By David Burley a Law Clerk of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group.
In the recent case of Roderick Group Pty Ltd (in liq), in the matter of Vlahos v Vlahos [2024] FedCFamC2G 1439 (“Vlahos v Vlahos”), the Court was tasked with deciding whether a bankruptcy notice sent by post, but which included an incorrect postcode in the address, had nevertheless been validly served. The case highlights the risks associated with relying on non-personal service methods such as service by post, where minor errors can lead to substantial legal consequences. The judgment underscores the importance of accuracy in serving documents and the benefits for creditors who opt for personal service (especially insofar as time and costs are concerned).
Background:
On 18 August 2021, a bankruptcy notice was issued to Mr Vlahos, based on a Court of Appeal order requiring him to pay $1,259,353.59. The creditor’s solicitor posted the notice to Mr Vlahos at 200 Dow Street, Port Melbourne. However, the envelope containing the notice was incorrectly addressed with the postcode “3205,” corresponding to South Melbourne, rather than “3207,” the correct postcode for Port Melbourne.
Mr Vlahos argued that he had never received the notice, as it was incorrectly addressed. The issue before the court was whether the notice had been properly served under regulation 102 of the Bankruptcy Regulations 2021 (Cth) (“Bankruptcy Regulations”) and section 28A of the Acts Interpretation Act 1901 (Cth) (“AIA”), which governs service of documents.
Legal Framework:
Service of bankruptcy notices is governed by both the Bankruptcy Regulations and the AIA. Regulation 102 of the Bankruptcy Regulations provides for service of documents under the Bankruptcy Act 1966 (Cth) by various means (including email). It also authorises service in accordance with section 28A of the AIA. Section 28A AIA provides that service may be effected by leaving the document at or sending it to the last known address of a natural person’s place of residence or business.
Additionally, section 29 of the AI Act deems service to be effective if a document is properly addressed, pre-paid, and posted as a letter, and deems service to take place when the letter would be delivered in the ordinary course of post. However, this presumption is rebuttable if the “served” party can prove non-receipt or improper service.
Why the Creditor Believed Service Was Valid
The creditor argued that they had used the address provided by Mr Vlahos himself in prior court proceedings, including documents filed as recently as May 2021, which listed 200 Dow Street, Port Melbourne with the 3205 postcode. The creditor claimed that by relying on the most recent address provided by Mr Vlahos, they had fulfilled their obligation to send the notice to his “last known address” under the Bankruptcy Regulations.
Furthermore, the creditor submitted that the error in the postcode was a minor and non-material defect, given that there was only one 200 Dow Street in the relevant municipality and that the document had not been returned as undeliverable. This, they argued, implied that the notice had likely reached Mr Vlahos.
The Respondent’s Position: A Case of Invalid Service
Mr Vlahos contended that the incorrect postcode meant the notice was not properly addressed, and as a result, he never received it. He argued that a notice sent to an incorrect address could not be deemed to have been properly served under the AIA or the Bankruptcy Regulations.
He also pointed to correspondence with Australia Post that suggested that postal items with incorrect postcodes might be delayed or returned to the sender. However, in this case, there was no evidence that the notice had been returned, leaving open the possibility that it was delivered somewhere other than his home. Importantly, Mr Vlahos claimed that the failure to receive the notice deprived him of the opportunity to comply, leading to an unjust bankruptcy order.
The Court’s Decision: Non-Personal Service Fails
Judge Symons ultimately sided with Mr Vlahos, finding that the bankruptcy notice had not been properly served. The court held that the incorrect postcode was a material error that prevented the creditor from benefiting from the presumption of service under section 29 of the AIA. The court emphasized that for service to be deemed effective, the document must be “properly addressed,” which includes using the correct postcode.
The judge also noted that while service by post is an accepted method, it is not without risks. The court found that the creditor could have easily verified the correct postcode before sending the notice and that relying on an outdated or incorrect address, even one provided by the debtor in earlier proceedings, could lead to service issues. Without proof that the notice had actually reached Mr Vlahos, the creditor’s petition was dismissed, and the sequestration order was set aside.
Proceed with Caution in Non-Personal Service
This is another in a long line of cases which serve as a cautionary tale for creditors who rely on non-personal service methods such as service by post. Personal service comes at an additional cost, and possibly some additional time at the outset of a matter, especially if the debtor avoids service. However this can be a small price to pay compared with the much great costs (including having to pay costs of the debtor and a bankruptcy trustee) in the event that a creditor’s petition is dismissed, or worse, a bankruptcy set aside. And of course, the whole process needs to begin again. A ‘stitch in time saves nine’ but personal service can save far more.
Read the decision here.
Matthews Folbigg Lawyers has a specialist team dedicated to Insolvency, Restructuring and Debt Recovery.
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact our Principal Stephen Mullette on (02) 9806 7459 stephenm@matthewsfolbigg.com.au or Jeffrey Brown on (02) 9806 7459 jeffreyb@matthewsfollbigg.com.au.
