The Evolution of Electronic Service of Bankruptcy Notices – Lexology

The Bankruptcy Amendment (Service of Documents) Regulations 2022 (New Regulations) came into effect on 6 April 2022, altering the requirements for the service of bankruptcy notices electronically.

Historically, the service of bankruptcy notices was governed by the Bankruptcy Regulations 1996 (Cth) (1996 Regulations). Regulation 16.01 of the 1996 Regulations stated that the methods of service included personal delivery, posting, courier or document exchange, or electronic mail. However, the 1996 Regulations were replaced by the Bankruptcy Regulations 2021 (Cth) (2021 Regulations) which whilst providing welcome amendments to sections of the legislation, made the process of distilling the correct procedural avenue for service an extremely convoluted one.

The 2021 Regulations required the reader to trawl through several pieces of legislation before finding the regulations governing electronic service. First, Section 102 of the 2021 Regulations stated that service may either be effected by courier or document exchange if the recipient uses one. It made no reference to service by any other means. A note directs the reader to section 28A of the Acts Interpretation Act 1901 (Cth).

Section 28A of the Acts Interpretation Act 1901 (Cth) sets out that personal delivery and sending documents via pre-paid post to the persons residence or place of business can be used for service. It also then directs the reader to the Electronic Transactions Act 1999 (Cth). Under this Act, it is a requirement that electronic service would be consented to by the recipient before it could be considered effective service.

In addition to burying the requirements in a figurative babushka doll of legislation, the actual requirement itself of requiring consent from the recipient for electronic service is a problematic one. Many recipients are not going to want to have bankruptcy notices served upon them, effectively eliminating email as a method of service.

In the recent case of Pegios in his own capacity and as trustee for Pegios Superannuation Fund v Arambasic [2022] FedCFamC2G 17 it was held that service had not been properly effected because the recipient had not consented to service by email.

Furthermore, even if the recipient consents to the service retroactively, this is still inadequate to satisfy the service requirements. In Re Robert Henry Hanlin Ex Parte: South Properties Development Pty Ltd [1985] FCA 447, it was held that the need for strict compliance cannot be waived by the debtor. This is the case even though no damage or injustice may have resulted from the notice being served in this fashion.

Bankruptcy notices have always been the subject of rigorous adherence to strict rules. In Ciftci, M v Colquhoun A.J.G [1994] FCA 756, Einfield J said:

[in] many ways such a finding brings about a very unjust result, but the law relating to bankruptcy has always been susceptible not only to a degree of technicality, but to a high degree of strict application. [the] duty [is] to act in accordance with the law as presently understood, and this would not be the first case in which an apparently unjust result flowed from the application of the appropriate rules.

The need for strict compliance of service regulations is understandable given the gravity of bankruptcy proceedings. However the requirement for consent for electronic service is one that presents a significant administrative hurdle, particularly when you consider the ever increasing digitalisation of society. The New Regulations however now provide the welcome change that prior consent of the recipient is not required for electronic service. It should be noted that where service is effected electronically, the 21 day compliance period is usually calculated from the time of transmission rather than of actual receipt.

The New Regulations come into effect alongside the Insolvency Practice (Bankruptcy) Amendment Rules 2022 which make trustee registration requirements more flexible, introduce more efficiencies, transparency and certainty to creditor meetings and streamline provisions so they are consistent with similar in the Insolvency Practice Rules (Corporations) 2016.

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The Evolution of Electronic Service of Bankruptcy Notices - Lexology