FEDERAL MAGISTRATES COURT OF AUSTRALIA
MALCOLM SLATER PTY LIMITED v THOMPSON & ANOR	[2010] FMCA 120	

BANKRUPTCY – Application for appointment of Trustee under s.50 of the Bankruptcy Act.	

Bankruptcy Act 1966 (Cth), s.50	

Deputy Commissioner of Taxation v  Clyne (1983) 50 ALR 118; (1983) 14 ATR 540
Steven Leondaris v KGB Design & Construction Pty Ltd [1998] FCA 1354	

Applicant:	MALCOLM SLATER PTY LIMITED
ACN 000 440 808	

First Respondent:	WILLIAM ARTHUR JOHN THOMPSON	

Second Respondent:	KATHERINE THOMPSON	

File Number:	SYG 230 of 2010	

Judgment of:	Barnes FM	

Hearing date:	12 February 2010	

Delivered at:	Sydney	

Delivered on:	12 February 2010	

REPRESENTATION
Counsel for the Applicant:	Mr Johnson	

Solicitors for the Applicant:	Sally Nash & Co	

Respondents:	No appearance	

ORDERS
(1)	Pursuant to s.50 of the Bankruptcy Act 1966 (Cth) Giles Geoffrey Woodgate, a registered trustee, take control of the property of each of William Arthur John Thomspon and Katherine Thompson up to and including 16 March 2010.
(2)	That there be liberty to apply on 2 business days notice or such shorter notice as a Federal Magistrate may allow to vary or vacate order 1 above. 
(3)	A sealed copy of this order be delivered to Giles Geoffrey Woodgate and to the Official Receiver and sent by express post to the respondents on or before close of business on Monday 15 February 2010.  
(4)	Costs of today are reserved. 
THE COURT NOTES THAT:
(1)	The usual undertaking as to damages has been given by the applicant.  

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY	
SYG 230 of 2010
MALCOLM SLATER PTY LIMITED
ACN 000 440 808	
Applicant

And

WILLIAM ARTHUR JOHN THOMPSON and KATHERINE THOMPSON	
Respondents

REASONS FOR JUDGMENT
(Revised from transcript)
1.	This is an application filed on 5 February 2010, seeking that Giles Geoffrey Woodgate, a registered trustee, take control of the property of each of William Arthur John Thompson and Katherine Thompson pursuant to s.50 of the Bankruptcy Act 1966 (Cth), until a specified date.  The application was filed on 5 February 2010.  At that stage an order was sought that the court dispense with personal service of the application, or grant short service.  
2.	On 9 February 2010 I made orders for short service of the application and affidavit in support and listed the matter for hearing on 12 February 2010.  The orders noted that if the respondents wished to participate in the hearing by way of a telephone link, they were to provide the Registry with a contact landline telephone number by midday today (and provided details of the Registry’s telephone and facsimile contact numbers).  This was to ensure that notwithstanding the short service and given that the respondents reside in rural New South Wales, they had the opportunity to participate.  
3.	In relation to the issue of whether the respondents are aware of these proceedings, the applicant relied on an affidavit of 9 February 2010 of Louise Harper as to service by express post of the original application, and two affidavits of service of Arlen James Tierney sworn on 11 February 2010 attesting to service on 10 February 2010 of a sealed copy of the relevant documents together with a copy of the orders that I made on 9 February 2010.
4.	However my chambers have not been informed of any contact by either of the respondents or on their behalf in relation to participation in the hearing today.  They were not present when the matter was called at 2.15pm this afternoon.  Nor have they appeared now, some 45 minutes later.  In these circumstances, I proceeded with the hearing of the application on what was, effectively, an ex parte basis, albeit that the respondents had been put on notice.  
5.	The applicant seeks orders pursuant to s.50 of the Bankruptcy Act, directing a specified registered trustee, Giles Geoffrey Woodgate, to take control of the debtor’s property.  Mr Woodgate has consented to act as trustee.  Under s.50 of the Act such an order may be made at any time after a bankruptcy notice is issued or a creditor’s petition is presented.  In this case, there is evidence before the court of the issue of Bankruptcy notice NN5503 of 2009 on 27 November 2009 to Mr and Mrs Thompson as the debtors.  The applicant is the creditor in that bankruptcy notice which is based on a judgment of the District Court at Bega.  The copy of the judgment annexed to the bankruptcy notice indicates that judgment was entered in favour of the applicant on 22 September 2008.  It was set aside on 10 November 2008, but was reinstated by orders made and entered on 20 February 2009.  It is in the sum of $209,576.76.  In addition interest of over $14,000 was claimed.  Hence the requirement of s.50(1) that the application be made at “any time after a bankruptcy notice is issued” is satisfied.  
6.	I also note the evidence before the court as to service of the bankruptcy notices on each of the respondents on 7 January 2010 by personal service at the office of Carol Stackpoole, a Financial Counsellor described in the affidavit of Marianne Bautista sworn on 5 February 2010 as having been consulted by the respondents in relation to the provision of financial advice.  Ms Bautista attested to conversations with Ms Stackpoole to which I will return.  
7.	Under s.50(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. 
8.	I am satisfied on the basis of the material before me, including the copy of the bankruptcy notice and the affidavit of Ms Bautista sworn on 12 February 2010, that the applicant is a creditor and that the respondents have not made any payments to the applicant to reduce the debt and have not complied with the bankruptcy notice.  Hence I am satisfied that the requirements of subsections (a) and (c) of s.50(1A) are met.
9.	The critical issue is whether under s.50(1A)(b) the court is satisfied that it is in the interests of the creditors to make the orders sought.  That requires consideration of the circumstances that have led to this application.
10.	The evidence before the court indicates that the respondents have an interest in two properties, at Bodalla and Howlong in New South Wales.  The property at Bodalla is in the sole name of Mr Thompson. A title search for that property reveals that it is subject to a mortgage to National Australia Bank.  A caveat was lodged on the title by the applicant in these proceedings.  The caveat is said to be based on a charge (which is a charge on Mr Thompson’s right, title and interest in and to the proceeds of sale of the Bodalla property and also the property at Howlong).  The chargor consented to the chargee lodging a caveat over the property for its security for the charge.  It also appears from the documents before me, including the title search and evidence of Ms Bautista, that this property is in the nature of commercial premises (a service station and garage) and has been the subject of leases to other persons.  The title search reveals that the service station premises have been leased and that the lease is subject to a mortgage back to both Mr Thompson and Kathleen (sic) Patricia Thompson.  Ms Bautista’s evidence is that on 20 January 2010 she was informed that the Thompsons had recently “sold the lease for $398,000” and that she was also informed that the business that operated on the Bodalla property had been sold.  On that basis it appears that money may have been recently received by the Thompsons.  
11.	There is limited evidence in relation to the mortgage to NAB.  Ms Bautista’s understanding from the respondents’ financial counsellor is that the mortgage was secured by both properties.  There is evidence of a mortgage over the Howlong property securing a loan of $680,000 and a title search in relation to the property at Howlong in the names of Mr Thompson and Kathleen (sic) Patricia Thompson reveals a mortgage to the NAB.  According to Ms Bautista, Ms Stackpoole’s understanding was that the bank had “agreed to separate the security over the two properties”.  
12.	An unresolved issue at this stage is whether Kathleen Thompson is the same person as Katherine Thompson, who is the debtor named in the bankruptcy notice.  Ms Bautista’s evidence of conversations with Ms Stackpoole and with the principal solicitor for the creditor is that the debtors are the owners of the Howlong property.  On that basis it is relevant to have regard to evidence of an intention on the part of the respondents to sell this jointly owned residential property based not only on what Ms Bautista was told about a proposed sale in January 2010 for $285,000 ( which may not have proceeded) but also evidence of advertisement on the internet of the Howlong property for sale for a price of $379,000 as at 5 February 2010 and evidence of a “For Sale” sign (but no “Sold” sign) on the property on 3 February 2010.
13.	Such evidence must be seen in circumstances where there is a substantial debt owed to the applicant of over $200,000 which has been outstanding for a considerable period of time.  While there has been some communication by Ms Stackpoole on behalf of the Thompsons in relation to this debt and the possibility that the debtors would take some steps towards offering partial repayment had been foreshadowed, it appears that a significant amount would remain outstanding as the evidence of Ms Bautista suggests that at present any proposal from the debtors would be for a sum that would be significantly less than the amount that is currently owed.  
14.	There is an available act of bankruptcy.  The affidavits of search of today’s date of the Bankruptcy Personal Insolvency Index maintained by ITSA, in relation not only to Mr Thompson, but also Katherine Thompson and also Kathleen Thompson reveal that no creditor’s petitions have been presented (although debtor’s petitions are disclosed in 2008 in relation to two persons named Katherine Anne Thompson of different addresses to the Howlong address).  
15.	As Mr Johnson for the applicant contended, there is evidence that the respondents are dealing with their assets by the transfer of the business and the mortgage and also by proposed sale of the jointly owned residential property.  
16.	There is no evidence as to any other unsecured creditors.  There is evidence of a secured creditor in the form of the National Australia Bank, although the extent of the debtors’ indebtedness to the bank is unclear.  
17.	Counsel for the applicant expressed concern as to the potential impact of the recent and proposed transactions, particularly given the absence of information about the debtors’ financial circumstances generally.  The order under s.50 is sought to preserve the status quo.  It may be that there are other creditors.  That is not known.  There are a number of unresolved issues.  However there is evidence in relation to the intended disposal of assets consisting of the Howlong property and of some disposal of assets in relation to the Bodalla lease (particularly in relation to Mr Thompson).  On balance, I consider that in all the circumstances of this case the evidence is such in relation to each of the Thompsons that it is in the interests of creditors that the orders sought be made to preserve the status quo.
18.	I note that the usual undertaking as to damages is given by the applicant.  
19.	The applicant seeks an order for a specified period (in accordance with s.50(1B) of the Bankruptcy Act) up to and including 16 March 2010.  It is also proposed that there be liberty to apply on two business days notice or such shorter notice as a Federal Magistrate may allow to vary or vacate the order.  Not only might such a provision be used by the applicant, but if there is a legitimate reason for the Thompsons’ non-appearance today, they would have the opportunity to bring the matter back before the court on short notice.
20.	I consider that it is appropriate in the exercise of my discretion to make the orders sought to enable appropriate steps to be taken to preserve and protect the property of the debtors, so that if sequestration orders are made pursuant to a foreshadowed creditor’s petition, their property will be available for distribution among the creditors on the basis provided for in the Bankruptcy Act (see in that respect Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118; (1983) 14 ATR 540 and Steven Leondaris v KGB Design & Construction Pty Ltd [1998] FCA 1354).
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate:  

Date:  3 March 2010