The recent decision of Szepesvary v Weston (Trustee), in the matter of Szepesvary (Bankrupt) (No 2) [2018] FCA 87 considered an application by a bankrupt seeking to annul his bankruptcy pursuant to section 153B of the Bankruptcy Act 1966 (Cth) (Act) and to set aside the bankruptcy notice on which the creditor’s petition was based pursuant to section 30 of the Act.

The underlying debt the subject of the bankruptcy notice had been assigned several years earlier (in 2011) by Westpac Banking Corporation (Westpac) to ACM Group Ltd (ACM).  Around this time, Westpac provided written notice to the bankrupt of the assignment, that the bankrupt’s liability to Westpac was now owed to ACM and that the liability was now due and payable to ACM (the Notice).

The bankrupt deposed that he did not receive the Notice until several years after the assignment and at which point he was already bankrupt.  In cross examination, the bankrupt agreed he could not recall all correspondence received from Westpac or ACM dating back to 2011 and confirmed that his house had a number of letter boxes and was often mistakenly delivered to his neighbour.

ACM relied on evidence of Westpac’s computer records which recorded that Westpac sent the Notice on 6 October 2011 to the bankrupt’s residential address.

Whether the Notice was served is important, as section 12 of the Conveyancing Act 1919 (NSW) provides that an absolute assignment in writing of any debt will only be effective if express notice is given to the debtor.

In considering the evidence, O’Callaghan J considered the decision of Jacobson J in Leveraged Equities Limited v Goodridge [2011] FCAFC 3 at [399]: –

“It is trite law that there is a prima facie presumption of fact that an envelope addressed and posted and not afterwards returned reached its destination in the ordinary course of post.”

O’Callaghan J, in summarising the parties evidence at [17] opined that ACM’s evidence supported a finding that the Notice was addressed and posted and was sufficient to enliven the presumption in Leveraged Equities Limited v Goodridge [2011] FCAFC 3, while the bankrupt’s evidence was not sufficient to displace the relevant presumption.

In considering the bankrupt’s evidence, O’Callaghan J referred to the decision of Lindgren J in Deputy Commissioner of Taxation v Trio [2007] FCA 776 at [27] where his Honour opined, in the context of service of a statutory demand at the registered office of a company: –

“There are strong policy reasons why any risk arising from the fact that there is no letter box or other facility for receipt of mail at the registered office or from such an arrangement should lie with the company. It is the company that chooses not to have such a facility, or to have as its registered office premises to which it is not practicable for mail to be delivered.” 

O’Callaghan J considered that the same policy considerations meant that risk of non-delivery of mail created by the bankrupt could not have been known by Westpac and determined that there was no basis to conclude that the sequestration order ought not to have been made within the meaning of section 153B(1) of the Act.

The decision serves as a timely reminder of the formality requirements when assigning a debt and more generally, the importance of the correct service of documents on the recipient.

Please contact us for more information.