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[2009] FCA 627
Federal Court of Australia
2009-06-15
Hely JJ, Perram J
Original judgment source is linked above.
Introduction 1 On 11 December 2008 a federal magistrate made a sequestration order against the estate of Mr Carantinos. From that order Mr Carantinos now appeals. The appeal raises only three issues: (a) The service issue. Mr Carantinos submits that he was not validly served with the bankruptcy notice. The parties agree that the notice had to be served at Mr Carantinos' last known address but are in disagreement as to whether an address at 44 Princess Highway, St Peters was that address. Mr Carantinos submits that his last known address was that of the firm of solicitors representing him in associated Supreme Court proceedings involving the petitioning creditor and himself. (b) The undertaking issue. Mr Carantinos submits that the solicitor for the petitioning creditor gave an enforceable undertaking not to enforce the petitioning creditor's judgment debt if certain affidavits were filed by a particular date. He says that the issue of the bankruptcy notice and the petition itself are contrary to this undertaking and that the federal magistrate should have declined to make the sequestration order in those circumstances. (c) The estoppel issue. Mr Carantinos submits that the same undertaking gives rise to an equitable estoppel preventing the petitioning creditor from pursuing the present sequestration proceedings. 2 It is useful to consider these issues in turn.
(a) The service issue 3 Before the federal magistrate, the petitioning creditor relied upon an act of bankruptcy said to have occurred on 13 March 2008 which was 21 days after it was alleged that Mr Carantinos had been served with a bankruptcy notice. It was common ground that he had not complied with the notice. Mr Carantinos' argument, very ably put by Mr Bowles, was that he had not been served with the notice so that no act of bankruptcy had occurred. 4 By force of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) ("the Act") a person who is served with a bankruptcy notice upon a final judgment or order who does not comply with the notice commits an act of bankruptcy. The provision does not define the ways in which such a notice is to be served but cl 16.01(1)(c) of the Bankruptcy Regulations 1966 (Cth) permits that, unless a contrary intention should appear from the text of the legislation, any document required by the Act to be served upon a person may be served by leaving it: … in an envelope or similar packaging marked with the person's name, at the last known address of the person. 5 In Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107 (Skalkos), Sundberg, Finkelstein and Hely JJ (at 117 [24]) held that reg 16.01 could, indeed, be used to serve a bankruptcy notice notwithstanding the harshness which might, in some circumstances, attend that conclusion. 6 There is no dispute that on 21 February 2008 a process server attended the premises at 44 Princess Highway, St Peters in Sydney and there left the bankruptcy notice in an envelope with Mr Carantinos' name upon it. The federal magistrate was satisfied that if that address was the "last known address" of Mr Carantinos then the notice was properly served. This conclusion was not in dispute before me. 7 The federal magistrate found that the premises at 44 Princess Highway, St Peters were the address generally used by Mr Carantinos when he was required to give an address for any official purposes. His Honour accepted Mr Carantinos' evidence that he received bank statements, rate notices and other important documents that would be required of his business there. 8 In Skalkos the Full Court accepted that the "last known address" of a person could be at business premises. If matters rested there then there could be no real question but that the premises at 44 Princess Highway, St Peters did constitute the last known address of Mr Carantinos. 9 However, Mr Bowles placed particular emphasis upon a passage in Skalkos in which the Full Court was describing the decision of Tamberlin J in Drake v Stanton [1999] FCA 1635. At 141 FCR 119 [36] the Full Court said: On that material it is clear that the appellant was not at the relevant time living at the Vaucluse address, though that was his usual dwelling house or residence; that his current residential address was not known to the respondent; that in various contexts he had given the Alexandria address as his address for service, and that the best prospect of getting a document to him was by sending it to that address. (Emphasis added.) 10 Mr Bowles submitted that the address at 44 Princess Highway, St Peters was not the address which had the "best prospect" of getting notice to Mr Carantinos. He submitted that the bankruptcy notice stood a much better chance of coming to Mr Carantinos' attention if it was served upon his solicitors, Munro Lawyers. 11 There is no question that Munro Lawyers were then acting for Mr Carantinos in the very proceedings giving rise to the judgment debt upon which the notice was founded. Nor can it be doubted that they were frequently in contact with the petitioning creditors' solicitors who were, of course, on the opposite side of that same litigation. I do not doubt that if the notice had been left at their offices that Mr Carantinos would have come to know of it. 12 Mr Bowles' submission that Munro Lawyers was the "best" address for ensuring that Mr Carantinos would get the notice was also based on a submission that the St Peters' premises were undergoing renovations and that Mr Carantinos did not attend those premises for the period between December 2007 and June 2008 [at sub 16].
Consideration 13 I would reject Mr Carantinos' argument for two reasons. First, the evidence did not establish that the creditor, or anyone else for that matter, was aware that the St Peters' premises were being renovated or that Mr Carantinos was absent therefrom. 14 Secondly, the federal magistrate - unsurprisingly in those circumstances - found as a fact that the premises of Munro Lawyers were not "better" than the premises at St Peters. This finding was not directly challenged before me. Once that is accepted it is difficult to discern how this ground can succeed. In my opinion, it does not.
(b) The undertaking issue 15 The debt the subject of the bankruptcy notice was based upon a judgment entered in the petitioning creditor's favour in the Supreme Court of New South Wales. The proceeding giving raise to that judgment debt travelled together with a broader partnership dispute between Mr Carantinos and the petitioning creditor which was heard and decided by Einstein J at the same time. The partnership dispute - but not the dispute resulting in the judgment debt - was subject to an appeal to the New South Wales Court of Appeal. However, in the meantime it had resulted in orders calling for the taking of accounts. I will not set those orders out. It suffices to say that Einstein J ordered Mr Carantinos to file on or before 28 September 2007 accounts together with verifying affidavits. 16 Because Mr Carantinos did not appeal from the judgment debt he was, in a practical sense, exposed to the risk that that judgment might be enforced. However, to avert that possibility he advanced to the petitioning creditor an argument that once the process of account taking in the partnership proceedings was concluded there would be sufficient funds in his favour to permit a set-off against his liability under the judgment. 17 The petitioning creditor was unpersuaded and signalled his intention to enforce the judgment. Mr Carantinos' solicitors then entered into a correspondence with the petitioning creditor's solicitors in which they sought to obtain an undertaking not to enforce the judgment whilst the appeal to the Court of Appeal was unresolved, if Mr Carantinos filed his affidavits verifying the accounts. 18 It is not necessary to set out in full all of this correspondence. However, two letters are of some importance. The first is a letter from the petitioning creditor's solicitors to Mr Carantinos' then solicitors of 24 September 2007. It is in these terms: Your response is unsatisfactory in a number of aspects. However, as a gesture of goodwill, we are instructed by our client that the judgment will not be enforced provided that the verified accounts are furnished by 28 September 2007 and if not, we are instructed to proceed to enforce the judgment without further notice. 19 On 28 September 2007 Mr Carantinos' solicitors replied in terms which included the following: Our client accepts the offer in your letter dated 24 September 2007. A copy of our client's affidavit of today's date is enclosed. That affidavit annexes and verifies the accounts. Please let us know if the format of the accounts is acceptable and what documents, if any, you require from our client for the purpose of your clients' notice of surcharges and falsifications. 20 Before the federal magistrate, this was said to constitute a binding contract, a proposition which his Honour rejected. Mr Carantinos does not seek to disturb that conclusion. 21 Instead, he advances an argument that the letter constituted an undertaking by the petitioning creditor's solicitors. Rule 26 of the New South Wales Solicitors Rules provides: A practitioner who, in the course of the practitioner's practice, communicates with another practitioner orally, or in writing, in terms which expressly, or by necessary implication, constitute an undertaking on the part of the practitioner, to ensure the performance of some action or obligation, in circumstances where it might reasonably be expected that the other practitioner will rely on it, must honour the undertaking so given strictly in accordance with its terms, and within the time promised, or, if no precise time limits is specified, within a reasonable time. (Emphasis added.) 22 This argument may be dispatched readily. The federal magistrate found that the letter of 24 September 2007 was not given personally by the solicitor on his own behalf but instead on behalf of the petitioning creditor. With respect to the federal magistrate, he was entirely correct so to conclude. 23 What r 26 requires for its enlivenment is conduct by the solicitor which expressly or by necessary implication constitutes an undertaking "on the part of the practitioner" that the performance of some action or obligation will be ensured. The letter of 24 September 2007 is simply incapable of constituting such an undertaking.
(c) The estoppel issue 24 In case the undertaking argument failed, Mr Bowles submitted that the same letter gave rise to an equitable estoppel. Whilst there are, no doubt, subtleties about equitable estoppel, none of those presently arise for consideration. This is because, whatever else might be said, the only representation that can be extracted from the letter of 24 September 2007 is a representation that if the accounts and verifying affidavits were furnished by 28 September 2007 then the petitioning creditor would not enforce the judgment without notice. 25 The federal magistrate found that the accounts and verifying affidavits which were provided by Mr Carantinos on 28 September 2007 did not comply with the orders of Einstein J. The non-compliance was significant and not contested. I would not read the letter of 24 September 2007 as accepting that verified accounts not substantially complying with the order were satisfactory. Accordingly, there has been no departure from the terms of the letter because Mr Carantinos never did the thing upon which the letter was necessarily premised. 26 Even if that were not so, however, the same analysis could be reached another way. The doctrine underpinning equitable estoppel is founded on preventing the unconscientious departure by the representor from his or her representation. Even if it was a reasonable interpretation of the letter of 24 September 2007 that the petitioning creditor would not enforce the judgment without notice once verified accounts - no matter how deficient - were lodged, I do not think that it would be unconscionable for the petitioning creditor to resile from that statement in circumstances where Mr Carantinos had failed in material ways to reveal his own financial position. 27 Mr Bowles submitted that only the Supreme Court could properly consider whether its orders for accounts had been complied with. However, such a contention cannot be correct. His client raised in this Court the argument that the letter of 24 September 2007 grounded an equitable estoppel. Having raised that argument Mr Carantinos cannot be heard to deny the ability of the petitioning creditor to examine his own compliance with that which the letter contemplated. The ground must be rejected.
Conclusion 28 Each of the grounds fails. The appeal must be dismissed with costs. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.
Associate: Dated: 15 June 2009 Solicitor for the Applicant: Mr D Bowles of Bowles Lawyers
Counsel for the First Respondent: Mr T Alexis SC with Mr S Golledge
Solicitors for the First Respondent: Rockliffs Solicitors & IP Lawyers
Carantinos
Magafas
(2004) 141 FCR 107