Klages (WA) Pty Ltd v Walker
[2008] FMCA 348
•10 March 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KLAGES (WA) PTY LTD v WALKER | [2008] FMCA 348 |
| BANKRUPTCY – Appointment of trustee to take control of the property of the debtor – factors for consideration. PRACTICE AND PROCEDURE – Substituted service – whether abnormal difficulty demonstrated – whether reasonable steps to ascertain whereabouts. |
| Bankruptcy Act 1966 (Cth), ss.5, 50(1)(1A)&(1B), 309(2) Federal Magistrates Court Rules 2001 (Cth), rr.6.14, 6.15 |
| Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118 Deputy Commissioner of Taxation v Barnes [2008] FMCA 7 Ginnane v Diners Club Ltd (1993) 120 ALR 375 Klages & Ors v Walker & Anor [2007] FMCA 2138 Sogelease Australia Ltd v Griffin [2003] FCA 455 |
| Applicant: | KLAGES (WA) PTY LTD |
| Respondent: | DUNCAN ALLISTER WALKER |
| File Number: | PEG 35 OF 2008 |
| Judgment of: | Lucev FM |
| Hearing date: | 10 March 2008 |
| Date of Last Submission: | 10 March 2008 |
| Delivered at: | Perth |
| Delivered on: | 10 March 2008 |
REPRESENTATION
| Counsel for the Applicant: | MR Robinson |
| Solicitors for the Applicant: | Williams & Hughes |
| Counsel for the Respondent: | No appearance |
| Solicitors for the Respondent: | No appearance |
ORDERS
The Court directs that pursuant to section 50(1) of the Bankruptcy Act 1966 (Cth), Mark Conlan, registered trustee, forthwith take control of the property of the Respondent Debtor, Duncan Allister Walker.
The Court directs the control of the property of the Respondent Debtor pursuant to Order 1 end upon the making of a sequestration order in these proceedings or the disposition otherwise of the creditors petition herein.
The Respondent Debtor, Duncan Allister Walker, be restrained, without prior approval of the Court, from paying, lending or depositing any monies with, or transferring or delivering any property to, any person, company or entity.
The Respondent Debtor, Duncan Allister Walker, be restrained, without prior approval of the Court, from transferring, sending or taking monies or other property out of Australia.
Hearing of the application for orders for substituted service be adjourned to 10.00 a.m. on 19 March 2008.
The Applicant have leave to file any amended application with respect to substituted service and any affidavit in support thereof by 4.00 p.m. on 18 March 2008.
The Respondent be advised of:
(a)the fact that these orders have been made; and
(b)the adjourned date for hearing of the substituted service application
by
(c)email to the last email address for the Respondent known to the Applicant;
(d)SMS text message to the last mobile telephone number for the Respondent known to the Applicant;
and that a signed copy of these orders in electronic format be attached to the email referred to in subparagraph (c).
Costs be reserved.
Leave to apply on 24 hours notice
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 35 of 2008
| KLAGES (WA) PTY LTD |
Applicant
And
| DUNCAN ALLISTER WALKER |
Respondent
REASONS FOR JUDGMENT
Application
The Applicant seeks:
a)firstly, under section 50 of the Bankruptcy Act, 1966 (Cth), the appointment of a trustee to take control of the property of the debtor, Duncan Allister Walker; and
b)secondly, orders for substituted service of the creditor’s petition dated 18 February 2008 and the orders made under section 50 of the Bankruptcy Act, if any.
Background
By way of background, it needs to be said that on 20 December 2007 in Klages and Others v Walker and Another[1] this Court ordered that the Respondent pay the Applicant the sum of $53,159.51 plus $20.19 per day from 11 December 2007 until payment. The amount of the judgment debt was not paid and a bankruptcy notice was served on the Respondent on 15 January 2008, with which the Respondent failed to comply on or before 5 February 2008.
[1] [2007] FMCA 2138
On 18 February 2008 a creditors petition application was made alleging the debt owing at that time was $53,745.21 based on the judgment debt. That petition is listed before a Registrar of this Court tomorrow.
On 22 February 2008 the Applicant made application to the Court for a Mareva type order to prevent the disposition of property in which the Respondent has an interest in the Perth suburb of Wilson[2]. This Court granted that injunction on 22 February 2008 and extended it until further order on 26 February 2008.
[2] The “Wilson Property”.
The present application was made on 27 February 2008.
It is fair to say that only the grant of the Mareva type order on 22 February 2008 appears to have prevented the Respondent from disposing of his interest in the Wilson property, which was the subject of a sale agreement and due for settlement on 25 February 2008.[3]
[3] “Sale Agreement”.
It would appear that the prospective purchaser under the Sale Agreement presently has possession of the Wilson Property.
From the evidence, it would appear that the Respondent also has a line of credit with the National Australia Bank secured against the Wilson property.
The present whereabouts of the Respondent are unknown but it would appear from the evidence that he was in Western Australia until on or about 25 February 2008.
There is some suggestion in the evidence he had gone overseas or was contemplating overseas at or about that time. It suffices to say that the evidence establishes that on the occasions when the Respondent spoke to the Applicant’s solicitors he was evasive about his whereabouts. The Court is satisfied on the evidence that the Respondent has endeavoured to hide his whereabouts from, at least, the Applicant’s solicitors.
The Court is also satisfied on the evidence that:
a)on 7 March 2008, the Respondent was notified of the date and time of today’s hearing by a message left on his mobile telephone by the Applicant’s solicitor, Mr Engelter;
b)the Respondent has been notified of the hearing of the creditors’ petition tomorrow by reason of a telephone conversation with that same solicitor on 22 February 2008; and
c)on 14 February 2008, Mark Anthony Conlan, of RSM Bird Cameron partners, being a registered trustee within the meaning of s.5 of the Bankruptcy Act, consented to act as trustee of the bankrupt estate of the Respondent.
Appointment of trustee
The Applicant seeks the appointment of a trustee under s.50 of the Bankruptcy Act.
Section 50(1), (1A) and (1B) of the Bankruptcy Act provide as follows:
“50(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.
(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.
(1B) If the Court directs a trustee to take control of the debtor's property, the Court must specify when the control is to end.”
For the purposes of section 50(1A) and (1B) of the Bankruptcy Act, the Court is satisfied that:
a)a bankruptcy notice has issued;
b)the creditor’s petition has been presented;
c)the Respondent, the debtor, has not yet been declared bankrupt;
d)the Applicant, who is a creditor, has applied for a direction for a specified registered trustee, Mr Conlan, to take control of the debtor’s property; and
e)the debtor has not complied with the bankruptcy notice.
Finally, the Court is satisfied that it is in the interests of creditors to make a direction for a registered trustee to take control of the Respondent debtor’s property. The Court is so satisfied because:
a)it is clear that the Respondent debtor has been endeavouring to conceal his whereabouts;
b)the Respondent debtor tried to dispose of the Wilson property in circumstances where a clear inference can be drawn that had settlement occurred and the funds been paid to the Respondent debtor, they would not necessarily have been disbursed to the benefit of the creditors, including the Applicant; and
c)that the use of the National Australian Bank line of credit facility by the Respondent debtor may have an adverse impact on the funds available for disposition to other creditors in the event of bankruptcy.
It has been said that the purpose of s.50 of the Bankruptcy Act is:
in aid of the creditors of a debtor who has already committed an act of bankruptcy and has a creditors’ petition impending against him, it is a necessary and ancillary provision designed to enable appropriate steps to be taken to preserve and protect the property of a debtor so that in the event of a sequestration order being made, that property will be available for distribution equitably amongst them in accordance with the statutory provisions contained elsewhere in the Bankruptcy Act.[4]
[4] Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118 at 123 per Neaves J.
The power to issue a s.50(1) order arises immediately a bankruptcy notice issues but is intended to provide only interlocutory or interim protection until the issuance of a sequestration order,[5] and thus the provision in s.50(1B) which requires a Court to specify when a s.50 order will end. Having regard to the purposes of s.50 of the Bankruptcy Act and the findings of fact made by the Court, the Court considers it appropriate:
a)to appoint under s.50(1) of the Bankruptcy Act a specified registered trustee to take control of the Respondent debtor’s property until a sequestration issues or the creditor’s petition is otherwise disposed of; and
b)to make ancillary orders restraining the Respondent debtor from dealing with or dissipating monies or property and from transferring monies or property outside of Australia.
[5] Sogelease Australia Limited v Griffin [2003] FCA 455 at para 13 per Emmett J.
Substituted service
With respect to the issue of substituted service, it is the case, as already indicated, that the whereabouts of the Respondent are presently unclear. He may be in Australia. He may be overseas. It is clear that he has not been served with the creditors’ petition and other relevant documents and it is equally clear for present purposes that that service has been made impracticable by the fact that his whereabouts are unclear and at least on one occasion he appears to have avoided service directly by a process server.
Rules 6.14, and especially 6.15, of the Federal Magistrates Court Rules2001 (Cth) are relevant. Rule 6.15 provides as follows:
“When making an order for dispensing with service or for substituted service, the Court may have regard to:
(a) whether reasonable steps have been taken to attempt to serve the document; and
(aa) 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
(b) whether the person to be served could become aware of the existence and nature of the document by means of advertising or another means of communication that is reasonably available; and
(c) the likely cost to the party serving the document, the means of that party and the nature of the proceedings; and
(d) any other relevant matter.”
The Court notes that rule 6.15 sets out some matters that the Court may have regard to, in its discretion, in determining whether to order substituted service.
Section 309(2) of the Bankruptcy Act provides that where a document is to be served on 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.
It would therefore appear to be a matter of discretion as to whether the Court utilises the provisions of rules 6.14 and 6.15 of the Federal Magistrates Court Rules or section 309(2) of the Bankruptcy Act to prescribe the means of service on a person, including service outside of the jurisdiction, assuming that the relevant provisions of each can otherwise be complied with. Under s.309(2) of the Bankruptcy Act, the discretion conferred is unfettered, but not to be exercised lightly. The Court must be satisfied that:
a)abnormal difficulty exists in effecting personal service of the creditor’s petition on the Respondent; and
b)there is a reasonable probability that the Respondent will be informed of the petition as a result of the form of service identified.[6]
[6] Deputy Commissioner of Taxation v Barnes [2008] FMCA 7 (“Barnes”); Ginnane v Diners Club Ltd (1993) 120 ALR 375 and the cases referred to therein.
In the circumstances of this case the Court is satisfied that there is difficulty as opposed to abnormal difficulty in serving the Respondent. That difficulty exists by reason of the Respondent’s whereabouts being unclear and the Respondent refusing to provide the Applicant with contact details and his contact details otherwise being presently unavailable from other sources.
The Court is not, however, satisfied that:
a)there is abnormal difficulty as yet demonstrated; or
b)that reasonable steps have yet been taken to precisely ascertain the Respondent’s whereabouts or for the purposes of serving the documents on him. At this stage all that has happened is that the Respondent’s solicitors have made inquiries of persons who may be expected to have some knowledge of the whereabouts of the Respondent and those inquiries have drawn a blank. The Court is not satisfied that all relevant possible investigations or inquiries have been made as to the whereabouts of the Respondent for the purpose of effecting service on him.
Further, the Court is not satisfied that there is a reasonable probability or likelihood that the substituted service orders sought to be made will result in the Respondent being informed of the petition. The circumstances of this case are different to those in Barnes where substituted service orders were made and in which the documents were able to be served on Australian solicitors then currently acting for the Respondents, of which there was evidence, there was an address in Yorkshire at which the Respondents appeared to be residing, again of which there was evidence, and a post office box which was actively being used by the Respondents in Perth, of which there was evidence.
There is no evidence such as to satisfy the Court in this case which indicates that any of the persons upon whom it is proposed to serve the documents will or will be likely to draw the Respondent’s attention to the documents sought to be served on them as proposed in order 8 of the proposed orders in the application. Given that the Respondent has vacated possession of the Wilson Property and there is no evidence of a forwarding address being left with any person, it seems that that means of service is unlikely to draw the Respondents’ attention to the documents to be served.
It might be the case that various electronic means, such as SMS or email, which have not yet been proposed, might be more appropriate means of drawing the Respondents’ attention to the documents to be served, given that the Respondents’ physical whereabouts are unknown.
In the circumstances the Court intends to adjourn the application for orders with respect to substituted service to 10.00 a.m. on 19 March 2008, with the Applicant granted leave to file any amended application for orders for substituted service and any further affidavits in support thereof, by 4.00 pm, on 18 March 2008.
For those reasons the Court proposes to make the following orders. Firstly, orders 1 to 4 in the form of the orders sought in the Applicant’s interim application, and:
(5) that the hearing of the application for orders for substituted service be adjourned to 10.00 am on 19 March 2008.
(6) that the Applicant have leave to file any amended application with respect to substituted service and any affidavit in support thereof by 4.00 pm on 18 March 2008.
(7)that the Respondent be advised of:
(a) the fact that these orders have been made, and
(b) the adjourned date for the hearing of the substituted service application,
by
(c) email to the last email address for the Respondent known to the Applicant; and
(d) SMS text message to the last mobile telephone number for the Respondent known to the Applicant and that a signed copy of these orders in electronic format be attached to the email referred to in subparagraph (c).
(8) Costs be reserved.
Orders in those terms will be made.
This matter will be adjourned to 10.00 a.m. on 19 March 2008. It just occurs to me in saying it ought to be adjourned to that date, that there will be, in the circumstances, liberty to apply as a ninth order on 24 hours’ notice.
(9) Liberty to the Applicant to apply on 24 hours’ notice.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate:
Date: 18 March 2008
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