Phoenix Constructions v McCracken - [2011] FMCA 828

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PHOENIX CONSTRUCTIONS v MCCRACKEN

[2011] FMCA 828

BANKRUPTCY – Creditors petition – application for stay – consideration of basis sought to be relied upon – stay refused.

Bankruptcy Act 1966, ss.40(1)(c), 41(6A)

Applicant:

PHOENIX CONSTRUCTIONS (QUEENSLAND) PTY LTD
ACN 056 159 614

Respondent:

JARROD MCCRACKEN

File Number:

BRG 712 of 2011

Judgment of:

Coker FM

Hearing date:

20 September 2011

Date of Last Submission:

20 September 2011

Delivered at:

Brisbane

Delivered on:

5 October 2011

REPRESENTATION

Counsel for the Respondent:

Mr Coulsen

Solicitors for the Applicant:

Connolly Suthers

Counsel for the Respondent:

Mr Keane

Solicitors for the Respondent:

Walsh Halligan Douglas

ORDERS

That the application for stay be dismissed.
That any amended Creditor’s Petition be filed and served by 4:00pm on 18 October 2011.
That any application or response to be relied upon by the Respondent be filed and served by 4:00pm on 1 November 2011.
That the Applicant be at liberty to file and serve any material in reply by 4:00pm on 15 November 2011.
That the matter be listed for the Creditor’s Petition and any other applications on 22 November 2011 at 10:00am in Townsville.
That costs of the Applicant be reserved to be determined on 22 November 2011 at 10:00am.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 712 of 2011

PHOENIX CONSTRUCTIONS (QUEENSLAND) PTY LTD
ACN 056 159 614

Applicant

And

JARROD MCCRACKEN

Respondent

REASONS FOR JUDGMENT

These proceedings were commenced on 11 August 2011 when Phoenix Constructions (Queensland) Pty Ltd, whom I shall refer to as the applicant, filed a creditor’s petition seeking orders with regard to the sequestration of the estate of Jarrod McCracken. I shall, for convenience, refer to Jarrod McCracken hereinafter as, the respondent.
There is before the Court quite a deal of material relating to issues with regard to service, or perhaps more accurately, attempted service of the respondent, with the creditor’s petition and with accompanying documentation. There appears clearly to be serious argument arising in relation to issues with regard to the actions of the respondent in relation to this matter, most particularly being reflected in the fact that the creditor’s petition that is presently before the Court, sets out what it says constitutes the acts of bankruptcy committed by the respondent, being breaches of the Bankruptcy Act and, in particular, the provisions of section 40, subsection (1)(c) of the Bankruptcy Act.
In other words, it is contended that:
a)The respondent departed Australia at a time when the applicant creditor was attempting to effect service upon the respondent debtor;
b)That the respondent debtor remained out of Australia at a time when the applicant creditor was attempting to effect service upon the respondent debtor;
c)The respondent debtor departed from his dwelling house at a time when the applicant creditor was attempting to effect service upon the respondent debtor;
d)The respondent debtor departed from his usual place of business at a time when the applicant creditor was attempting to effect service upon the respondent debtor;
e)The respondent debtor absented himself at a time when the applicant creditor was attempting to effect service upon the respondent debtor; and
f)The respondent debtor began to keep house at a time when the applicant creditor was attempting to effect service upon the respondent debtor.
I detail those particular claims as to a basis upon which an act of bankruptcy has occurred, because it is clear that the basis, at least at this time upon which the applicant seeks to suggest that a sequestration order should be made does not arise, as is more often, if not almost exclusively the case, from a situation where the amount claimed, as detailed in any bankruptcy notice, has not been paid.
In response to the creditor’s petition, an interim application was filed on 15 September 2011 by Walsh Halligan Douglas Lawyers, the solicitors for the respondent. In the interim application they sought orders on the following basis:
i)Pursuant to section 41(6A) of the Bankruptcy Act 1966, the bankruptcy proceedings bearing matter BRG712 of 2011 in the Townsville Registry of the Federal Magistrates’ Court be stayed pending a final determination of the appeal in the Supreme Court of Queensland against the judgment on 15 June 2011 (“the judgment”) to which these bankruptcy proceedings relate;
ii)The time for the respondent to respond to the bankruptcy notice be extended to 21 days from the date of the final decision of the Court of Appeal in relation to the judgment;
iii)Costs of this application be costs in the cause; and
iv)Any further order under this Honourable Court as it may deem mete.
Interestingly, when the matter came before this Court on 20 September 2011, the position taken on the part of the applicant was simply that any interim application brought, in relation to this matter, was filed out of time and that, therefore, it was not necessary to deal with the interim application at all.
In fact, there was quite lengthy argument put in relation to the matter as to the fact that there was no direct evidence whatsoever provided by the respondent in relation to the proceedings. In that case, it’s noteworthy that the only affidavits filed were those of the respondent’s solicitor, Ms Slasberg, filed to accompany the interim application of 15 September 2011, and subsequently on 20 September 2011 an affidavit of a Mr Khadem deposing to what he says might give rise to the confusion with regard to service upon the respondent as deposed to by the process server, Mr Kennedy.
In any event, it was strongly submitted on the part of the applicant that the appeal in relation to this matter is irrelevant because, as I have already detailed, the act of bankruptcy that is claimed in no way relates to the issues of the debt, at least as it appears to arise from the judgment of the Supreme Court of Queensland at Townsville, but rather as a result of the various actions that are deposed to by the applicant as having been perpetrated by the respondent, in other words, his absenting of himself, setting up house, being absent from his place of businesses and the like.
Thereafter I was addressed at length as to the behaviours that are at least reported on the part of the applicant to have occurred in relation to this matter, and to the fact that they, of themselves, constitute an act of bankruptcy and are sufficient, therefore, for there to be an order for sequestration of the estate being made. The position taken by the respondent in relation to this matter is that the respondent has not had the opportunity to reply in relation to the sequestration proceedings.
I must say that I am, at least at the present time, somewhat sceptical in relation to that particular aspect of the matter. I note, for example, and I make no criticism of the legal representatives for the respondent at this time, that at the commencement of submissions made on behalf of the respondent, by Mr Keane of counsel, he indicated that he did not have his client with him.
Understandably, I would think, I inquired why that was the case, and the rather circumspect answer that was given in that regard was because, “he is elsewhere”. It was troubling because, if anything, that answer and the non-committal nature of the answer, if anything, gave, I thought some strength to the concerns that were raised on the part of the applicant with regard to the respondent absenting himself, or avoiding service of documentation, in relation to the proceedings.
In any event the address thereafter made on the part of the respondent was to say that there was a very grave and serious concern that arose in relation to allowing the sequestration order to be made, because if the appeal, which had been filed by the respondent, were successful, then the success of the appeal would be, to all intents and purposes, nugatory because of the fact that the sequestration order had already been made.
Accordingly, it was submitted that, in all the circumstances, it was appropriate that there should be a stay until the hearing of the appeal or, alternatively, at least until such time as there had been an opportunity for the stay application, which was before the Full Court of the Supreme Court of Queensland, to be heard.
I adjourned the making of a decision, because I obviously needed to give serious consideration to the competing aspects of the matter, in relation to these proceedings.
Quite simply, it would appear that the applicants have a judgment. They are entitled to the fruits of their litigation and, in the circumstances, which currently exist, there was an apparent reluctance, at the very least, on the part of the respondent to satisfy the judgment. Balanced against that was the need to consider the fact that there was before the Supreme Court an appeal, and whilst it was argued that the basis for the appeal was without merit, at least, argued from the applicant’s perspective in relation to this matter, there was also a need to consider the very real ramifications and consequences for the respondent if the appeal were successful, but a sequestration order had already been made.
That balance needed to be looked at, and I was troubled by the consequences one way or the other in relation to the matter. It was noteworthy additionally, however, that counsel for the respondent indicated that, from their perspective, the appropriate order in any event, in relation to the matter would be to stay, if not until such time as the appeal had been heard, at least until the application for stay before the Full Court of the Supreme Court had been determined.
In that respect, I have now received notification that the application for stay of the petitioning creditor’s judgment against the debtor has been heard by the Full Court of the Supreme Court at Brisbane. I do not know the outcome of that particular determination in relation to this matter, and it is perhaps, in the circumstances, appropriate that I not know, at least until such time as information can properly be put before the court by way of affidavit and evidence.
I am, however, of the view that there needs to be a proper and full determination in relation to this matter and, in my assessment, that can only properly occur once there has been evidence put before the Court. I was, as I indicated previously in these reasons, somewhat sceptical as to the position that was taken with regard to the respondent having affidavits filed by his legal representatives and by one other person, but that there was no affidavit or evidence filed by him in relation to this matter, nor, in fact, was there any appearance by him and the rather unusual submission being put forward of, counsel did not have his client with him because he was, “elsewhere”.
The fact is that this matter needs to be heard. It needs to be determined and, if appropriate, and, certainly from the applicant’s perspective, it would be argued that it is appropriate, then the applicant should be entitled to receive the fruits of the litigation, which is before the court.
Accordingly, I do not intend to stay these proceedings, at least at this time. Rather I intend to make further directions with regard to the matter, including, as I note, there was an indication of an intent to file an amended creditor’s petition, leave to file that petition and to then have directions with regard to material in response.
I make it clear that, in my view, a failure to fully and completely outline the position of the respondent in relation to this matter would be fatal to any further proceedings in respect of the matter. Whilst I do not, certainly at this stage, make any determination in respect to whether the respondent has or has not absented himself for the purposes of avoiding his creditors, I must say that the comprehensive material that has so far been filed on behalf of the applicant with regard to the attempts at service and what, at least, is contended on the part of the applicant, are very clear steps to avoid service, are matters which will need to be given full consideration in respect of the proceedings.
Accordingly, I order:

ORDERS DELIVERED

I will direct that my reasons be published in relation to that matter.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Coker FM

Date: 27 October 2011