Abadeen Group Pty Limited v Bluestone Property Services Pty Limited

Judgment (Ex Tempore) 1HIS HONOUR: By originating process filed on 4 January 2013 the plaintiff World Square Realty Pty Ltd seeks an order pursuant to (Cth) Corporations Act 2001, s 459G setting aside a creditor's statutory demand dated 11 December 2012 served on it by the defendant Gabriel Ehrenfeld. The creditor's statutory demand was as follows: To: WORLD SQUARE REALTY PTY LTD ACN 122 381 926 of Suite 32, 520 George St, SYDNEY, New South Wales 2000 1. The company owes GABRIEL EHRENFELD of Level 23, Tower 1, 520 Oxford St, BONDI JUNCTION, New South Wales 2022 ("the creditor") the amount of $103,568.37, being the amount of the debt described in the Schedule. 2. The amount is due and payable by the company. 3. The creditor requires the company, within 21 days after service on the company of this demand: (a) to pay to the creditor the amount of the debt; or (b) to secure or compound for the amount of the debt, to the creditor's reasonable satisfaction. ... 6. The address of the creditor for service of copies of any application and affidavit is Level 23, Tower 1, 520 Oxford St, BONDI JUNCTION, NSW 2022. SCHEDULE Description of Debt: Money owed by the Debtor to the Creditor for money had and received and being a judgment debt entered on 6 November 2012 in proceedings number 2012/00306479 issued in the Local Court of NSW, Waverley Registry. Amount of Debt: $103,568.37 2The first issue of significance is whether the s 459G application was made within time. Within that, the first question is when was the creditor's statutory demand served. The affidavit of Ian Robert Sanderson sworn 11 February 2013 deposes that he posted the creditor's statutory demand by ordinary prepaid post in an envelope addressed to the plaintiff on 11 December 2013, and according to his usual practice, before 5pm on that date, by placing it in a post box operated by Australia Post on level five of the Westfield Shopping Centre in Oxford Street, Bondi Junction. That affidavit also establishes that the ordinary course of post for an article posted at that post box to reach an address in the Sydney central business district would be not much longer than one business day. Accordingly, it might be concluded that, in the ordinary course of post, the creditor's statutory demand would have been delivered to the plaintiff by no later than 13 December 2012. 3While there is no definition of service in the Corporations Act, nor prescription as to the mode of service of a statutory demand, s 109X authorises several methods of service on a company, including (under sub-section (1)(a)) that a document may be served on a company by leaving it at or posting it to the company's registered office. The meaning of posting is dealt with in (Cth) Acts Interpretation Act 1901, s 29, which provides: Where an Act authorises or requires any document to be served by post, and whether the expression "serve" or "give" or "send" or any other expression is used, then unless the contrary intention appears the service shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post. It has been held that s 109X is to be construed by reference to Acts Interpretation Act s 29 [Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) [2002] NSWSC 118; Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd [2005] SASC 48]. 4Once it is established that documents have been sent by post in accordance with Acts Interpretation Act, s 29(1), and Corporations Act, s 109X, the documents are deemed to have been served at the time at which the letter would have been delivered in the ordinary course of post. In order to avoid the effect of that deeming provision, it is necessary to prove that the documents were not so delivered [Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 96]. There is a distinction between non-delivery and non-receipt. It is insufficient to prove mere non-receipt if a party wishes to establish that service by post has not been effected [FP Leonard Advertising Proprietary Limited v KD Travel Service (1993) 12 ACSR 136, 138]. 5The affidavit of Dong Ling Michelle Xiao sworn 25 February 2013 was filed late in the proceedings in order to endeavour to rebut the presumption. She deposed that she was an office manager of the plaintiff and as such was responsible for receiving all correspondence addressed to the plaintiff; that on 19 December 2012 she received an envelope containing the creditors statutory demand; and recalls that it was 19 December 2012 because on that date she sent an email to the plaintiff's lawyers and copied it to one Brian McMillan. She annexes a copy of the email, which is in the following terms and bears the date 19 December 2012 at 4:19:21pm: Hi Dominic. Please find the attached letter we received today. Kind regards, Michelle. 6As the transmission to Mr Oliveri (but not that to Mr McMillan) was apparently unsuccessful, Mr McMillan forwarded the email to Mr Oliveri on 21 December at 8:27pm. 7In the course of submissions, I suggested that the affidavit of Michelle Xiao was insufficient to rebut the presumption, because a bare assertion of responsibility for receiving correspondence and receipt of the envelope on a particular date went no further than proving non-receipt as opposed to non-delivery and that more was required. Ms Xiao was then called to give oral evidence, and explained that she cleared the plaintiff's post box on a daily basis; that the post box was located on the basement level of the building in which the plaintiff's premises are situated; that the post box bears the designation "32", corresponding with the suite number of the plaintiff's offices in that building; and that she worked full time five days a week and did not have time off in December prior to 22 December. 8That evidence substantially overcomes the defects in her affidavit evidence. Coupled with the contemporaneous email referring to receipt of the attached letter "today", despite the fact that in the ordinary course of post the letter would have been delivered earlier, I am satisfied that in fact it was not delivered to the plaintiff's address until 19 December 2012. 9Accordingly, I find that the creditor's statutory demand was served on 19 December 2012. 10The next question is, when did the twenty-one day period expire? It is clear that the twenty-one day period may not be extended under Corporations Act, s 1322(4), or otherwise [David Grant & Company Proprietary Limited v Westpac Banking Corporation [1995] HCA 43]. Nor does the court's power to extend time in s 459F(2) permit the making of an order extending the period for compliance after time for compliance has expired [Aussie Vic Plant Hire Proprietary Limited v Esanda Finance Corporation Limited [2008] HCA 9]. 11If the last day in the twenty-one day period is a Saturday, Sunday or public holiday, the application may be filed on the next following day which is not a Saturday, Sunday or public holiday [(Cth) Acts Interpretation Act 1901, s 31(2); Kanwa Nominees Pty Limited v Australian Taxation Office [2001] ACTSC 30; Acts Interpretation Act, s 36 Southern Titanium NL v Bell Potter Corporate Finance Limited [2004] SASC 93]. 12Initially Mr Oliveri for the plaintiff contended that, by operation of (NSW) Supreme Court (Corporations) Rules 1999, r 1.9(4), the period commencing on 25 December 2012 and ending at the end of 1 January 2013 was not to be counted. That rule is in the following terms: In calculating a period of time for the purposes of these rules, the period beginning on 25 December in a year and ending at the end of 1 January in the next year is not to be counted. 13As will be seen, that rule relates to the calculation of a period of time "for the purposes of these rules". The period of twenty-one days is fixed by the Corporations Act, not by or under the rules, and the rules of the Supreme Court cannot affect the interpretation or enlargement of time fixed by the Corporations Act. 14It follows that if, as I have found, the statutory demand was served on 19 December 2012, the 21 day period expired on 9 January 2013. 15The next subsidiary question is whether the s 459G application was properly served. The Corporations Act does not prescribe the mode of service required by s 459G. Where the creditor is an individual, s 109X is of no assistance. However, Acts Interpretation Act 1901, s 28A, provides for the service of documents on natural persons, and provides that for the purposes of any act that requires or permits a document to be served on a person, whatever expression is used, then unless the contrary intention appears, the document may be served on a natural person by delivering it to the person personally, or by leaving it at or sending it by prepaid post to the address of the place of residence or business of the person last known to the person serving the document. While there are authorities that suggest that s 28A is not applicable to the service of a s 459G application [Rochester Communications Group Pty Limited v Lader Pty Limited (1997) 23 ACSR 380; Howship Holdings Limited v Leslie (1996) 133 FLR 303; Howship Holdings Limited v Leslie (No 2) (1996) 41 NSWLR 542] the prevailing view is that the section does apply [Quitstar Pty Limited v Cooline Pacific Pty Limited [2002] NSWSC 402; Polstar Pty Limited v Agnew [2007] NSWSC 114]. 16Moreover, the form of creditor's statutory demand is prescribed by the (Cth) Corporations Regulations 2001, and includes provision for an address for service. The only purpose for providing for an address for service is to identify a place at which a s 459G demand could be served. In Zipvac Australia Pty Limited v James [2011] NSWSC 392, Barrett J stated, albeit obiter, that the service of the originating process and supporting affidavit at the address specified for service on the statutory demand must be regarded as good service, even if it was the address of the creditor's solicitor and not the creditor itself [see also Newsnet Pty Limited v Patching [2011] NSWSC 690; The Site Foreman Pty Limited v Brand [2011] NSWSC 451; Woodgate v Garard Pty Limited [2010] NSWSC 508]. 17The evidence establishes that the originating process and supporting affidavit of Mr Oliveri sworn 4 January 2013, having been filed on 4 January 2013, were delivered to the defendant's address for service by post on 8 January 2013. That is within the 21 day period, 18Accordingly, there was valid service within time of the s 459G affidavit. 19The next and essential issue is whether there was a genuine dispute as to the existence or amount of the debt claimed, or some other reason why the creditor's statutory demand should be set aside. In this case, the statutory demand relied exclusively on a judgment debt. As will be seen from its recitation above, it descended to no detail as to the nature, effect or origin of the debt. In fact, it had been the subject of a statement of claim in the Local Court which claimed $100,000 plus interest for "money had and received by the defendant for the plaintiff", particularised as follows: On 31 May 2012 the plaintiff paid to the defendant the sum of $100,000 which had not been returned to the plaintiff by the defendant when requested. 20That statement of claim was issued from the Local Court at Waverley on 3 October 2012. On 29 October 2012, the present plaintiff sent to the defendant a request for particulars. It seems that that request was not received, due to a mistake made by the present plaintiff in connection with the facsimile number to which it should be sent. As a result, the defendant obtained a default judgment against the plaintiff, which was entered on 6 November 2012. The plaintiff learnt of the default judgment on or shortly after 22 November 2012, and on 5 December filed a motion in the Local Court seeking to have the judgment set aside and the particulars previously requested provided The plaintiff sought a stay of the judgment until the hearing of the motion, which was claimed in terms, "The judgment be stayed until the hearing of this motion." 21On 10 December 2012, a Registrar of the Local Court listed the motions for hearing on 18 January 2013 and recorded, "Interim stay granted pending determination of these motions." Due to the subsequent and somewhat belated service of affidavits by the defendant resisting the application to set aside the judgment in the Local Court proceedings, that hearing was vacated and has been adjourned to a later date, which has not yet arrived. 22As the creditor's statutory demand relied exclusively on a judgment debt, the plaintiff does not establish a bona fide dispute within s 459H merely by showing that an application has been made to set aside the default judgment [Timberland Property Holdings Pty Limited v Schindler Lifts Pty Ltd [2011] NSWSC 466]. This is analogous to the rule that the pendency of an appeal from a judgment does not of itself establish a genuine dispute as to the existence of a judgment debt [Eumina Investments Pty Limited v Westpac Banking Corporation [1998] FCA 824; Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited (1996) 21 ACSR 235]. However, the pendency of an appeal, and by analogy the pendency of an application to set aside a default judgment, can constitute "some other reason" to set aside a creditor's statutory demand within s 459J(1)(b). In this respect, a relevant factor is whether an application for a stay is available, and if so has been made or refused [Abadeen Group Pty Limited v Bluestone Property Services Pty Limited [2011] NSWSC 137; Barclays Australia v Gaffikin; Eagle Homes Pty Limited v LED Builders Pty Limited [1999] NSWSC 1049; Scope Data Systems Pty Limited v BDO Nelson Parkhill [2003] NSWSC 137]. 23In this case, a stay of the judgment had been obtained, the day before the creditor's statutory demand was served. In those circumstances it is arguable, for the reasons explained by Ward J in Fitness First Australia Pty Limited v Dubow [2011] NSWSC 531, especially at [144] and [145], that the stay precluded the issue and service of the statutory demand. Like her Honour in that case, it seems to me that having regard to the terms of the notice of motion filed in the Local Court, and the terms of the Registrar's annotation, it is at least arguable that the stay was one of the operation and not just the execution of the order. 24In any event, even if the stay did not preclude the issue of the statutory demand, in my judgment, having regard to the circumstance that the creditor's statutory demand was in form one founded exclusively on the judgment debt without further particularisation, that the judgment had been obtained in circumstances where particulars had been sought by the present plaintiff and - albeit through no fault of the present defendant - not provided, an application had been made very promptly to set aside the judgment and a stay obtained, there is "some other reason" within s 459J(1)(b) to set aside the statutory demand. 25However, that is not the whole of the story. The evidence discloses more about the nature of the debt and prima facie difficulties with the plaintiff's defence of the Local Court claim. Although not evident on the s 459G affidavit itself, which after all could only respond to what was claimed in the creditor's statutory demand, it emerged in subsequent evidence that the claim was one for return of a deposit which the plaintiff had received in the course of its business as a real estate agent. 26On 31 May 2012, the defendant wrote to the plaintiff a letter in the following terms: 1 CLAIRVAUX ROAD, VAUCLUSE NSW 2030 (ALSO KNOWN AS 29 NEW SOUTH HEAD ROAD, VAUCLUSE NSW 2030) REGISTERED PLAN: LOTS 1, 2 AND 3 DEPOSITED PLAN 1052282 FOLIO IDENTIFIER: AUTO CONSOL 4979-67 (Property) I refer to the above Property and previous communications in relation to the same. Pursuant to those discussions, I attach hereto the following: 1. BANK CHEQUE A bank cheque in the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) payable to your trust account. The funds are fully refundable immediately upon request from myself and your acceptance of the payment is confirmation of this provision and the owner's agreement to proceed in accordance with this letter. 2. EXECUTED CONTRACT The contract will become effective at exchange of the contract, which will be ninety (90) days after acceptance of the terms of this letter. Upon exchange, the purchaser will be entitled to assume immediate occupation of the Property. Immediately upon occupation, the purchaser will take out a public liability insurance policy with respect to the Property and provide the vendor with a certificate of currency in relation to the same. Please convey the owner's acceptance of this proposal in writing by close of business on 1 June 2012 27That letter was amended and signed, it would seem, by the plaintiff and the defendant, by deleting from numbered paragraph 1, the matter "upon request ... with this letter" and inserting, "if the vendor does not accept the terms of the purchase conditions", and by inserting the following "purchase conditions": (a) Exchange within 90 days. (b) Settlement 31 May 2013 with a 60 day notice to complete. (c) Renting the property from time of exchange for $180,000 per annum. (d) Insurance policy engaged by the purchaser. 28The plaintiff issued to the defendant a receipt number 0300 dated 31 May 2012 identifying the vendor (being the plaintiff's principal), the purchaser (as the defendant), the deposit paid, and having subscribed to it: Information: (a) the principal has no obligation to sell this property and you have no obligation to buy this property. (b) this deposit is repayable to you in the event that a contract is not entered into between you and the principal for the sale of the property. Incorporation of those provisions is consistent with the agent's obligations under r 11(b) and schedule 2 part 1 r 5(1) of the (NSW) Property, Stock and Business Agents Regulation 2003. 29On 8 June 2012, the defendant wrote to the plaintiff: I note that we have not been able to reach agreement on the above property. In the circumstances I now need to proceed with alternative arrangements. Accordingly, please contact me so that we can arrange for the return of the deposit. 30In a draft defence prepared for filing in the Local Court proceedings, the plaintiff will apparently assert that it is holding the said sum in trust pursuant to the terms of the agreement recorded on the 31 May 2012 letter; that the claim against it is therefore otiose; and further "that it was the disclosed agent of the vendor and as such is not liable to be sued by the plaintiff". 31This last proposition appears highly doubtful. In Sorrell v Finch [1977] AC 728, in respect of an estate agent receiving a holding deposit as distinct from a contractual deposit, it was said that it was not in accordance with first principles in the branch of the law concerned to hold that the estate agent in such circumstances was authorised to receive on the vendor's behalf a precontract deposit in the absence of expression or implied authority so to do, and in neither way was such authority there given, nor did the prospective vendor's knowledge that a deposit had been received of itself impose any liability upon him to repay it. In those circumstances, a claim against the vendor failed, the agent being exclusively responsible. The leading judgment was that of Lord Edmund-Davies who said (at 743) that in such circumstances, the inference was irresistible that the appellant agent was receiving money as a stakeholder, and that there was no novelty about such observations, the law having long been to the same effect in Australia and New Zealand. His Lordship cited (at 744) Salmond J in Richards v Hill (1920) 39 NZLR 724, who said (at 728): The defendants had no right so to part with the deposit. It was held by them for and on account of the plaintiff [purchaser] until and unless a complete contract was effected between her and the vendor. No such contract was ever effected, and the defendants [agents] must account for the deposit accordingly to the plaintiff [purchaser]. Lord Russell said (at 754) that, In cases such as the present it is wrong to say that by the engagement of an estate agent there is conferred upon the estate agent either implied or ostensible authority to receive a deposit from a would-be purchaser as agent for the vendor...If the estate agent receives a deposit either without other definition of his character or in terms "as stakeholder" and the estate agent goes bankrupt or otherwise defaults the vendor is not liable to the purchaser. 32The corollary is that the agent is liable. In this case, it seems to me, at least prima facie, that the agent received the deposit without definition of his character, if not explicitly as stakeholder, and in those circumstances is presumed to have received the deposit as stakeholder, and so that the agent and not the vendor is liable to the purchaser to refund it. 33However, it is fair to say that the plaintiff could not have been expected to meet this issue in detail, and that the s 459G affidavit, as the creditor's statutory demand, was limited to the unelaborated claim founded on the default judgment. It is conceivable, despite the difficulties to which I have adverted, that the application to set aside the judgment might succeed, in that a tenable defence might be shown. 34The justice of the case will be met, as it has often been in cases where an application is made to set aside a statutory demand pending an appeal, by requiring the amount of the demand to be paid into court. As the practical effect of the statutory demand, if not set aside, would be to deprive the plaintiff of the opportunity of pleading a defence by way of interpleader in the local court, it seems to me that there would be no injustice in imposing such a condition, and Mr Oliveri for the plaintiff did not submit otherwise. 35Accordingly, I will impose such a condition pursuant to (Cth) Corporations Act 2001, s 459M. My orders are: (1)Upon condition that by 11 March 2013 the plaintiff pay into court to the credit of these proceedings the sum of $103,568.37, I order that the creditor's statutory demand served by the defendant on the plaintiff dated 11 December 2012 be set aside.