Carantinos v Magafas

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].