Substituted Service of a Creditor’s Petition is an application for an order that a respondent debtor who does not want to be served personally, can be served another way.
A creditor’s petition is an originating process and as such is required to be personally served on the debtor.
However, if you have had any experience with sophisticated debtors then you know that this can be easier said than done.
In some cases judgment debtors will go to extreme lengths to avoid being personally served. Some never answer the door, some move house in the middle of the night, some move interstate, and some dye or shave their hair and assume an alias.
If it is impracticable to serve a document in this way, the Court may make an order dispensing with service or substituting another way of serving the document, by ordering substituted service of a creditor’s petition.
Our insolvency lawyers explain how to make an application for substituted service of a creditor’s petition.
309(2) of the Bankruptcy Act 1966
The Bankruptcy Act 1966 (Cth) confers concurrent jurisdiction on the Federal Circuit Court of Australia and the Federal Court of Australia.
Section 309(2) of the Bankruptcy Act 1966 (Cth) gives a discretion to the Federal Circuit Court to order service of a document in a manner specified by the Court, it says:
(2) 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.
The leading authority considering section 309(2) is Ginnane v Diners Club Limited [1993] FCA 167 as per Northrop, Shepherd and Einfeld JJ:
The discretion conferred by s 309(2) is unfettered but the authorities show that in relation to a creditor’s petition, the discretion is not to be exercised lightly. Normally, before exercising the discretion in relation to a petition, the court must be satisfied that abnormal difficulties exist in effecting personal service of the petition on the debtor and that there is a reasonable probability that the debtor will be informed of the petition as a result of the form of service identified.
See also Equititrust Limited v Bosiljevac [2007] FCA 323; and Re: Mendoca Ex parte Commissioner of Taxation (1969) 15 FLR 256.
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021
Rule 2.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) says:
(1) Unless these Rules otherwise provide, a person must make an application required or permitted by the Bankruptcy Act to be made to the Court:
(a) if the application is not made in a proceeding already commenced in the Court–by filing an application in accordance with Form B2; or
(b) in any other case–by filing an interim application in accordance with Form B3.
An application for an order for substituted service of a creditor’s petition is an interim application and must be made by filing an interim application in accordance with Form B3.
Then subsection 4 goes on to say:
(4) An interim application filed in accordance with Form B3 must state:
(a) if appropriate, each section of the Bankruptcy Act, or of the Bankruptcy Regulations , or each rule of Court under which the application is made; and
(b) the relief sought.
In the old legislation, the rule stated:
(1) If, for any reason, it is impracticable to serve a document in a way required under this Part, the Court may make an order dispensing with service or substituting another way of serving the document.
(2) The Court may specify the steps to be taken for bringing the document to the attention of the person to be served.
(3) The Court may specify that the document is to be taken to have been served on the happening of a specified event or at the end of a specified time.
The above Act and Rules essentially provide for a two-limbed test:
- The First Limb – it has to be impracticable to serve a document in a way required under this Part; and
- The Second Limb – the Court must be satisfied that the steps to be taken will bring the document to the attention of the person to be served.
In Deputy Commissioner of Taxation v Barnes [2008] FMCA 7 the Federal Magistrates Court of Australia (now called the Federal Circuit Court of Australia) followed Ginnane v Diners Club Limited [1993] FCA 167 and said:
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
This article will now explore the requirements of each limb below and explain the Substituted Service of a Creditor’s Petition.
You could also try to make an application for informal service.
Impracticable to Serve a Document in a way Required under this Part
Impracticable is one of those words that you first hear in law school, and if you have never been to law school, you may have never heard of the word im-prac-tic-a-ble.
The dictionary definitions are here Impossible in practice to do or carry out or here not practicable: incapable of being performed or accomplished. Impracticable is a synonym of impractical.
Document is not defined but the case law has included a creditor’s petition.
Therefore, if you have taken reasonable steps to personally serve the debtor, but it is:
- Impossible or incapable of being performed or impractical;
- To hand the respondent debtor, or put down in the presence of the debtor telling the debtor what it is;
- A copy of the documents required to be served.
Then you will likely satisfy the first limb of the test.
In Low v Maye [2015] FCCA 3485 the Court considered that reasonable steps had been taken when they said:
Court is satisfied that reasonable steps have been taken by the applicant trustee to ascertain the respondent bankrupt’s whereabouts for the purposes of serving the substantive application on the respondent bankrupt. Telephone book and Electoral Roll searches have been conducted, various addresses for persons with the surname “Maye” have been ascertained, and the process server has undertaken enquiries in relation to those persons, and has ascertained the whereabouts of the respondent bankrupt’s ex-wife, brother, daughter and sons from whom certain information was able to be obtained.
In Klages (WA) Pty Ltd v Walker [2008] FMCA 348 the Court said:
The Court is not, however, satisfied that there is abnormal difficulty as yet demonstrated; or 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.
In PAR & RV Scragg Trading as Peter Scragg & Associates v Vonta [2017] FCCA 1686 the Court said:
I am satisfied that the petitioner took all reasonable steps to bring the petition to Ms Vonta’s notice. The process server made several attempts at service.
In Atap Pty Ltd & Anor v Dorotich [2014] FCCA 203 the Court said:
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.
Substituted Service of a Creditors Petition
If you or your bankruptcy lawyers have taken all reasonable steps to try to personally serve the respondent debtor, and you have not been able, then you will have satisfied the first limb of this test. This evidence will need to be included in your affidavit in support of the application.
As a general rule, the Courts like to see a minimum of six (6) attempts at service, over about two (2) weeks. This is a general rule-of-thumb, as some instances may require more, and some instances may require less, as illustrated by the above cases.
If you genuinely cannot personally serve this debtor, then you will need to prove to the Court that the form of service that you have identified will bring the creditor’s petition to the respondent debtor’s attention.
Reasonable Probability that the Respondent will be Informed of the Petition as a Result of the Form of Service Identified
The Court needs to be satisfied that the method or methods that you propose for service, will actually bring the creditor’s petition to the attention of the respondent debtor.
In Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 the Court said:
It is a fundamental rule that a method of substituted service will not be allowed which will not in all reasonable probability be effective to bring knowledge of the proceedings to the debtor.
In Klages (WA) Pty Ltd v Walker [2008] FMCA 348 the Court said:
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 … 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 Low v Maye [2015] FCCA 3485 after submitting affidavit evidence from the bankrupt’s brother of an active post office box and an active mobile telephone number (amongst other evidence), the Court said:
There is sufficient information concerning the likelihood that the respondent bankrupt is the user of the post office box addresses and the mobile telephone number referred to above, to warrant the conclusion that those modes of communication are being used by the respondent bankrupt, and that service upon them is likely to draw the respondent bankrupt’s attention to the documents to be served.
If you can provide current evidence that the respondent debtor:
- Has a current mobile phone number that they are actively using; and/or
- Has a current email address of email addresses that they are actively using; and/or
- Has a current post office box address that they are actively using; and/or
- Has a current residential address that they are actively using; and/or
- Any other relevant considerations; then
It is likely that the Court will make the order using these, in combination, to bring the creditor’s petition to the attention of the persona to be served.
If you can provide affidavit evidence of the above, then you will likely get your order.
Substituted Service of a Creditor’s Petition Process
If you meet the requirements of both limbs of the test above, you can make the application for substituted service of the creditor’s petition.
The application for is Form B3 Interim application. It must be filed in the same file as the creditor’s petition and include the draft orders you are seeking. A copy of the Registrars’ Bankruptcy & General Matters – Standard Orders is here.
In support of the application and draft order(s) you will need to provide affidavit evidence of both limbs of the test, as above. The form of the affidavit is Form 59 Affidavit.
Once you have all of this material, you can lodge the documents electronically via eLodgment facility.
Once the documents have been lodged, they will be given a return date with the location as eCourtroom.
Find out more about the Federal Courts eCourtroom here.
If successful you will be give the order (or an order that the Registrar thinks fit).
You will then need to serve the respondent debtor in the way stated in the order, and provide an affidavit evidencing this.
If you do all of this, then it is likely that you will be able to continue with the hearing of the creditor’s petition at the next return date.
The Fees for an Application for Substituted Service of a Creditor’s Petition
The fees are provided in Schedule 1 of the Federal Court and Federal Circuit and Family Court Regulations 2022 (Cth).
The fee for the Interlocutory / interim application is:
- $1,060.00 for a corporate applicant; and
- $430.00 for a personal applicant.
You may be entitled to an exemption of these fees, click here for more information.
FAQ on Substituted Service of a Creditor’s Petition
This FAQ section provides clear and concise answers to common questions about the substituted service of a creditor’s petition after non-compliance with a bankruptcy notice, outlining the legal framework, requirements, and practical steps involved.
Whether you’re a creditor dealing with an elusive debtor or seeking to understand this legal process, these FAQs offer valuable guidance and insights.
What is substituted service of a creditor’s petition?
Substituted service of a creditor’s petition is a legal process that allows a creditor to serve a debtor with a petition through alternative methods when personal service is impracticable. This might be necessary when a debtor avoids personal service by moving house, changing appearance, or using other tactics.
Why might substituted service of a creditor’s petition be necessary?
Substituted service is necessary when a debtor is actively avoiding personal service. This can include not answering the door, moving without notice, or using aliases. The court recognises these tactics and allows for alternative methods to ensure the debtor is informed.
What are the two main requirements for obtaining substituted service?
The two main requirements are proving that personal service is impracticable and showing that the alternative method proposed will likely inform the debtor of the petition. Both conditions must be met to satisfy the court.
How does the court determine if personal service is impracticable?
The court considers whether reasonable steps have been taken to serve the debtor personally. This includes multiple attempts at different times and possibly at different locations. The court looks for evidence that personal service is impossible or highly impractical.
What evidence is needed to support an application for substituted service?
Evidence includes detailed records of attempts to serve the debtor, such as dates, times, and methods used. It might also include witness statements or surveillance showing the debtor’s evasive behaviour. The goal is to demonstrate exhaustive efforts to achieve personal service.
What alternative methods of service might the court approve?
The court might approve methods such as serving the petition via email, SMS, posting it to a known address, or leaving it with a person likely to inform the debtor. The method must have a reasonable probability of reaching the debtor.
Can electronic means be used for substituted service of a creditor’s petition?
Yes, electronic means such as email or SMS can be used if there is evidence that the debtor uses these communication channels. The court needs assurance that these methods will effectively inform the debtor about the petition.
How many attempts at personal service are considered reasonable?
Generally, courts like to see at least six attempts over a period of about two weeks. However, the exact number may vary based on the specific circumstances of each case.
What is the cost of filing an application for substituted service?
The cost for an interlocutory or interim application is $1,060 for a corporate applicant and $430 for a personal applicant. Fee exemptions may be available under certain conditions.
What forms are required for applying for substituted service?
The application requires a Form B3 Interim Application and Form 59 Affidavit. These forms should include evidence of attempts at personal service and the proposed alternative method of service.
What happens after the application for substituted service is filed?
Once filed, the documents are lodged electronically, and a return date is set for an eCourtroom session. If the court grants the order, the creditor must serve the debtor in the manner specified by the court and provide proof of this service.
What criteria does the court consider for substituted service of a creditor’s petition?
The court considers whether the proposed method will likely inform the debtor, the cost and practicality of the method, and any other relevant factors. The goal is to ensure the debtor receives actual notice of the petition.
Can a creditor proceed with the hearing if substituted service is successful?
Yes, if substituted service is successful and the debtor is properly notified, the creditor can proceed with the hearing of the creditor’s petition at the next return date. The creditor must provide evidence of compliance with the court’s order.
Why is it important to follow the proper process for substituted service of a creditor’s petition?
Following the proper process ensures that the debtor is fairly notified and that the creditor’s actions are legally sound. Failure to comply with legal requirements can result in delays, additional costs, and potentially invalid service, undermining the entire debt recovery process.
