By Lara Wehbe a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
If a creditor provides a post office box for payment of a bankruptcy notice will the notice be considered valid?
We can now look to the case of Scenic Rim Regional Council v Cutbush (No 3) [2025] FCA 1103 which sets a clear precedent on whether the notice will be effective.
Facts
The Applicant Creditor asserted that they had served a bankruptcy notice by post to the address on the bankruptcy notice (which was listed as a post office box).
The Respondent Debtor claimed that the notice was invalid as the address used in the notice was not permitted under section 41(2) of the Bankruptcy Act 1966 (Cth) (which provides that a bankruptcy notice must be in accordance with the form prescribed in the regulations) as well as the Bankruptcy Regulations 2021 (Cth) section 9 (which prescribes the form of a bankruptcy notice).
Issue
Whether the bankruptcy notice served by the Creditor was valid despite a PO Box being listed as the address for payment of the debt. That is, did the notice comply with the essential requirements of the Act, the Regulations and the Court Rules.
Reasons for Judgment
Following the authorities regarding applications to set aside bankruptcy notices the Court considered the relevant questions to be:
- Whether the Bankruptcy Notice was defective or irregular;
- If so, whether the defect or irregularity was substantive or merely formal; and
- If merely formal, did it occasion substantial injustice?
Was the Notice Defective?
Firstly, the Court (Justice Wheatley) noted that the prescribed form had changed over time (including from the version considered in previous cases) and “is now less prescriptive” (at [94]). In reality, the form now simply provides a blank box to be completed by the creditor to identify where payment of the judgment debt may be made.
Her Honour considered that the evident purpose of this box “is to facilitate payment” and that “correct completion of the prescribed form in Section 2 now permits details which facilitates where or how the payment can be made. This accords with a purposive construction to inform the debtor what is required to comply with the bankruptcy notice” (at [96]).
This would facilitate payment by electronic funds transfer and would allow completion “by provision of a name … and bank account details”. Wheatley J held that in such circumstances there need not be a physical street address stated on the notice for it to be valid, although her Honour left open the question of what additional details might be required to comply with paragraph 1(b) of the bankruptcy notice, which requires a debtor (in lieu of payment) to “make arrangements to the creditor’s satisfaction for settlement of the debt”. In this case, because the Creditor’s solicitors details were also provided, the Court was satisfied that this requirement was met.
The Court considered a number of other cases which had considered the same issue and distinguished them given the form has now changed and the requirements for specific addresses had been derived from the form itself (as it then stood).
In summarising the cases and the law, the Court held that:
- The address in the bankruptcy notice should be one at which it is reasonably practicable to make payment or arrangements to the creditor’s satisfaction;
- The debtor has a duty to seek out a creditor and a right to make payment where the creditor can be found; and
- It is acceptable to identify a solicitor or law firm on behalf of a creditor to make payment.
In the present matter, the Court answered the first question in the negative – the bankruptcy notice was not defective. The relevant section of the bankruptcy notice is not limited to identifying where payment may be made, but also how (at [132]). The solicitor’s phone number, email, and post office box details made it “reasonably practicable, taking a common-sense approach, to make payment of the debt or to make arrangements to the creditor’s satisfaction.”
Was Any Defect Formal or Substantive?
Although finding that the notice was not defective, the Court nevertheless considered whether (if it had been defective) the defect was substantive or merely formal. Consistently with her Honour’s consideration of the current version of the prescribed form, noting no requirement for a street address to be specified, Justice Wheatley held that if there had been a defect, it was only formal, and thus would not invalidate the notice unless it caused substantial injustice, in accordance with the authorities.
Did the listed PO Box address cause a substantial injustice?
Again, although the bankruptcy notice had been found not to be defective, the Court nevertheless went on to consider whether (if it had been) it was capable of misleading or causing substantial injustice to the Debtor. The Court held it was not:
- On the facts, the Creditor provided the relevant PO Box, telephone number and email of their solicitor. With this information, the Debtor had the ability to pay the amount outstanding to the Creditor. Ultimately, these details made it ‘reasonably practicable’ for the Debtor to make payment.
- Moreover, the PO Box could not have deceived the Debtor as although there was no street address, the Debtor would have been able to identify the street address by calling the number or email listed on the notice.
- Therefore, there was no substantial injustice and on these grounds the notice was held to be valid.
Held
The bankruptcy notice was valid and enforceable.
This case sets an important precedent regarding the validity of bankruptcy notices in respect of the current version of the prescribed form of a bankruptcy notice. This will include circumstances where the Creditor only provides a PO Box to make payment. However, it will potentially apply to other alleged defects in the notice which previous cases have identified and held to be sufficient to set aside a notice, but which may no longer be sufficient, having regard to the current form. Ultimately, the Court is likely to prefer a purposive interpretation of the legislation and is inclined to have regard to a “reasonably practicable” and “common sense approach” to determine a bankruptcy notice’s validity.
Read the article/judgment here.
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