Beware - the electronically issued bankruptcy notice

Anne v Ask Funding Ltd [2015] FCA 1111

Since AFSA introduced an online system for processing applications to issue bankruptcy notices, debtors have come up with various (sometimes very creative) arguments for why bankruptcy notices issued electronically do not comply with the legislative requirements.

In Curtis v Singtel Optus Pty Ltd (2014) 225 FCR 458, the debtor attempted to argue that a bankruptcy notice was invalid as when AFSA sent the endorsed bankruptcy notice by email, the relevant judgment was sent as a separate pdf attachment. This argument was not accepted. However, significantly, the Full Court, in obiter, found that if the judgment was not attached to the email at all, then the bankruptcy notice would be a nullity. Further, it was concluded that such a defect could not be cured by s 306(1) of the Bankruptcy Act 1966 (Cth).

In Anne v Ask Funding Ltd [2015] FCA 1111, the Federal Court applied the reasoning in Curtis and found that a bankruptcy notice issued by the Official Receiver was invalid.  This was on the footing that the email sent to the creditor enclosing the endorsed bankruptcy notice did not also attach a copy of each of the relevant judgments. This occurred due to a limitation of AFSA’s online system for issuing bankruptcy notices. 

To my knowledge, this is the first decision where the court has found the procedure used by AFSA to issue bankruptcy notices electronically is deficient such that the notice is a nullity.

In this case, the bankruptcy notice issued by the Official Receiver relied upon two separate judgments. The bankruptcy notice was issued electronically by AFSA following an application being made by the creditor’s solicitors online. While the solicitor attached a copy of each of the judgments relied upon when applying for the notice, AFSA only attached a copy of one of the judgments to the solicitors when the bankruptcy notice was emailed to the creditor's solicitors. The solicitors for the creditor attached a copy of the second judgment themselves before it was served on the debtor.

The creditor later relied upon the debtor’s failure to comply with this bankruptcy notice to secure a sequestration order against the debtor.

The debtor appealed this decision primarily on the basis that the bankruptcy notice was a nullity because the Official Receiver attached only one of the two orders that the bankruptcy notice relied on when it was issued.  This argument was successful and the sequestration order was set aside.

While it is well known that there is a requirement to attach a copy of the judgment or final order relied on to the bankruptcy notice, equally there are provisions dealing with how the Official Receiver must issue bankruptcy notices in order for them to be valid.

The courts have time and time again held that bankruptcy is a very serious matter and strict compliance is required by the creditor. The lesson here is that great care needs to be exercised when dealing with bankruptcy, and that you cannot always rely on AFSA's system to get it right.