Atap Pty Ltd & Anor v Dorotich [2014] FCCA 203 (14 February 2014)

Last Updated: 17 February 2014

FEDERAL CIRCUIT COURT OF AUSTRALIA

ATAP PTY LTD & ANOR v DOROTICH

[2014] FCCA 203

Catchwords: BANKRUPTCY – Substituted service of creditors petition – whether abnormal difficulty in serving.

Legislation: Bankruptcy Act 1966 (Cth), ss.43(1)(b)(i), 52(1)(b), 309(2) Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(e) Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.4.05(a) Federal Circuit Court Rules 2001 (Cth), rr.6.06(1) and 6.07(1)

Battenberg v Restrom (2006) 149 FCR 128; [2006] FCAFC 20 CSR Ltd v Barillaro (2001) 184 ALR 308; [2001] FMCA 23 Deputy Commissioner of Taxation v Barnes (2008) 70 ATR 776; [2008] FMCA 7 Deputy Commissioner of Taxation v Cranswick (2010) 117 ALD 95; [2010] FCA 891 de Robillard v Carver (2007) 159 FCR 38; [2007] FCAFC 73 Equititrust Ltd v Bosiljevac [2007] FCA 323 Ginnane v Diners Club Ltd [1993] FCA 167; (1993) 42 FCR 90 In re Conan Doyle’s Will Trusts, Harwood v Fides Union Fiduciare [1971] Ch 982 Re Mendonca; Ex Parte Commissioner of Taxation (1969) 15 FLR 256 Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107; [2004] FCAFC 321 Wandina Holdings Pty Ltd v Duncan & Anor [2011] FMCA 49

First Applicant:

ATAP PTY LTD

Second Applicant:

BUZZO NOMINEES PTY LTD

Respondent:

KEVIN WILLIAM DOROTICH

File Number:

PEG 332 of 2013

Judgment of:

Judge Antoni Lucev

Hearing date:

10 February 2014

Date of Last Submission:

11 February 2014

Delivered at:

Perth

Delivered on:

14 February 2014

REPRESENTATION

Counsel for the First and Second Applicants:

Mr G Metaxas

Solicitors for the First and Second Applicants:

Metaxas & Hager

For the Respondent:

No appearance

ORDERS

(1) That the applicants’ application for substituted service of a creditors petition on the respondent be dismissed.
(2) That there be no order as to costs.

FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH

PEG 332 of 2013

ATAP PTY LTD

First Applicant

BUZZO NOMINEES PTY LTD

Second Applicant

And

KEVIN WILLIAM DOROTICH

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application by the applicants, Atap Pty Ltd and Buzzo Nominees Pty Ltd, seeking orders for substituted service on the respondent, Kevin Dorotich (aka Kevin William Dorotich) of a creditors petition under the Bankruptcy Act 1966 (Cth).^[1]
2. The orders for substituted service which are sought seek that substituted service be effected by service at BDR Business Accountants, by prepaid ordinary post to a post office box address, by email to “[e-mail]” and “[e-mail]”, and that a text message be sent to a mobile telephone number and by email to the two addresses set out immediately above indicating that the Court will be hearing the creditors petition on a particular date.
3. Although the application for substituted service does not specifically say so, the applicants’ outline of submissions filed in support of the orders for substituted service, make it clear that the applicants also seek orders for service outside of the jurisdiction. Thus, at the time of filing the application for substituted service there were two issues to be determined:
   1. whether service outside of the jurisdiction; and
   2. whether some form of substituted service, including service outside of the jurisdiction,

would be ordered by the Court.

Facts

4. On about 15 June 2010 the applicants and the respondent executed a written loan agreement^[2] under which the applicants agreed to lend the respondent, as trustee of the Dorotich Property Trust, $100,000^[3] to finance the costs to strata title a property at 107 Dixon Road, Rockingham, Western Australia.^[4] In the Loan Agreement the respondent’s address is “PO Box 5148, Rockingham, Western Australia”.^[5]
5. On or about 15 June 2010 the applicants advanced $100,000 to the respondent under the Loan Agreement.^[6] The term of the Loan Agreement was 12 months.^[7]
6. On 30 June 2011 the respondent requested that the applicants grant an extension of nine months to the Loan Agreement. On 30 June 2011 the applicants agreed to the nine month extension.^[8] On 19 August 2011 the applicants and the respondent executed a deed of extension and variation of the Loan Agreement.^[9] The respondent’s address in the Deed of Extension is the Rockingham PO Box Address.^[10] The respondent was obliged to pay the Debt to the applicants on or before 21 May 2012.^[11]
7. The respondent failed to pay:
   1. the Debt due to the applicants on 21 May 2012; and
   2. interest due on the Debt from 21 February 2013.^[12]
8. The respondent’s failure to pay the Debt to the applicants on 21 May 2012, and to pay interest since 21 February 2013, was a breach of the Loan Agreement as amended by the Deed of Extension.^[13]
9. The applicants commenced action in the District Court of Western Australia by Writ of Summons on 29 May 2013.^[14]
10. On 11 July 2013 the respondent sent an email to Mr Choules advising that “The settlement for the sale of the Dixon Road units has been delayed”. The respondent’s email was sent from “[e-mail]”.^[15]
11. In July 2013 it would appear that the respondent travelled to China.^[16] It is not possible to tell from the Respondent’s Facebook Page how long he spent in China.
12. The applicants were unable to effect personal service of the Writ of Summons in the District Court Action and were granted leave by Order of a Registrar of the District Court of Western Australia made 15 August 2013, to serve the Writ of Summons out of the jurisdiction on the respondent by sending the Writ of Summons to the respondent as an attachment to an email addressed to the respondent at “kevin [e-mail]”.^[17] If the District Court Registrar gave Reasons for Decision they are not in evidence. It is not apparent why the Writ of Summons was to be served on “[e-mail]” rather than “[e-mail]”, but for present purposes that is not material.
13. On 19 August 2013 the Property was sold by the mortgagor, the Bendigo and Adelaide Bank Limited.^[18]
14. On 3 October 2013 the applicants were awarded judgement in default of appearance against the respondent in the District Court Action for $108,333 plus interest of $39,252 and costs of $1,462.40.^[19]
15. A bankruptcy notice^[20] in the amount of $149,145^[21] was issued by the Official Receiver on 7 October 2013.^[22] Service of the Bankruptcy Notice was effected on the same day by sending the Bankruptcy Notice to the respondent as an attachment to an email, sent to “[e-mail]”.^[23] Service of a bankruptcy notice by electronic transmission, such as electronic mail, in such a manner that the documents will, in the ordinary course of events, be received by a person is a proper means of service.^[24] The Bankruptcy Notice listed the respondent’s address as “10 Olympic Pl, Rockingham, WA, Australia”.^[25]
16. On 19 November 2013 lawyers for the mortgagor bank wrote to the respondent, and to the lawyers for the applicants, advising that settlement of the sale of the Property had taken place on 19 August 2013, and seeking advice concerning the disposition of surplus funds from the sale of the Property. The 19 November 2013 Letter was addressed to Mr Dorotich at the Rockingham PO Box Address and at “[e-mail]”.^[26]
17. On 20 November 2013 the applicants’ lawyers wrote to the respondent, requesting consent to the surplus funds being placed in an interest bearing account opened in the names of the parties to the District Court Action, and that the respondent execute an irrevocable authority to transfer the surplus funds to the applicants.^[27] The 20 November 2013 Letter was addressed to Mr Dorotich at the Rockingham PO Box Address, and on the face of the 20 November 2013 Letter it was to be sent by email to “[e-mail]”. The covering email to which the 20 November 2013 Letter was attached indicates however that the email, and attachment, were sent to “[e-mail]”.
18. The 20 November 2013 Letter enclosed the Default Judgment and the 19 November 2013 Letter.
19. On 21 November 2013 the applicants’ lawyers received an email^[28] from the respondent indicating that “The bank has taken all that I have. I have nothing left.” Further, the 21 November 2013 Email indicated a willingness to sign an authority for funds to be transferred to the applicants. Although not expressed, it can be inferred that this is a reference to the surplus funds referred to in the 19 November 2013 Letter.^[29] The 21 November 2013 Email was sent from “[e-mail]”.
20. On 21 November 2013 the applicants’ lawyers sent the respondent a second email, addressed to “dorotichkevin”, to which the 21 November 2013 Email had also been sent, and which indicates that it is sent to “[e-mail]”.^[30] After a further reminder sent to Mr Dorotich on 24 November 2013, he replied on 25 November 2013, from “[e-mail]”, annexing an authority,^[31] signed by him, as trustee for the Dorotich Property Trust, and containing the Rockingham PO Box Address.^[32] The Rockingham PO Box Address had seemingly been inserted by Mr Dorotich, as the drafts of the Authority which had been sent to him contained an address of “10 Olympic Place, Rockingham, Western Australia”.^[33]
21. On 29 November 2013 the Respondent’s Facebook Page indicated that he was living in Goiania,^[34] which the Court is told is in Brazil.
22. An ASIC company search was conducted by the applicants’ lawyers for Madcity Enterprises Pty Ltd on 6 January 2014. The ASIC extract provided details as at 22 June 2011, and indicated that Madcity Enterprises Pty Ltd was an Australian proprietary company limited by shares with its registered office at BDR Business Accountants, 1^st Floor, 4 Sutton Street, Mandurah, WA 6210, and with its principal place of business at 58 Harrington Waters Drive, Waikiki, WA 6169. The directors included the respondent whose address is given as 6 Burnside Way, Waikiki, WA 6169, and lists him as the holder of two fully paid ordinary shares, of 10 fully paid ordinary shares issued.^[35]
23. All of the Landgate records for the Property which are in evidence list the respondent’s address as the Rockingham PO Box Address.^[36]
24. At the hearing of the matter on 10 February 2014 the Court expressed concern about a lack of evidence of the respondent being ordinarily a resident in Australia at the time the act of bankruptcy was allegedly committed on 28 October 2013. At the hearing the Court indicated that it considered that there was probably not sufficient evidence to conclude that the respondent was ordinarily resident in Australia at the time of the act of bankruptcy for the purposes of making an order for substituted service outside of the jurisdiction.^[37] The Court also inquired as to what inferences could be drawn from, or whether any form of judicial notice could be taken of, the respondent’s continued use of the Rockingham PO Box Address. In order to allow the applicants to deal with what might have been a lacuna in their evidence the Court granted leave to the applicants to file any further affidavits with respect to the issue of the respondent being ordinarily resident in Australia by 4.00pm on 11 February 2014. Consequently, a further affidavit was filed on 11 February 2014.^[38] Mr Metaxas’ February 2014 Affidavit does not address the Post Office Box issue. It does however indicate that:
    1. on 10 February 2014 a director of one of the applicants was informed that Mr Dorotich was living with his son in Brisbane, and the informant was able to provide two mobile telephone numbers for the respondent and a mobile telephone number for his son. Additionally, the informant indicated that he had within the last two to three weeks sold a car for the respondent in Western Australia and sent the money to him in Brisbane;
    2. the respondent’s son’s Facebook page records the respondent as being a friend;^[39]
    100. the respondent’s son had relocated to Brisbane on or about 25 March 2013 according to his Instagram profile;^[40]
    4. two screen shots from the respondent’s son’s Instagram account contain pictures of the respondent, identified for Mr Metaxas by Mr Choules;^[41]
    5. one of the screen shots from the Instagram account is accompanied by text indicating that the respondent’s son posted the following message “Merry Christmas. Just picked up the old boy. Nice head dad.”^[42]
    6. Mr Metaxas had endeavoured to contact the respondent and his son on the mobile telephone numbers provided by the informant, but the mobile phones were not answered and recorded automated messages were heard by Mr Metaxas. It does not appear that Mr Metaxas left any message on any of the mobile phones concerned;^[43]
    7. aside from the reference to the respondent being in Brisbane, the applicants are unaware of the respondent’s whereabouts;^[44] and
    8. the applicants believe that the respondent now resides in Australia and is therefore an ordinary resident of Australia.^[45]

Service outside of the jurisdiction

25. The issue of service outside of the jurisdiction has, as a consequence of the evidence in Mr Metaxas’ February 2014 Affidavit, fallen away. The applicants, according to that affidavit, accept that, and the evidence, on the balance of probabilities indicates that, the respondent now resides in Australia, and therefore it is unnecessary to make an order for service outside of the jurisdiction.^[46]

Substituted service

26. Ordinarily, a creditors petition must be served personally.^[47]
27. It is, however, well recognised that s.309(2) of the Bankruptcy Act confers a discretionary power on this Court to order service of a document in a manner specified by the Court.^[48] Furthermore, if an order for substituted service is obtained under s.309(2) of the Bankruptcy Act under which the notice can be served within Australia, it is not necessary to obtain separate leave under s.40(1)(g) of the Bankruptcy Act to serve the notice overseas, even if the respondent is overseas at the time of service pursuant to the substituted service order.^[49]
28. In Deputy Commissioner of Taxation v Barnes^[50] this Court said that:
    • 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 creditors petition on the Respondents; and
      • (b) there is a reasonable probability that the Respondents will be informed of the petition as a result of the form of service identified.^[51]
29. The first question to be determined then is whether abnormal difficulty exists in effecting personal service of the creditors petition on the respondent.
30. The applicants initially appear to have assumed, on the basis of the Respondent’s Facebook Page, that the respondent was overseas. All that the evidence indicates, however, is that:
    1. the respondent was in China sometime in July 2013;
    2. the Respondent’s Facebook Page said that he was living in Goiania in Brazil as at 29 November 2013;
    100. the respondent’s son moved to Brisbane in March 2013, and that the respondent’s son picked the respondent up at a time at a time he was wishing people “Merry Christmas”, and it is thus reasonable to infer, picked up the respondent at Christmas 2013 in Brisbane; and
    4. the applicants accept that the respondent is now resident in Brisbane.
31. The applicants have the means to make enquiries of the respondent, at the very least via email, and now it would appear via mobile telephone, but no enquiry has been made of the respondent as to whether he is willing to accept service of the creditors petition, either personally in Brisbane, or by an alternative means of service, such as by a solicitor or agent. Such an enquiry ought to have been made given the history of the matter: the respondent reasonably readily granted the Authority which enabled surplus funds in relation to the Property to be paid to the applicants when he was asked to do so by the applicants.
32. There is an assertion that the applicants do not know the respondent’s whereabouts, other than the fact that he is in Brisbane, but there is very little evidence of any enquiries being made or instituted in an endeavour to locate the respondent. There is, for example, no evidence of a Brisbane based lawyer, process server or investigator undertaking any investigations to establish where it is in Brisbane that the respondent is residing. There is no evidence of simple checks, such as electoral rolls or telephone books, or of other investigations which might reveal the respondent’s whereabouts, such as establishing the respondent’s son’s address, or by following the respondent’s son, a task that a competent investigator might not find difficult, given that the son appears to have a propensity to expose his movements and activities to the world via electronic social media. Evidence of matters such as those are essential in establishing that there is an abnormal difficulty in effecting personal service on the respondent, assuming a lack of co-operation, which cannot be assumed for reasons set out above.^[52]
33. Even when the applicants’ lawyers have been given mobile telephone numbers which appear to be for the respondent and the respondent’s son, and have rung those mobile telephones, and gone through to recorded or automated message banks, the applicants’ lawyers failed to leave a message requesting that the respondent or the respondent’s son contact them. The failure to return calls, whether the return of calls and their early termination, or the return of the calls and an indication that the respondent, or the respondent’s son, would not disclose the respondent’s whereabouts, would have been evidence relevant to the issue of abnormal difficulty in effecting service. The failure of the applicants’ lawyers to leave a message precludes further consideration along those lines.
34. It is not part of the Court’s role to order substituted service of documents merely because lawyers assume, or assert, that it is difficult to serve a person, when in fact, no proper enquiries or reasonable steps have been made to see if service might be accepted by the respondent, or might be avoided by the respondent. Substituted service orders ought not be made where no, or no reasonable, steps or enquiries have been made to otherwise effect service. The inability to effect prompt personal service is not to be confused with abnormal difficulty, particularly in circumstances where no immediate time constraints which might affect the proceedings are evident.^[53]
35. In this case the Court is not satisfied that the applicants, or the applicants’ lawyers, have taken steps sufficient to satisfy the Court that abnormal difficulty exists in effecting personal service of a creditors petition on the respondent.

Conclusions and orders

36. On the basis of the above matters and the evidence presently before the Court, the Court is not satisfied that abnormal difficulty exists in effecting personal service of a creditors petition on the respondent. It follows from that conclusion that the Court is not prepared to grant an order for substituted service in the terms sought by the applicants, and the application for substituted service of a creditors petition on the respondent must be dismissed. As the application was effectively brought and argued ex parte, and as there are no costs involved other than the applicants’ costs, the Court will order that there be no order as to costs.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev

Associate:

Date: 14 February 2014

---

^[1] “Bankruptcy Act”.
^[2] “Loan Agreement”. The Loan Agreement is Annexure TPC-2 to the affidavit of Timothy Philip Choules, sworn 9 December 2013 (“Mr Choules’ Affidavit”); Mr Choules’ Affidavit, para.3.
^[3] “Debt”.
^[4] “Property”; Mr Choules’ Affidavit, paras.3-4 and Annexure TPC-2.
^[5] Loan Agreement, Preamble (“Rockingham PO Box Address”).
^[6] Mr Choules’ Affidavit, para.5.
^[7] Loan Agreement, Schedule, cl.2.
^[8] Mr Choules’ Affidavit, Annexure TPC-4.
^[9] “Deed of Extension”; Mr Choules’ Affidavit, Annexure TPC-3.
^[10] Deed of Extension, Preamble.
^[11] Deed of Extension, cl.2.3.
^[12] Mr Choules’ Affidavit, para.8.
^[13] Deed of Extension, cl.3; Loan Agreement, cll.5, 6 and 12.
^[14] “District Court Action”; Mr Choules’ Affidavit, para.9 and Annexure TPC-5.
^[15] Mr Choules’ Affidavit, para.15 and Annexure TPC-9.
^[16] Mr Choules’ Affidavit, Annexure TPC-8 (“Respondent’s Facebook Page”).
^[17] Mr Choules’ Affidavit, paras.10-12 and Annexure TPC-6.
^[18] Mr Choules’ Affidavit, paras.2 and 16 and Annexures TPC-1 and TPC-10.
^[19] Mr Choules’ Affidavit, para.13 and Annexure TPC-7 (“Default Judgment”).
^[20] “Bankruptcy Notice”.
^[21] Affidavit of Gregory Emerson Metaxas, sworn 19 November 2013, paras.2 and 4 and Annexures GEM-1 and GEM-2 (“Mr Metaxas’ November 2013 Affidavit”).
^[22] Mr Metaxas’ November 2013 Affidavit, paras.2 and 4 and Annexure GEM-2.
^[23] Mr Metaxas’ November 2013 Affidavit, paras.2 and 3 and Annexure GEM-1.
^[24] Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(e); Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; (2004) 141 FCR 107 at 117 per Sundberg, Finkelstein and Hely JJ; [2004] FCAFC 321 at para.31 per Sundberg, Finkelstein and Hely JJ; CSR Ltd v Barillaro (2001) 184 ALR 308 at 311-312 per Raphael FM; [2001] FMCA 23 at paras.13-18 per Raphael FM.
^[25] Mr Metaxas’ November 2013 Affidavit, Annexure GEM-1.
^[26] Mr Choules’ Affidavit, para.16 and Annexure TPC-10 (“19 November 2013 Letter”).
^[27] Mr Choules’ Affidavit, para.17 and Annexure TPC-11 (“20 November 2013 Letter”).
^[28] “21 November 2013 Email”.
^[29] Mr Choules’ Affidavit, para.18 and Annexure TPC-12.
^[30] Mr Choules’ Affidavit, para.20 and Annexure TPC-14.
^[31] “Authority”.
^[32] Mr Choules’ Affidavit, para.20 and Annexure TPC-14.
^[33] Mr Choules’ Affidavit, para.19 and Annexure TPC-13.
^[34] Mr Choules’ Affidavit, para.14 and Annexure TPC-8.
^[35] Affidavit of Gregory Emerson Metaxas, sworn 6 January 2014, para.8 and Annexures GEM-7 (“Mr Metaxas’ January 2014 Affidavit”).
^[36] Mr Choules’ Affidavit, Annexure TPC-1; Mr Metaxas’ January 2014 Affidavit, Annexures GEM-1 to GEM-6.
^[37] Bankruptcy Act, s.43(1)(b)(i).
^[38] Affidavit of Gregory Emerson Metaxas, sworn 11 February 2014 (“Mr Metaxas’ February 2014 Affidavit”).
^[39] Mr Metaxas’ February 2014 Affidavit, para.3 and Annexure GEM-2.
^[40] Mr Metaxas’ February 2014 Affidavit, para.6 and Annexure GEM-4.
^[41] Mr Metaxas’ February 2014 Affidavit, paras.7-8 and Annexures GEM-5 and GEM-6.
^[42] Mr Metaxas’ February 2014 Affidavit, Annexure GEM-6.
^[43] Mr Metaxas’ February 2014 Affidavit, para.10.
^[44] Mr Metaxas’ February 2014 Affidavit, para.9.
^[45] Mr Metaxas’ February 2014 Affidavit, para.11.
^[46] Mr Metaxas’ February 2014 Affidavit, para.11.
^[47] Bankruptcy Act, s.52(1)(b); Federal Circuit Court Rules 2001 (Cth), rr.6.06(1) and 6.07(1); Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.4.05(a); de Robillard v Carver [2007] FCAFC 73; (2007) 159 FCR 38 at 53 per Moore, Conti and Buchanan JJ; [2007] FCAFC 73 at para.79 per Moore, Conti and Buchanan JJ.
^[48] Deputy Commissioner of Taxation v Cranswick [2010] FCA 891; (2010) 117 ALD 95 at 106 per McKerracher J; [2010] FCA 891 at para.70 per McKerracher J (“Cranswick”); Battenberg v Restrom [2006] FCAFC 20; (2006) 149 FCR 128 at 133-134 per Heerey, Dowsett and Conti JJ; [2006] FCAFC 20 at para.19 per Heerey, Dowsett and Conti JJ (“Battenberg”).
^[49] Battenberg FCR at 133-134 per Heerey, Dowsett and Conti JJ; FCAFC at para.19 per Heerey, Dowsett and Conti JJ.
^[50] (2008) 70 ATR 776; [2008] FMCA 7 (“Barnes”).
^[51] Barnes ATR at 786 per Lucev FM; FMCA at para.71 per Lucev FM, citing Ginnane v Diners Club Limited [1993] FCA 167; (1993) 42 FCR 90 at 92 and 95 per Northrop, Sheppard and Einfeld JJ; Equititrust Limited v Bosiljevac [2007] FCA 323 at paras.7-12 per Collier J; Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 at 261 per Gibbs J; and see also Cranswick ALD at 106 per McKerracher J; FCA at paras.70-71 per McKerracher J.
^[52] Wandina Holdings Pty Ltd v Duncan & Anor [2011] FMCA 49 at para.13 per Lucev FM.
^[53] In re Conan Doyle’s Will Trusts, Harwood v Fides Union Fiduciare [1971] Ch 982 at 984 and 985 per Goulding J.