National Australia Bank Ltd v Elgammal
[2014] FCCA 828
•14 April 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NATIONAL AUSTRALIA BANK LTD v ELGAMMAL | [2014] FCCA 828 |
| Catchwords: BANKRUPTCY – Creditor’s petition – notice of opposition – where bankruptcy notice sent to respondent’s solicitor by email – where solicitor wrote to inform applicant that he was not instructed to accept service – consideration of regulation 16.01 of Bankruptcy Regulations 1996 (Cth) – whether service of bankruptcy notice effected – application for sequestration order dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth) s.52 |
| Mulherin & Quinn Villages Pty Limited [2012] FMCA 1063 Sea Shepherd Australia Limited v Commission of Taxation [2013] FCAFC 68 Re Briggs; Ex Parte Briggs & Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 Lazar & Jocylyn Seccombe and Another [2005] FCA 1652 Sunderland & G. & J. Drivas Pty Limited [2000] FCA 1029 |
| Applicant: | NATIONAL AUSTRALIA BANK LTD |
| Respondent: | ELARABY ELGAMMAL |
| File Number: | SYG 129 of 2014 |
| Judgment of: | Judge Raphael |
| Hearing date: | 14 April 2014 |
| Date of Last Submission: | 14 April 2014 |
| Delivered at: | Sydney |
| Delivered on: | 14 April 2014 |
REPRESENTATION
| Solicitors for the Applicant: | Gadens Lawyers |
| Solicitors for the Respondent: | Sarvaas Ciappara |
ORDERS
Creditor’s petition set aside.
Application for a sequestration order dismissed.
Applicant creditor to pay the debtor’s costs, to be taxed if not agreed in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 129 of 2014
| NATIONAL AUSTRALIA BANK LTD |
Applicant
And
| ELARABY ELGAMMAL |
Respondent
REASONS FOR JUDGMENT
There comes before the court today an application for a sequestration order which is resisted on interesting and, the court believes, important grounds. The respondent debtor was the guarantor of an obligation to the applicant creditor. It was an obligation that he did not meet. The creditor obtained judgment in the Supreme Court of New South Wales on 12 April 2013 in the substantial sum of $347,044.48. It sought recovery of that amount. On 7 August 2013 it wrote to Mr Elgammal advising him that a judgment had been obtained against him and requesting that the amount then owing, having increased to $374,948.48, be paid by 30 August 2013. It warned that unless payment was received, the creditor would proceed with bankruptcy proceedings against him without further notice. On 21 August 2013 a solicitor, Mr Gary Koutzoumis, wrote to the bank’s lawyers, Messrs Gadens, indicating that he had been:
“instructed to conduct some preliminary inquiries for and on behalf of Mr Elaraby Elgammal arising from a piece of correspondence received by him and dated 7 August 2013.”
Correspondence between Mr Koutzoumis and Messrs Gadens then continued after Mr Koutzoumis advised on 24 August 2013 that he had been retained by Mr Elgammal. The correspondence continued until 9 September 2013 when Messrs Gadens reminded Mr Koutzoumis that a judgment had been obtained on 12 April 2013 and that their firm had been instructed to proceed with enforcement action. This resulted in a letter on the same day which would clearly appear to have been an offer made on behalf of Mr Elgammal because the copy that is attached to the affidavit of Pip Ashleigh Nagan, contains an almost 95 per cent redaction.
Gadens replied on 23 September 2013. A certain amount of the letter was redacted but it did say this:
“Kindly confirm if you hold instructions to accept service of documents on behalf of your client, including the bankruptcy notice issued against your client.
Otherwise, kindly confirm the current address of Mr Elgammal so that we may arrange for him to be personally served with any documents.”
Mr Koutzoumis replied on 26 September 2013 but the whole of the letter is redacted, save for the words “our client”. On 9 October 2013 Gadens wrote again. The entirety of that letter has been redacted, save the reservation of rights, including rights under the judgment by that firm. Mr Koutzoumis responded on 10 October 2013, seeking some particulars of the figures that must have been contained in Gadens’ letter. Gadens would appear to have provided those particulars on 17 October 2013 in a highly redacted letter, in which they also said:
“We are instructed to continue with legal action including enforcement of the judgment and bankruptcy proceedings, without further notice.”
On the same day, Mr Koutzoumis wrote, making reference to Mr Elgammal as “our client”. Gadens responded, reserving rights, on 7 November 2013 and on the same day, sent to Mr Koutzoumis by email and, presumably, attachment, a letter in the following form:
“Dear Mr Koutzoumis,
National Australia Bank Limited v ETA Enterprises Pty Limited and Ors
Bankruptcy Notice BN165323 Issued 17 September 2013
We enclose by way of service, bankruptcy notice (BN 165323) issued on 17 September 2013 against your client.
Yours sincerely
Marc Rossi, for GADENS LAWYERS.”
That email was sent at 10.30 am. At 10.41 am Mr Koutzoumis responded:
“Dear Marco,
Regrettably I am not instructed to accept service with respect to your purported Bankruptcy Notice.
I suggest you serve Mr El Gammal personally as I will not accept service.
Thank you
Kind regards,
Gary Koutzoumis.”
The amended notice of opposition to the petition that was presented to this Court on 20 January 2014, it states:
“1. The petitioning creditor failed to serve a bankruptcy notice on the debtor in accordance with regulation 16.01 of the Bankruptcy Regulations 1996 (Cth) and as such, the debtor has not failed to comply with the bankruptcy notice; such that non-compliance, being “the act of bankruptcy” upon which the petition is founded;
2. By virtue of ground 1 above, the Court has no jurisdiction under section 43 of the Bankruptcy Act 1996 (Cth) (The “Act”) to make a sequestration order against the debtor;…”
Regulation 16.01 of the Bankruptcy Regulations 1996 (Cth) is in the following form:
“Service of documents
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
(a) sent by post, or by a courier service, to the person at his or her last-known address; or
(b) left, in an envelope or similar packaging marked with the person's name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person's name, at the last-known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.
(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(a) in the case of service in accordance with paragraph (1)(a) or (b)--when the document would, in the due course of post or business practice, as the case requires, be delivered to the person's address or document exchange facility; and
(b) in the case of service in accordance with paragraph (1)(c), (d) or (e)--when the document is left, delivered or transmitted, as the case requires.”
The creditor argues that by sending the bankruptcy notice as an attachment to an email to Mr Koutzoumis, service was effected in accordance with reg.16.01(e)(ii). The creditor also argues that service could be considered to have been effected under reg.16.01(1)(a), (b) or (c).
The authority that the applicant submits provides support for these arguments is a decision of Burnett FM, as his Honour then was, in Mulherin & Quinn Villages Pty Limited [2012] FMCA 1063.[1] It is an accepted principle of the common law that that one judge that will not make a decision contrary to that of another judicial officer of the same court, unless the first judicial officer comes to the view that the original decision is clearly wrong. It is with some regret that I have to say that I am of that view in relation to this decision. In Mulherin a creditor had served a second bankruptcy notice upon a debtor by sending the same by way of facsimile to his solicitors. His Honour came to a number of views. At [34], having referred to certain authorities in relation to regulation 16.01, he said that:
“In that regard then, the circumstances appear to me to be analogous to service in the sense provided for in sub-regulations (a) (b) or (c) of regulation 16.01, which do not require personal service, but service at a place or address with which the debtor has an established connection. Given a long and established connection between the debtor and the solicitor, it seems to me that the facts support that conclusion. Upon that basis, I would be prepared to find that the faxing of a bankruptcy notice to the debtor’s solicitor would here satisfy the requirement of being sent in such a manner that it should, in the ordinary course, be received by the debtor.”
[1] Mulherin.
To the extent that his Honour appears to be saying that he believed that the method of service there utilised would fulfil the requirements of 16.01(1)(a), (b) or (c), I cannot agree. A facsimile is not a document sent by post or courier service and it is not a document that has been left in an envelope. It occurs to me, however, that a proper reading of the whole judgment indicates that this is some reflection on the part of his Honour and it is not a finding. His Honour then turns to his interpretation of regulation 16.01(1)(e) where he had previously opined:
“14. The language of sub-regulation (e), paragraphs (i) and (ii), is difficult. The disjunctive “or” appears at two important parts of the regulation. The opening sentence of sub-regulation (e) is split by the insertion of the disjunctive “or” as are paragraphs (i) and (ii) of the sub-regulation. Arguably, the first part of the sentence could apply expressly to paragraph (i) and the second part of the sentence to the disjunctive paragraph (ii). Construing the regulation this way would in practical terms address the mischief of ensuring that when electronic means of service are used the mode of such transmission which most closely relates to the physical means by which such transmission will be received is engaged to infer service might come to the attention of the recipient.
15. For instance, commonly with a fax transmission the recipient will have a dedicated machine at the receiving end. That machine would constitute a “facility.” Undoubtedly if the facility was maintained by the debtor for the receipt of electronically transmitted documents (in this instance the bankruptcy notice), the forwarding by fax would in the ordinary course be brought to the debtor’s attention.
16. Likewise, if the manner of service in the second part of sub-regulation (e) is regulated by paragraph (ii), then in practical terms the forwarding of the bankruptcy notice by email need not be tied to a specific facility or machine for such transmission to be received by the debtor in the ordinary course of events. This mode acknowledges a more flexible capacity for emails to come to the attention of an intended recipient. For instance, it has long been the case that internet service providers may facilitate access to personal email accounts that are not tied to any particular piece of equipment or device. There is a general capacity to receive emails from any machine or device which has the capability to logon to the internet.
…
21. It follows, in my view, that the proposed construction which gives both paragraphs (i) and (ii) of sub-regulation (e) meaning and work, provides the interpretation which is to be preferred. That is the construction contended for by the debtor. Namely that the application of each part of the first sentence of sub-regulation (e) split by the disjunctive expressly applies to paragraph (i) and/or paragraph (ii) respectively, having regard to the disjunctive.
22. In this case, there is no contest concerning the facts. The facsimile was sent to a facility maintained by person other than the debtor, and it follows that service was not effected as required byregulation 16.01(e) (i).
23. As the mode of transmission was by facsimile and not by another mode of electronic transmission, paragraph (ii) is not engaged.
I am of the view that his Honour’s reasoning is in error. In my view, there is no disjunctive here. There is merely the drafter’s wish to allow for more than one form of electronic transmission. It is to be remembered that these regulations were created at a time when electronic mail was in its infancy and facsimile was the preferred method of communication electronically. In my view, both the subclauses of regulation 16.01(e) apply to both facsimile transmissions and other electronic transmissions. As his Honour suggests, generally speaking, a facsimile system would require a machine that is maintained in a particular place but the facility referred to in 16.01(e)(i) could also refer to a computer terminal which would receive electronically-transmitted documents attached to emails. Subclause (ii) should not exclude facsimiles where there may be evidence that facsimiles sent to a particular number are received by a person. This subclause, in giving an example, falls into the trap identified by the Full Bench in Sea Shepherd Australia Limited v Commission of Taxation [2013] FCAFC 68, where Besanko J said at [4-5]:
“The applicant referred to examples 11.15, 11.16 and 11.17. The respondent referred to examples 11.14, 11.15 and 11.18.
None of these examples provide any real assistance in relation to the ground upon which Gordon J decides this case, and with which I agree. In any event, in the circumstances they constitute a distraction from the task of construction which the Court must undertake. Unless the example matches exactly the facts before the Court (a circumstance which is likely to be very rare) examples should be approached with caution. I say that because of the temptation to reason by analogy from an example to the facts before the Court and in the process to bypass the actual words to be construed by the Court. To make this observation is perhaps to do no more than reiterate the point made generally about the use of extrinsic material by Heydon J in SAEED v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252 at 277 – 278 [74].”
In coming to the above interpretation of these subclauses of the regulations, I am satisfied that subregulation 16.01(e)(i) is not brought into play because a computer in a solicitor’s office is not maintained by the “person” for the receipt of electronically-transmitted documents, the person in this case always being the debtor and not the debtor’s solicitor. In regard to subclause (e)(ii), the question is whether or not it can be said that a document sent to the solicitor’s office is a document that should, in the ordinary course of events, be received by the debtor. Having regard to the correspondence between these parties, I think the answer to that question is, “No.” I say this, notwithstanding the rather detailed correspondence between the solicitors regarding payment of the debt. I fully accept that at all material times Mr Koutzoumis was the solicitor for Mr Elgammal in connection with these negotiations. But Mr Koutzoumis did not respond to Gadens’ very specific request to tell them whether or not he was instructed to accept service, including service of the bankruptcy notice. None of the letters written by Mr Koutzoumis made reference to this, and it does seem clear from the correspondence that Mr Koutzoumis’ job was as a negotiator on behalf of Mr Elgammal. His lack of instructions to accept service was confirmed by the very speedy advice given to Messrs Gadens to their email purporting to effect service. In those circumstances, it cannot be said that the document should, in the ordinary course of events, be received by the debtor. I have no evidence before me that Mr Koutzoumis sent the document to Mr Elgammal. It is quite possible that all that he did was to tell Mr Elgammal, either in writing or orally, that a bankruptcy notice had been sent to him and that he had returned it and that Mr Elgammal should await proper service in accordance with the provisions of the Act and Regulations.
It follows from the above that I am of the view that no service of the bankruptcy notice was effected in accordance with the Act and Regulations. The question is whether or not the court should exercise its discretion which, in Re Briggs; Ex Parte Briggs & Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 311 – 312, the discretion was explained. The cases there cited were considered by Jacobson J in Lazar & Jocylyn Seccombe and Another [2005] FCA 1652. There his Honour concluded that he should not set the notice aside at the stage of that application where the only question for the purposes of the Regulations was whether the bankruptcy notice was left in an envelope. On the facts of that case, it would appear that the debtor received the bankruptcy notice and passed it on to his solicitor. His Honour, effectively, left a final decision about the validity of the bankruptcy notice to the judge hearing the petition, as was recommended by Hely J in Sunderland & G. & J. Drivas Pty Limited [2000] FCA 1029.
In the instant case, I would not seek to exercise my discretion in favour of the applicant because I cannot be satisfied that the bankruptcy notice was received by the respondent and, therefore, that he had an opportunity to comply with it. This is the hearing of the petition. In coming to this conclusion, the court has no alternative but to set aside the petition and dismiss the application for a sequestration order. It would follow that the applicant creditor must pay the debtor’s costs.
There was a third ground in the amended notice. It argued that the court should find that there was other sufficient reason for not making the order: that the debtor has brought a claim in negligence against his former solicitor (not Mr Koutzoumis) for leading him into the original guarantee and loan agreement with the National Australia Bank. Whilst it appears that, at the moment, the solicitor has not responded to the proceedings, the court is sensible of the fact that a claim in this amount will be covered by the compulsory insurance scheme run by the Law Society and that one can expect that such a case will be fought or, at the very least, not concluded for some considerable time. I do not have sufficient information about the case to come to the very serious finding that this proviso in s.52 should be applied as against a creditor who would have had every right as to his remedy had he complied with the provisions of the Regulations. The costs in this matter should be taxed if not agreed in accordance with the Federal Circuit Court Bankruptcy Rules.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Associate:
Date: 24 April 2014
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