Did the Substituted Service Orders exclude other means of service, including service in accordance with reg 102?
55 Dr Lee submits that the Substituted Service Orders operated to exclude reg 102, arguing that such an intention may be implied from the terms of the Substituted Service Orders. Dr Lee relies on the observations of the Full Court in Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; 141 FCR 107 at [30] (Sundberg, Finkelstein & Hely JJ).
56 Dentons submit that on the proper construction, the Substituted Service Orders do not exclude the operation of reg 102. Dentons raise an anterior point as to whether the Court has the power to preclude reliance on the modes of service available under reg 102.
57 The first aspect of the contest between the parties on this issue is whether Skalkos is authority for the proposition that an order of the Court may exclude the operation of reg 16.01 of the Bankruptcy Regulations 1996 as it then was, and by analogy reg 102 as presently in force. The relevant text of the regulations are extracted at [50] (reg 102) and [53] (reg 16.01) above. Neither party advanced submissions which sought to relevantly distinguish Skalkos on the basis of the manner in which the relevant regulation is now expressed.
58 The relevant passage of the Full Court's reasons in Skalkos is as follows (at [29] to [30] (emphasis added)):
29 … In any event, a contrary intention for the purposes of reg 16.01(1) must appear from the Act or the Regulations, or from some other legislation. … Nor does it appear from quite accurate statements such as those in factors (a), (e) (f) and (g). It is true that provisions such as reg 16.01 contemplate the possibility of something less than actual receipt by the person to be served. But as Tindal CJ said in Bishop v Helps (1845) 2 CB 45 at 57; 135 ER 857 at 862 (a passage quoted in Fancourt at 96):
"It was probably considered that the public convenience would be promoted by the present provision, and that its advantages would greatly outweigh the inconvenience which, in some few cases, might possibly arise from it."
In our view, the fact that in some cases reg 16.01 can produce harsh results, which is what the combination of the factors relied on is directed to establishing, does not constitute a contrary intention for the purposes of reg 16.01(1). Factors (d), (h) and (i) assume that it is open to a debtor to prove non‑receipt of the notice. As we have said, this assumption is ill‑founded.
30 The appellant also contended that the order for substituted service itself constituted a contrary intention for the purposes of reg 16.01. Assuming the Court has power to preclude reliance on the modes of service prescribed by reg 16 (perhaps under s 309(2) of the Act), an order for substituted service will constitute a contrary intention only if it evinces an intention that it is to operate either to the exclusion of reg 16 or to the exclusion of any other mode of service. We agree with his Honour that the substituted service order is permissive in terms, prescribing a method "by which service may be effected". It is silent about service otherwise than in accordance with its terms. The order does not constitute a contrary intention for the purposes of reg 16.01(1).
59 Dr Lee places reliance on Skalkos at [30] as authority for the proposition that the Court has power to preclude reliance on the modes of service specified in the regulation. I am unable to accept that submission. It is clear that the Court assumed, without deciding, that the Court had power to exclude recourse to reg 16.01 and on the basis of that assumption proceeded to construe the relevant orders in Skalkos. In assuming the existence of a power, the Court posited that "perhaps" the source of such a power was to be found in s 309(2) of the Bankruptcy Act. Section 309(2) of the Bankruptcy Act provides as follows:
(2) Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court, whether or not any other manner of giving or serving the notice or other document is prescribed.
60 The Full Court, acting on an assumption as to the existence of the power, concluded that the substituted orders in that case did not evince the requisite intention in any event. The anterior question as to the existence of the power was, in the circumstances, not necessary to resolve, and was accordingly left open. I will proceed in a similar fashion by assuming that the Court has the relevant power and moving directly to construing the relevant orders. It will only be necessary to determine the anterior issue as to power, if the Substituted Service Orders properly construed evince an intention to preclude Dentons relying on alternative modes of effecting service, including those specified in reg 102.
61 In Skalkos the primary judge found that the effect of the substituted service orders in that case did not preclude the creditor from serving in any other way permitted by law. The Full Court in Skalkos agreed that the substituted service orders in that case were permissive, not prescriptive, or otherwise mandatory.
62 Skalkos demonstrates that service in accordance with the means specified in the Bankruptcy Regulations will not necessarily be excluded because substituted service orders are made. The starting point is the terms of the particular orders made and whether properly construed the orders evince an intention to preclude reliance on reg 102 of the Bankruptcy Regulations. The principles concerning the interpretation of orders are summarised by the learned authors in Herzfeld P, Prince T, Interpretation (2nd edition, Thomson Reuters, 2020) at [36.70] as follows:
Orders are subject to "ordinary rules of construction". Thus, "the court construes [the orders] just like any other document. It does not delve into the subjective intention of the judge pronouncing the[m]". More generally, "[e]ven if surrounding circumstances are used to construe a court order the task is still one of ascertaining what the words of the order mean".
The orders must be construed on their terms, read as whole, and given effect accordingly. Extrinsic material, such as the reasons for judgment, cannot be used to deny the effect of the words of the orders. Orders should be construed so as to give them valid effect, if possible. It may be appropriate to construe an order against the interest of the applicant for the order, for instance if the order is silent on a matter about which the applicant made no submissions when seeking it.
…
(footnotes omitted)
Applying those principles and on the assumption that the Court has power to require that service be effected in accordance with its orders and not otherwise thus excluding the availability of service under reg 102 in a particular case, I now turn to the construction of the Substituted Service Orders made in these proceedings (extracted in full at [22] above).
63 I begin with the scheme of the Substituted Service Orders read as a whole.
64 Order 1 of the Substituted Service Orders relevantly provides that service of the Bankruptcy Notice "may" be achieved by taking the cumulative list of prescribed actions set out in order 1(a) to (c) inclusive. In its ordinary usage, "may" is understood to be permissive in character. It is often contrasted with the words "must" or "shall" which are generally understood to have an imperative or mandatory character. In my view, the plain meaning of the words used in order 1 is to provide a permissive alternative means of service should Dentons wish to avail itself of that means of service. There is no suggestion in the words used in order 1 of an intention to exclude any other available means of service, or specifically the modes of service specified in reg 102. That is clear from the use of the phrase "may be effected by the following means" in order 1.
65 The consequence of Dentons availing itself of the alternate means of service afforded by order 1, is regulated by order 2 which provides that "[s]ervice in accordance with this order shall be deemed good and sufficient service". The shift from the permissive "may" to the imperative "shall" in order 2 is consistent with the purpose of order 2 which is directed to achieving with certainty what will constitute "good and sufficient service" if the modes of service in order 1 are utilised. The change from the permissive expression "may" in order 1 to the prescriptive formulation "shall" is necessary to achieve the purpose to which order 2 is directed in this regard.
66 The shift from "may" in order 1 to "shall" in order 2 is continued in order 3 which provides that the Bankruptcy Notice shall be deemed to be served on the Respondent on 31 October 2023. Similarly to order 2, the use of prescriptive language in order 3, reflects the need for certainty in the deeming mechanism directed to fixing the date on which service is achieved if the means by which service is effected are as specified in order 1. Having regard to the cumulative modes of service specified in order 1, the deeming mechanisms in orders 2 and 3 have work to do in providing certainty as to the validity and date of service effected by these means. The deeming mechanisms in orders 2 and 3 are to be construed on their terms, read as a whole, in the context of the whole of the orders. Properly construed in this way, the deeming mechanism in orders 2 and 3 are simply not engaged unless service is effected in accordance with order 1. To read order 3 as effecting a deeming date of service in respect of modes of service other than those mentioned in order 1(a) to (c) is to construe order 3 in isolation and without regard to the orders as a whole. To do so, would be against principle.
67 Likewise orders 4, 5 and 6 are prescriptive in relation to steps that Dentons must take if service is to be effected in reliance on order 1 and thereby attract the benefit of the deeming mechanisms in orders 2 and 3. Each of orders 4, 5 and 6 are expressed in imperative language. Construing the orders on their terms, read as a whole and in context, there is no ambiguity. The orders provide Dentons with an option to serve in accordance with the cumulative modes of service in order 1 on condition that if that option is taken up, orders 4, 5 and 6 must be complied with, and the result will be that good and effective service will be deemed to have occurred on 31 October 2023 by operation of orders 2 and 3.
68 The submissions advanced for Dr Lee recognised that the substituted service orders in Skalkos which were framed by reference to the term "may" were similarly found to be permissive in nature and therefore were not found to operate to exclude recourse to reg 16.01.
69 The similarity of the orders considered in Skalkos and the present Substituted Service Orders is not limited to the use of the permissive formulation in order 1 of both sets of orders. In fact, the orders considered in Skalkos are structured in a way that is strikingly similar to the Substituted Service Orders in this case. That is not surprising given that the issue of substituted service orders is a common feature of practice and procedure. It is not unusual for the formulation of the expression of procedural orders to be informed by orders that have been the subject of judicial review, particularly at the appellate level. It is convenient to extract the form of the substituted service orders in Skalkos (T & S Recoveries Pty Ltd v Skalkos, in the matter of Skalkos [2004] FCA 816 at [4] (Wilcox J)):
1 Service of Bankruptcy Notice No 300 of 2003 addressed to Theodore Skalkos may be affected [sic] by serving:
(i) the Bankruptcy Notice together with a sealed copy of this order as follows:
(a) by sending on or before 4 April 2003 by pre-paid ordinary post addressed to the judgment debtor at 118-124 Bourke Road, Alexandria;
(b) by personal service on or before 4 April 2003 on any person apparently over the age of sixteen years at 118-124 Bourke Road, Alexandria.
2 Service in accordance with this order shall be deemed good and sufficient service of the Bankruptcy Notice upon the Debtor.
3 The Bankruptcy Notice shall be deemed to be served on the Debtor on 11 April 2003.
4 A copy of the Bankruptcy Notice to be served pursuant to para. 1 of this order is to be annexed to any affidavit proving that service.
5 The copies of the Bankruptcy Notice for service and proof of service all be amended by deleting the words in paragraph 3 of the notice "after service on you of this Bankruptcy Notice" and substituting "after 11 April 2003".
6 A copy of this order be given to the Official Receiver in Sydney.
7 Costs of this application be reserved for the purposes of any future creditor's petition based on this bankruptcy notice.
70 It is immediately apparent that the structure of the orders presently under consideration closely follows the structure of the orders considered in Skalkos.
71 Dr Lee seeks to distinguish the analysis in Skalkos in so far as it focussed on the permissive framing of order 1 by submitting that the Full Court did not address the prescriptive language in orders 4 to 6 which she relies on as support for her contention that the Substituted Service Orders ousted reg 102. In order to circumnavigate the construction proffered by the Full Court, in Skalkos of order 1 and the use of "may", the following further arguments were advanced for Dr Lee:
(1) because orders 4 to 6 of the Substituted Service Orders are framed in prescriptive terms and are not required by reg 102, the Substituted Service Orders formed a code as to how service was to be effected, to the exclusion of the operation of reg 102;
(2) the Substituted Service Orders should be construed as an exclusive code for service because the incompatibility between the regime for service provided in the orders versus that available under reg 102 is such as to objectively mislead the recipient of the Bankruptcy notice. Dr Lee submits that order 3 of the Substituted Service Orders deems service to occur on 31 October 2023, with the result that the time fixed for compliance would be 21 November 2023 whereas in absence of compliance with the Substituted Service Orders, on the Registrar's reasoning service occurred on 16 October 2023 with the result that the time fixed for compliance was 7 November 2023 (sic). Dr Lee submits that to construe the orders in this way is productive of confusion and is objectively misleading and so this construction should be avoided;
(3) Dr Lee submits that it would not be apparent to any debtor from the face of the Substituted Service Orders that the Substituted Service Orders had not been complied with;
(4) Dr Lee submits that the confusion is amplified by the fact that Dentons failed to make the amendments required by order 4 of the Substituted Service Orders which would have in effect helped clarify that certain things must be done within 21 days "after 31 October 2023. To my mind the fact that the Bankruptcy Notice that was delivered had not been so amended mitigates potential confusion to which Dr Lee refers; and
(5) Dr Lee's submission culminates in a submission that the conflicting consequential time periods ought to be avoided given the penal consequences of a bankruptcy notice and thus the Substituted Service Orders should be read as operating as a code to the exclusion of reg 102.
72 Dr Lee also seeks to distinguish Skalkos on the following basis:
Regulation 102 does not require that any of the specific matters set out in orders 4 to 6 to be carried out. The Orders are therefore not compatible with the methods of service set out in reg 102. In this respect, Skalkos did not consider the effect of order 5 of the orders there (which is analogous to orders 4 and 6 here). Their Honours only focused on the words "may be effected", without considering the substituted service orders as a whole. "May" is merely presumptively permissive. On a proper construction of the Orders here, the word "may" is mandatory in nature given that the Orders operate as Code.
(footnotes omitted)
73 I am not persuaded that Skalkos can be distinguished in the manner advanced by Dr Lee. In my view, orders 4 to 6 of the Substituted Service Orders must be read in their context. Those orders effectuate the replacement of words on the bankruptcy notice to make clear that the time of service is 31 October 2023, which is the deemed time of service provided by orders 2 and 3, if, and only if, substituted service has been effected in accordance with order 1. A cursory review of the Bankruptcy Notice makes it plain that the Notice has not been amended to substitute the words "after service on you of the Bankruptcy Notice" with the words "after 31 October 2023" as required by order 4.
74 Dr Lee submits reg 102 does not impose the same requirements in respect of service as contained in the Substituted Service Orders. So much may be readily accepted. I do not accept however by reason of order 4 to 6, that the Substituted Service Orders are necessarily incompatible with reg 102. Compliance with orders 4 to 6 is only required if Dentons is to successfully affect service in accordance with the Substituted Service Orders. It is common ground that Dentons did not do so. Dr Lee does not advance any cogent reasons as to why orders 4 to 6 should be understood as being applicable where Dentons seek instead to affect service in accordance with reg 102. The "prescriptive" nature of order 4 to 6 is only engaged where substituted service in accordance with the permission granted in order 1 is relied upon. Dentons do not proceed on that basis. So understood, I do not accept Dr Lee's submission that Skalkos can be distinguished and the implicit criticism that Dr Lee makes in respect of the Full Court in Skalkos failing to consider the substituted orders as a whole.
75 Dr Lee's submissions proceeded on the premise that the Substituted Service Orders could impliedly evince an intention to operate exclusively and to the exclusion of reg 102. Dentons now submits that if the Substituted Service Orders were intended to operate in the manner advanced by Dr Lee, the Court would have to evince that intention "on the face of the [Substituted Service Orders]". I do not understand Denton's submission to be that orders cannot impliedly evince an intention in the manner advanced by Dr Lee. Rather, Dentons points to Bobos v Deputy Commissioner of Taxation [2019] FCA 1910 (Markovic J) and submits that there is a high bar to overcome. In Bobos, the relevant substituted service order provided that "Service… of the Bankruptcy Notice is… to be effected by the following means". Justice Markovic noted that the substituted service orders relevant in Bobos did not use the permissive term "may" and were otherwise silent on service by means other than in accordance with their terms: at [89]. Nonetheless, Markovic J found that the substituted service orders did not evince or constitute a contrary intention for the purposes of reg 16.01(1) of the Bankruptcy Regulations: at [90].
76 Dr Lee submitted that the relevant question on this application is:
(1) whether the Substituted Service Orders evinced a contrary intention which requires analysing the Substituted Service Orders as a whole; and
(2) not comparing the text of orders 1 and 2 of the Substituted Service Orders with equivalent orders in Skalkos and Bobos.
77 I accept the first part of Dr Lee's submission but not the later. In circumstances where, as I have identified above, there are substantial similarities between the Substituted Service Orders and the ones considered by the Full Court in Skalkos, I do not accept that the analysis in Skalkos is not a useful source of guidance particularly having regard to the observation made above as to common practice of the formulation of procedural orders being informed by previous orders directed to the same procedure. Similarly, Markovic J's analysis of Bobos also serves as a useful comparator and lends support to Denton's submission as to standard of satisfaction required before making a finding that the Substituted Service Orders properly construed impliedly exhibit an intention that the orders will operate to the exclusion of all other methods of service.
78 For these reasons, I am not satisfied that properly construed the Substituted Service Orders operated to preclude Dentons relying on the alternative modes of service specified in reg 102.