Austar Finance Group Pty Ltd v Campbell

Requirements as to service of the application

1. Mr Katekar, who appears for the Company, relies on s 465A of the Corporations Act which relevantly provides that: "A person who applies under s 459P, 462 or 464 for a company to be wound up must: (a) lodge notice in the prescribed form that the application has been made; and (b) within 14 days after the application is made, serve a copy of it on the company; and (c) cause a notice setting out the prescribed information about the application to be published in the prescribed manner."
2. Mr Katekar also refers to r 2.7(1) of the Supreme Court (Corporations) Rules 1999 (NSW) which provides that: "As soon as practicable after filing an originating process and, in any case, at least 5 days before the date fixed for hearing, the plaintiff must serve a copy of the originating process and any supporting affidavit on: (a) each defendant (if any) to the proceeding, and (b) if the corporation to which the proceeding relates is not a party to the proceeding - the corporation.
3. Mr Katekar rightly points out that, by r 1.3(2) of the Corporations Rules, the other rules of the Court also apply to a proceeding in the Court under the Corporations Act to the extent they are relevant and not inconsistent with the Corporations Rules. Rule 10.20(2) of the UCPR provides for personal service of an Originating Process in proceedings on a defendant and UCPR r 10.22 provides for personal service of a document on a corporation to be effected by personal service of the document on a principal officer of the corporation or by service in any other manner in which service of such a document may, by law, be served on the corporation. Mr Katekar also rightly points out that s 109X of the Corporations Act permits service to be effected on a company by leaving a document at or posting it to the company's registered office or by personal service on a director.
4. Mr Katekar submits that a person who applies for the company to be wound up must serve the originating process on the company. That proposition is correct in the sense that, as I noted above, s 465A(b) of the Corporations Act requires the applicant in a winding up application to take that course. It does not, of course, necessarily follow from the fact that the applicant for a winding up order must serve that application that only the applicant may serve that application. I will address that question further below.
5. Mr Katekar submits that CSR did not serve the Originating Process on the Company in accordance with any of the methods permitted for personal service. He points to the fact that the Company's solicitors did not have instructions to accept service at the time that CSR provided a copy of the Originating Process to the Company by email on 26 February 2016, and CSR otherwise did not take any steps to serve the Originating Process on the Company. That submission requires the significant qualification that the act of CSR's solicitors of bringing the Originating Process and supporting documents to the attention of the Company's solicitors and the Company's solicitors act in bringing those documents to the attention of the Company (which, as I noted above, I infer took place where the Company did not lead evidence to the contrary) may provide a basis for informal service at general law or under UCPR r 10.14.

Whether the Court's jurisdiction in a winding up application depends on service

1. In oral submissions, Mr Katekar submitted that the Court's in personam jurisdiction depended on valid service of the proceedings on a defendant. Dr Greinke, who appeared for the Islamic Republic of Pakistan, submitted that the Court's jurisdiction to wind up a company is conferred by s 1337B of the Corporations Act and does not depend on service. That section provides that, subject to an exclusion which is not presently relevant, jurisdiction is conferred on the Court of each State with respect to civil matters arising under the Corporations legislation. Dr Greinke also submitted that the Court's jurisdiction is invoked by the filing of the Originating Process, and that service of a winding up application is for the purpose of giving notice of that application to the defendant.
2. Dr Greinke referred to the observation of Menzies J in Motor Terms Company Pty Ltd v Liberty Insurance Ltd (in liq) (1967) 116 CLR 177 at 194-195, where his Honour considered the consequence of a petitioning creditor being paid off between the presentation of a winding up petition and the making of a winding up order and observed that that circumstance would not put an end to the petition or effect the Court's jurisdiction to hear and determine the petition, although the Court might, in the exercise of its discretion, refuse to make a winding up order upon the petition of a person who was not then a creditor. It does not seem to me that that observation assists the Islamic Republic of Pakistan, where it deals with the position where the Court's jurisdiction has been properly invoked, prior to the creditor being paid off.
3. Given the conclusion that I reach below on other grounds, it is not necessary to determine whether the Court's jurisdiction requires service or merely notice of an application. The relevance of both service and notice to an application were recognised by Barrett J in Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) [2002] NSWSC 118; (2002) 41 ACSR 15 at [23] where his Honour observed that: "In the case of the application for a winding-up order, the service requirement arises under s 465A(b). That section obliges the applicant to "serve" a copy of the application on the company within 14 days after the application is made. Although there is no provision of the Act precluding the making of a winding up order in the absence of service of the application, the fundamental principle that it is service which founds the court's jurisdiction produces that result. Any order made in the absence of the affected party in circumstances where it later became clear that that party had not been served would be set aside virtually as a matter of course. Where, as in the case of an order for winding up, the court is exercising a statutory jurisdiction and the statute prescribes a conventional service regime, it is to that regime that the court will have regard."
4. Dr Greinke also drew attention to the decision of Austin J in Carter v Newtel Ltd [2003] NSWSC 128; (2003) 44 ACSR 661 at [23], where Austin J dispensed with requirements for advertising or publication of notice of the application or service on a company under s 465A of the Corporations Act. I do not consider that decision establishes that the Court's jurisdiction does not require service upon the company, in the ordinary case, because the applicant in that case was the liquidator of the company in voluntary liquidation, which there sought an order for the company's winding up by the Court. The Court's jurisdiction over the Company was established by its participation, by its liquidator, in the proceedings and service of the proceedings was not necessary to establish that jurisdiction.

Whether compliance with the time limit for service in s 465A of the Corporations Act is a prerequisite to the Court's jurisdiction

1. Mr Katekar submits that Banfirn's delivery of the Originating Process and associated documents to the Company is not service because Banfirn did not deliver those documents within 14 days after the winding up application was made, where the Originating Process was filed on 22 February 2016 and that delivery did not occur until until 23 March 2016. Mr Katekar's submission in this respect has the essential premise that s 465A(b) of the Corporations Act has the same effect as s 459G of the Corporations Act, such that it not only requires the applicant for a winding up order to serve a copy of the winding up application on the relevant company within 14 days, but also has the result that a winding up application can only be made or continued if it is served within that 14 day period.
2. It does not seem to me that s 465A of the Corporations Act has the effect for which Mr Katekar contends. First, the language of ss 459G and 465A of the Corporations Act is very different. Section 459G(2) of the Corporations Act expressly provides that an application may only be made within 21 days after a creditor's statutory demand is served and limits the Court's jurisdiction to deal with an application made outside that period. By contrast, s 465A of the Corporations Act is not the source of the Court's jurisdiction to deal with a winding up application which arises under s 459P of the Corporations Act, which permits specified persons to apply to the Court for a company to be wound up in insolvency, or under s 461 of the Corporations Act in respect of winding up on other grounds. Section 465A seems to me to be a procedural direction, although mandatory in character, as to the steps which must be taken by a person who applies to wind up a company under, relevantly, s 459P of the Corporations Act.
3. I am reinforced in that view by the fact that s 465A of the Act has taken its present form for several years and Mr Katekar fairly accepted that he had not been able to identify any occasion on which a winding up application had been dismissed because it was served outside the 14 day period specified in s 465A(b) of the Corporations Act. That position is to be contrasted with the many occasions on which applications to set aside a creditor's statutory demand have failed by reason of service outside the 21 day period specified in s 459G of the Corporations Act.
4. Dr Greinke also submits, and I accept, that it appears that late service under s 465A(b) of the Corporations Act would constitute a defect or irregularity in connection with a winding up application, for the purposes of s 467A of the Corporations Act, which would not have the result that the winding up application would be dismissed unless the Court was satisfied that substantial injustice had been caused. The position in that respect differs from that in respect of noncompliance with the time limit in s 459G of the Act, because the time limit in that section is an essential aspect of the Court's jurisdiction.
5. In oral submissions, Mr Katekar also drew attention to s 459C of the Corporations Act which provides for a presumption of insolvency if, during or after the three months ending on the day when the winding up application was made, a company failed (as defined by s 459F) to comply with a creditor's statutory demand. That section does not seem to assist in determining this application, since it would operate in the same way whether a winding up application was continued by a creditor who filed it or a substituted creditor under s 465B of the Corporations Act, and irrespective of whether the application was served by the applicant in the winding up application or by a potential substituting creditor, or by formal or informal means. Mr Katekar also drew attention to s 459R of the Corporations Act which requires an application for a company to be wound up in insolvency to be determined within six months after it is made, unless the Court extends the period on specified grounds. It also does not seem to me that that section assists in the determination of this case, where it would also operate in the same way whether the winding up application had been served formally or informally and could readily be complied with in this case.

Whether only the applicant for a winding up order can serve the winding up application

1. Mr Katekar also submits that s 465A of the Corporations Act requires that the Originating Process be served by the person who made the winding up application, namely CSR rather than Banfirn. I also do not accept that submission. It seems to me that s 465A of the Corporations Act requires that the person who made the application, namely CSR, serve it within 14 days. The imposition of an obligation on the applicant for a winding up order to serve the application is neutral as to whether service could, in a proper case, also be effected by a third party. That is a matter that would be addressed by the general law, and the UCPR, which will apply by reason of s 79 of the Judiciary Act 1903 (Cth) in the absence of any inconsistency with s 465A(b) of the Corporations Act.
2. Dr Greinke submits that, even if service by Banfirn constituted a defect or irregularity in the winding up application, s 467A of the Corporations Act provides that the application should not be dismissed because of that irregularity. However, it seems to me that that submission assumes the conclusion that the Islamic Republic of Pakistan seeks to establish, that the provision of a document by Banfirn to the Company constituted service of it, and does not itself establish that proposition.

Whether informal service is sufficient

1. Dr Greinke submits that service is not limited to service in a formal manner or only by the plaintiff and refers to observations of Young J in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 ("Howship") at 544 that: "The ordinary meaning of 'service' is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope (1854) 4 De GM & G 328 at 341-345; 43 ER 534 at 539-540; R v Heron; Ex parte Mulder (1884) 10 VLR 314 at 315; Pino v Prosser [1967] VR 835 at 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them. If this were not so, one would get the absurd situation referred to byMcInerney J in Pino v Prosser (at 837), that the conclusion would be onewhich is: '… remarkable to the point of seeming absurdity, in that the defendantwho, on his own affidavit admits that he received the writ … should beheld not to have been served.'"
2. Mr Katekar in turn drew attention to the decision of Palmer J in Woodgate v Garard Pty Ltd [2010] NSWSC 508; (2010) 78 ACSR 468, where Palmer J referred to Howship and to the application of what his Honour described as the "effective informal service rule" in subsequent cases concerning service of statutory demands and other documents on a company and (at [44]) helpfully summarised the relevant principles. Mr Katekar particularly relied on his Honour's observation (at [44(iv)]) that: "the prescribed modes are not exclusive of other modes of service: if some other mode of service is employed, whether it is good service depends upon whether the serving party can prove to the court's satisfaction that the document actually came to the attention of an officer of the company who was either expressly or implicitly authorised by the company to deal directly and responsively with the document, or documents of that nature ("a responsible officer")." As I noted above, I draw the inference that the Originating Process that commenced the winding up and supporting documents in fact came to the attention of an officer of the Company who was authorised to deal with them, and very likely to the attention of the Company's sole director, when they were provided by CSR to the Company's solicitors.
3. I accept that, in some circumstances, something less than formal service may be effective as service. However, it does not seem to me that that proposition extends, in the general case, to service of proceedings commenced by a plaintiff by a third party which did not have the plaintiff's authority to effect such service. It would not be unusual for a plaintiff to commence proceedings to preserve a limitation period but not serve them while it undertakes further investigations. It seems to me that there is little attraction in a proposition that a third party could bring about a result that a plaintiff was deprived of a decision whether to go forward with its own proceedings, or when to serve them, by obtaining a copy of the originating process from the registry and serving it upon the defendant without the plaintiff's authority, and potentially also without the plaintiff's knowledge. It therefore does not seem to me that the principle of informal service at general law extends to the provision of a document by a plaintiff which is not intended to be by way of service (as here, in the case of the information provided by CSR) or by a third party without the plaintiff's authority.

Whether the Court should make an order under UCPR r 10.14(3)

1. However, that is not the end of the matter because, as Dr Greinke points out, UCPR r 10.14(3) provides that: "If steps have been taken, otherwise than under an order under this rule, for the purpose of bringing the document to the notice of the person concerned, the court may, by order, direct the document to be taken to have been served on that person on a date specified in the order." That rule does not in terms require that those steps have been taken by the plaintiff in the proceedings or a person on its behalf or with its authority, although it might be expected that the Court would rarely permit service to be effected by a stranger to the proceedings without the plaintiffs' authority for the reasons noted above. It seems to me that the Court would exercise its discretion whether to make such an order, in this context, having regard to the statutory purpose served by Part 5.4B of the Corporations Act, including the desirability of winding up insolvent companies for the benefit of their present and future creditors and the community, and the particular statutory purpose intended to be served by ss 465A and 465B of the Corporations Act, namely to give other creditors notice of a winding up application and the opportunity to be substituted in the winding up proceedings, including where a creditor which initiates those proceedings does not proceed with them diligently or at all.
2. Mr Katekar relied on the observation of Austin J in Austar Finance Group Pty Ltd v Campbell [2007] NSWSC 1493; (2007) 215 FLR 464 at [71] that a confirming direction under UCPR r 10.14(3) could not be made, after the expiration of the 21 day time period set by s 459G(3) of the Corporations Act, to cure noncompliance with the requirements for service of an application to set aside a creditor's statutory demand under s 459G of the Corporations Act. That observation is consistent with the authorities that establish that the time limit in s 459G of the Corporations Act is essential to the Court's jurisdiction to set aside a creditor's statutory demand. That observation does not, however, extend to s 465A of the Corporations Act, where I have not accepted that that section has an operation analogous to that of s 459G of the Corporations Act.
3. It seems to me that the Court can and should make an order confirming service under UCPR r 10.14(3) in this case, as from 26 February 2016 when the Originating Process and supporting documents were provided by CSR's solicitors to the Company's solicitors and, I infer, by those solicitors to the Company. It seems to me that several matters support the making of such an order. First, although I accept that CSR did not subjectively intend to bring about service of the proceedings, an option not to serve the proceedings was not properly available to it, by reason of the obligation upon it to serve those proceedings under s 465A(b) of the Corporations Act. It seems to me that the Court should more readily make an order under UCPR r 10.14(3) where a party which brought proceedings to another party's attention was under a statutory obligation to serve those proceedings, and where such an order would bring about the same result as compliance with that obligation.
4. Second, the substitution regime in s 465B of the Corporations Act assumes, reasonably enough, that the applicants in a winding up proceeding will comply with the statutory obligation imposed upon it to serve those proceedings and cause the prescribed notice of them to be published under s 465A(b)-(c) of the Corporations Act. The commencement of proceedings, without service or publication in breach of s 465A(b)-(c) of the Corporations Act, would subvert the substitution regime and promote the use of the Court's process to bring about private settlements between the applicant in a winding up order and insolvent companies, to the detriment of creditors which could otherwise have brought a substitution application had the proceedings been served and published as the Corporations Act requires. It seems to me that the Court should more readily make an order under UCPR r 10.14(3) in that situation.
5. Third, in this case, the Company was not only the beneficiary of the failure to effect service as required by s 465A(b) of the Corporations Act, but it promoted that failure, by seeking and obtaining an undertaking from CSR that it would not serve or publish the application as s 465A(b)-(c) of the Corporations Act required. It seems to me that the Court should more readily make an order under that rule against a party which promoted the breach of a statutory obligation as to service. Fourth, as I have noted above, the Court may infer that the Company became aware of the application at the time it was provided by CSR's solicitors to the Company's solicitors, and it was at least aware of that application by the time that it sought to have orders made by the Registrar dismissing it, without allowing other creditors the opportunity to be substituted under s 465B of the Corporations Act. The Court should more readily make an order under that rule where a party was in fact aware of the relevant proceedings.
6. I am reinforced in these views because, as Dr Greinke points out, proceedings for winding up have a representative character, in which a plaintiff is at least to some extent acting on behalf of all of a company's creditors. It is not necessary, in order to reach that result, to go as far as Dr Greinke does in his submission that arrangements of the kind reached between CSR and the Company constitute a fraud upon the creditors. For all these reasons, I am comfortably satisfied that the Court may properly make an order under UCPR r 10.14(3) on the basis that steps have been taken by CSR, other than under an order under UCPR r 10.14, for the purpose of bringing the documents to the notice of the Company, and that order would promote the purposes of the relevant statutory regime.
7. Had it been necessary to do so, I would also have made such an order, for the reasons set out above and one additional reason, so far as Banfirn had also brought the application and supporting documents to the Company's attention. The additional reason is that Banfirn was not a stranger to the proceedings, but an entity which by that time had filed a notice of intention to appear in the proceedings and had standing to proceed with an application to be substituted for CSR, once the proceedings were served. It seems to me that the Court would also more readily make an order under UCPR r 10.14(3) in that situation, than in a case where a stranger to the proceedings which had no proper interest in them served documents associated with the proceedings upon a defendant.

Whether the Company waived any objection as to service

1. Mr Katekar also acknowledged that the Company emailed a copy of signed short minutes of order to the Corporations Registrar on 26 February 2016, seeking to have the proceedings dismissed by consent. The Registrar, properly, did not make orders to that effect, given the substitution regime contemplated by s 465B of the Corporations Act. Mr Katekar submitted that this conduct did not amount to a waiver by the Company of the requirement for service. It is not necessary to address that submission, given the other findings that I have reached on other grounds, and because the Islamic Republic of Pakistan, which was the only party to take an active role in this application, did not contend to the contrary.

Orders

1. Accordingly, I make the following orders:
2. Pursuant to r 10.14 of the Uniform Civil Procedure Rules, direct that each of the documents attached to an email dated 26 February 2016 from solicitors for CSR Building Products Limited to solicitors for Denham Constructions Pty Ltd (Annexure "AR1" to Ms Radich's affidavit dated 31 March 2016) be taken to have been served on Denham Constructions Pty Ltd on 26 February 2016.
3. The Interlocutory Process filed by Denham Constructions Pty Ltd on 31 March 2016 be dismissed.
4. Subject to hearing the parties, the Company should also pay the costs of the Islamic Republic of Pakistan of and incidental to the Interlocutory Process, as agreed or as assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 May 2016