavit on 10 April 2015. Having read that affidavit, I decided I would deliver my reasons for judgment on 15 April 2015.
In these reasons, therefore, I consider whether it is open to me to order that EMP have leave to serve the bankruptcy notice outside Australia, whether it is open to me to be satisfied that an order for substituted service should be made under s.309(2) of the Act and, if it is open to me to make both orders, which of the two orders I should make.
Facts
On 21 August 2012 EMP commenced proceedings against Ms Tomasevich in the District Court of New South Wales for damages.[1] EMP claimed Ms Tomasevich breached a number of warranties in a sale of business agreement made between EMP and Ms Tomasevich.
[1] Affidavit of G Shute, 08.01.15, [2]; annexure “GS-7”, pages 1-8
By letter dated 4 April 2014, four days before the proceedings were listed for hearing, Ms Tomasevich’s solicitor, Mr Dev Menon of Clamenz Evans Ellis Lawyers, informed EMP’s solicitors that Ms Tomasevich had terminated his retainer. The letter stated:[2]
We note that we have been instructed that Ms Tomasevich currently lives offshore in India. However, we have not been provided with her current address as our primary form of communication has been via telephone.
[2] Affidavit of G Shute, 08.01.15, annexure “GS-7”, page 10
The hearing nevertheless went ahead and, on 10 April 2014, EMP recovered judgment against Ms Tomasevich for $112,013.[3] Ms Tomasevich did not appear at the hearing.[4]
[3] Affidavit of G Shute, 08.01.15, annexure “GS-7”, page 14
[4] Affidavit of G Shute, 08.01.15, [7]
Mr Shute deposes Ms Tomasevich had sold her assets to her husband (the Husband), an Indian national.[5] He further deposes that the Husband was the founder of a successful Mumbai tabloid, is active in Mumbai society, and has business interests and a charity.[6] Mr Shute deposes that it is apparent from the webpage article published by the tabloid that Ms Tomasevich is living with the Husband in Mumbai.[7]
[5] Affidavit of G Shute, 08.01.15, [10]
[6] Affidavit of G Shute, 08.01.15, [11]
[7] Affidavit of G Shute, 08.01.15, [12]; annexure “GS-7”, pages 15-18
Commencing on 13 August 2014 Ms Elena Douglas embarked on what may accurately be described as a campaign to send emails to persons who know Ms Tomasevich providing details of the District Court proceedings. The persons to whom Ms Douglas sent the emails were those that were recorded in the data files located on the computers EMP acquired from Ms Tomasevich as part of its purchase of the business.[8] Ms Douglas says she “hoped that by writing these emails that Tomasevich would be motivated to contact me and that we could commence discussions in respect of her payment of the court order”.[9]
[8] Affidavit of E Douglas, 08.01.15, [14]
[9] Affidavit of E Douglas, 08.01.15, [13]
Ms Douglas’s campaign had some effect. On 17 September 2014 Ms Tomasevich’s former lawyer, Mr Dev Menon, wrote a letter to EMP’s lawyers.[10] As at that date, Mr Dev Menon was not a member of Clamenz Evans Ellis Lawyers; he was a member of a firm called “Clamenz Lawyers”. Mr Menon stated he acted on behalf of the Husband. The letter alleged that Mr Shute and Ms Douglas had intentionally accessed deleted emails and deleted contact lists from the computer Ms Tomasevich provided to EMP, and had defamed the Husband. The letter made other allegations which it is not necessary to repeat in these reasons.
[10] Affidavit of E Douglas, 08.01.15, [17]; annexure “ED-4”, pages 70-71
In addition to sending emails, on 8 August 2014 Ms Douglas commissioned a debt recovery agency to complete a “skip trace” in relation to Ms Tomasevich or the Husband.[11] The debt collecting agency informed Ms Douglas it was unable to uncover any contact details for Ms Tomasevich or the Husband in Australia.[12] On 20 January 2015 the debt collecting agency again confirmed, this time to Mr Shute, that it has been unable to uncover information regarding ownership of any property in Australia by Ms Tomasevich or the Husband.[13]
[11] Affidavit of E Douglas, 08.01.15, [16], annexure “ED-4”, pages 68-69
[12] Affidavit of E Douglas, 08.01.15, [16]
[13] Affidavit of G Shute, 27.01.15, [4]; annexure “GS-8”
EMP also commissioned a company to conduct a “skip trace” in relation to Ms Tomasevich in India.[14] A report issued by that company indicates that Ms Tomasevich resides at a particular address in Mumbai, India.[15]
[14] Affidavit of G Shute, 23.02.15, [21]
[15] Affidavit of G Shute, 07.03.15, [2]; annexure “GS-10”, pages 1-2
Service of bankruptcy notices outside Australia
Under s.40(1)(g) of the Act, a debtor commits an act of bankruptcy if he or she does not comply with the requirements of a bankruptcy notice that is issued under s.41 of the Act, and which has been served on the debtor.
An act of bankruptcy under s.40(1)(g) of the Act may occur even where the bankruptcy notice has been served on the debtor outside Australia. That will occur, however, only if the Court had first given the creditor leave to serve the bankruptcy notice outside Australia; and only if the debtor does not comply with the bankruptcy notice within the time fixed by the Court at the time the Court grants leave to the creditor to serve the bankruptcy notice outside Australia.
The question I must consider is whether, as I suggested to Mr Shute might be the case, it is relevant to the exercise of the discretion under s.40(1)(g) of the Act that at the time an application for a sequestration order is made the jurisdictional requirements specified in s.43(1)(b) of the Act will be satisfied. That question was considered by Siopis J in Commonwealth Bank of Australia v Oswal.[16]
[16] [2013] FCA 391
In that case the creditor applied for an order for substituted service on the debtor who was outside Australia at the time the creditor made the application. The creditor’s solicitors attempted to obtain the debtor’s address from the debtor’s solicitor. The debtor’s solicitor declined to provide that information. Counsel for the creditor addressed the Court on whether, to obtain the order for substituted service, it was necessary for the creditor to demonstrate the creditor had a prima facie or good arguable case for the existence of the jurisdictional foundation for the Court to make a sequestration order if the debtor were not to comply with the bankruptcy notice. Siopis J held it was not necessary.
First, his Honour was of the opinion that the Full Federal Court in Battenberg v Restrom[17] held that a consideration of the jurisdictional criteria set out in s.43(1) of the Act does not arise in relation to an application for substituted service of a bankruptcy notice addressed to a person out of the jurisdiction where the substituted service is to be effected in Australia.[18] Second, quite apart from authority, his Honour was of the opinion that, to require the Court to consider, at the time an application for substituted service is made, “jurisdictional constraints attendant upon the making of a sequestration order related to the bankruptcy notice, would require the Court to embark upon an unacceptable degree of speculation”.[19] His Honour said:[20]
Accordingly, it is not possible for a court to determine at the time that a bankruptcy notice is served, whether the jurisdictional constraints on the making of a related sequestration order will be met. All that a court could do at the stage of giving leave to serve the bankruptcy notice, would be to consider the debtor’s circumstances at that time and make assumptions as to whether:
(a) the debtor’s circumstances will change before the expiry of the date for payment of the sum demanded in the bankruptcy notice;
(b) the debtor will pay the sum demanded on that date - such that the failure to pay amounts to an act of bankruptcy; and
(c) the petition ultimately presented and relied upon at the hearing will rely upon that act of bankruptcy.
In my view, this level of speculation renders such an inquiry by the court inutile, because it does not operate as a reliable predictor of whether the jurisdictional requirement for the making of a sequestration order will be met at the relevant date.
[17] [2006] 149 FCR 128 (Heerey, Dowsett and Conti JJ)
[18] [2013] FCA 391 at [33]
[19] [2013] FCA 391 at [36]
[20] [2013] FCA 391 at [37]-[38]
Siopis J also concluded that even if it were necessary for his Honour to have granted leave to the creditor to serve the debtor outside Australia his Honour “would not have regarded it as necessary for the [creditor] to demonstrate that there was a prima facie or good arguable case that the Court would have jurisdiction to make a sequestration order, by reference to the debtor’s circumstances at the present time”.[21]
[21] [2013] FCA 391 at [38]
Should leave be granted to serve the bankruptcy notice in India?
Given what Siopis J said in Oswal, it is not relevant to my consideration of whether I should grant EMP leave to serve the bankruptcy notice on Ms Tomasevich in India that EMP may be unable to satisfy the jurisdictional requirements prescribed by s.43(1) of the Act if Ms Tomasevich will fail to comply with the requirements of the bankruptcy notice. Are there any other matters that weigh against my granting leave to serve the bankruptcy notice on Ms Tomasevich in India?
One potential matter is what may loosely be described as considerations of comity. Could the granting of leave to serve the bankruptcy notice outside of Australia be seen as an interference with any aspect of another country’s sovereignty? It my opinion, that question must be answered in the negative. As was said by the Full Federal Court in Battenberg v Restrom, service of a bankruptcy notice cannot be equated with the service of an originating process of a court:[22]
We see no reason to apply well-settled rules concerning jurisdiction to the administrative issue and service of a bankruptcy notice. The bankruptcy notice contains a command in the sense that it indicates that the debtor is required, within a specified period, to pay the amount of the debt or make appropriate arrangements with the creditor. The consequence of non-compliance is that bankruptcy proceedings may be taken. It is, in effect, a notice of intention to commence such proceedings in the event that payment is not made.
[22] [2006] 149 FCR 128 (Heerey, Dowsett and Conti JJ) at [15]
On the other hand, there are factors in favour of my granting leave to EMP to serve the bankruptcy notice outside Australia. The judgment on the basis of which the bankruptcy notice has been issued relates to a transaction that took place, and assets that were located, in Australia. Further, the evidence establishes Ms Tomasevich has left Australia; and it is an available inference that Ms Tomasevich did not have a bona fide defence to the claims EMP brought against her in the District Court, and that she purported to defend those claims to give herself time to make arrangements to leave Australia and to remove from Australia assets that may have been associated with her. It is reasonable to infer that it was to deal with circumstances such as these that Parliament provided for the service of a bankruptcy notice outside Australia.
For these reasons, I am satisfied it would be open to me to grant leave to EMP to serve the bankruptcy notice on Ms Tomasevich in India. I next consider whether it would also be open to me to order substituted service under s.309(2) of the Act.
Should the Court make an order for substituted service under s.309(2) of the Act?
Subsection 309(2) of the Act provides as follows:
Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court, whether or not any other manner of giving or serving the notice or other document is prescribed.
Before the Court can make an order under s.309(2) it must be satisfied that “abnormal difficulties exist in effecting personal service on the debtor and that there is a reasonable probability that the debtor will be informed of the document as a result of the form of service identified”.[23]
[23] Commonwealth Bank of Australia v Oswal [2013] FCA 391 at [15]
The matters to which I have referred in paragraph 22 of these reasons satisfy me there are abnormal difficulties in EMP serving Ms Tomasevich personally with the bankruptcy notice, not only in Australia, but also in India. I am satisfied, however, that Ms Tomasevich will be informed of the bankruptcy notice if it is served on the offices of Clamenz Lawyers in an envelope marked to the attention of Mr Dev Menon. The evidence satisfies me that Mr Dev Menon of Clamenz Lawyers has connections with Ms Tomasevich. In addition to having acted on her behalf in the District Court proceedings, Mr Dev Menon wrote the letter dated 17 September 2014 to EMP’s lawyers in response to Ms Douglas’ communications with persons in relation to Ms Tomasevich. It is true Mr Dev Menon says he wrote the letter on instructions from the Husband. In substance, however, the letter concerns, or at least substantially concerns, the interests of Ms Tomasevich, and so should be viewed as, in substance, a letter Mr Menon wrote on behalf of Ms Tomasevich and the Husband.
In my opinion, it would be open to the Court to make an order under s.309(2) of the Act that the bankruptcy notice be served on Ms Tomasevich by its being served on the offices of Clamenz Lawyers in an envelope addressed to that firm of lawyers and marked to the attention of Mr Dev Menon.
Leave to serve in India, or order for substituted service?
I have concluded it is open to the Court both to make an order granting EMP leave to serve the bankruptcy notice on Ms Tomasevich in India, and also to make an order for substituted service under s.309(2) of the Act. Which of these two orders should I make?
Given the matters I have identified in paragraph 22 of these reasons, I find it is likely that Ms Tomasevich will seek to evade service of the bankruptcy notice in India. In those circumstances, I am of the opinion that the most appropriate course would be for me to order that the bankruptcy notice be served on Ms Tomasevich by delivering the bankruptcy notice to the offices of Clamenz Lawyers in an envelope addressed to that firm of lawyers and marked to the attention of Mr Dev Menon. The address of the offices of Clamenz Lawyers at which the bankruptcy notice should be served is that specified in the letterhead of the letter dated 17 September 2014 Mr Dev Menon sent to EMP’s lawyers to which I refer above.
I propose to so order. I also propose to reserve liberty to EMP to apply to the Court.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 15 April 2015