The Federal Circuit and Family Court of Australia (Division 2) (FCFCOA) recently delivered a significant judgment in Roderick Group Pty Ltd (in liq), in the matter of Vlahos v Vlahos [2024] FedCFamC2G 1439, setting aside a sequestration order due to a bankruptcy notice not being properly addressed and served. The judgment highlights the importance of ensuring that bankruptcy notices are properly addressed, and further emphasises the strict procedural requirements relating to service in bankruptcy proceedings.
1. Background
This matter was an application for review of a sequestration order made by a Registrar of the FCFCOA. The application was brought by the debtor, upon whom a sequestration order was made, who sought to set aside the creditor’s petition on the basis that he was not served with the bankruptcy notice as required by the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and Bankruptcy Regulations 2021 (Cth) (Bankruptcy Regulations).
The petitioning creditor had served the bankruptcy notice via pre-paid post to the debtor’s address, which it had obtained from related proceedings in the Victorian Court of Appeal (VCA). However, the postcode used in the address was incorrect: the notice was sent to South Melbourne, Victoria (postcode 3205), instead of Port Melbourne, Victoria (postcode 3207).
The debtor challenged the validity of the service, arguing that the petitioning creditor had failed to comply with its service obligations under the Bankruptcy Act and Bankruptcy Regulations. Specifically, the debtor contended that the bankruptcy notice did not contain the correct service address (by reason of the postcode error), rendering service invalid under Regulation 102 of the Bankruptcy Regulations (which draws in sections 28 and 29 of the Acts Interpretation Act 1901 (Cth) (AIA) – more on this below).
2. Legal Framework
Regulation 102(1)(a) of the Bankruptcy Regulations allows a document to be served by sending it via courier service to the address last known to the person serving the document. Section 28A(1)(a)(ii), which is referred to as a note to regulation 102, , provides that service may be effected by sending the document by pre-paid post to the person’s last known address. Section 29(1) of the AIA further deems service by post to have been effected if the document is properly addressed, prepaid, and posted, unless the contrary is proved.
3. The Court’s Findings
The FCFCOA found in favour of the debtor, setting aside the sequestration order and dismissing the creditor’s petition. Key findings of the court included:
- Failure to properly address the Bankruptcy Notice: The court held that the petitioning creditor was not entitled to rely on the deemed service provisions in section 29(1) of the AIA because the bankruptcy notice was not properly addressed. The incorrect postcode (3205 instead of 3207) invalidated the address, even though the creditor had sourced it from a document filed by the debtor in related VCA proceedings. The court emphasised that it would have been a straightforward step for the creditor to verify the accuracy of the postcode, which it failed to do – see [111].
- Burden of proof: Under section 40(1)(g) of the Bankruptcy Act, the creditor bears the burden of proving valid service of the bankruptcy notice. The court found that the petitioning creditor failed to discharge this burden – see [124]-[125].
- Impact of deemed service: The court noted that even if the petitioning creditor had been entitled to rely on the deemed service provisions in section 29 of the AIA, the debtor had not provided sufficient proof to rebut the presumption of service. However, this finding did not alter the conclusion that the notice had not been properly served due to the incorrect address – see at [121].
4. Implications of the Decision
This decision highlights several important points for creditors seeking to enforce bankruptcy notices:
Accuracy in addressing: Creditors must ensure that the address used for service is correct, including all components such as the postcode. Even minor errors can invalidate service and undermine enforcement proceedings.
Verification obligations: The judgment emphasises that creditors have a duty to verify the accuracy of the address used for service, particularly when relying on information from other legal proceedings.
Burden of proof: The onus remains on creditors to prove valid service of bankruptcy notices. Failure to meet this procedural requirement can result in the dismissal of a creditor’s petition and the setting aside of sequestration orders.
Limitations of deemed service: While section 29 of the AIA provides a mechanism for deemed service by post, it is not an automatic safeguard. Proper addressing is a prerequisite for invoking these provisions.
5. Conclusion
The decision in Roderick Group Pty Ltd (in liq), in the matter of Vlahos v Vlahos serves as a caution for creditors regarding the procedural rigor required in bankruptcy matters. The case highlights the necessity of strictly complying with service requirements under the Bankruptcy Act and Bankruptcy Regulations to avoid potentially having a creditor’s petition set aside and/or dismissed. Creditors must exercise diligence in verifying addresses and ensuring that all statutory requirements are met to avoid adverse outcomes in bankruptcy proceedings.
6. Need Advice?
Professional legal advice should always be sought to ensure compliance with relevant laws and regulations.
At Hunt & Hunt, we have a specialist debt recovery and insolvency team who can assist you with anything debt recovery related, including advising and acting for you throughout the process of serving a bankruptcy notice.
If you require advice on your specific circumstances, please don’t hesitate to get in touch.
