Australian Ophthalmic Supplies Pty Ltd v Klas Pty Ltd

Judgment 1On 19 July 2011, the plaintiff ("Kennards") commenced these proceedings by filing an originating process seeking an order that the defendant ("Systems") be wound up in insolvency and an order that a liquidator be appointed. Also filed were affidavits directed towards proof of insolvency (by means of the presumption made available by s 459C(2)(a) of the Corporations Act 2001 (Cth)) and proof of other necessary matters. 2The proceedings came before me for hearing on 5 September 2011. Counsel for Kennards submitted that the orders sought should be made. 3There is, however, a preliminary matter. It concerns service. 4Kennards' solicitors posted the originating process and certain other documents on 20 July 2011 to Systems' registered office at Mackay in Queensland. The procedure for service envisaged by s 109X(1)(a) of the Corporations Act was thus followed. But Kennards did not make any attempt to comply with s 16 of the Service and Execution of Process Act 1992 (Cth); and the effect of s 9(9) of that Act is, in substance, that the Act's provisions override those of s 109X(1)(a). 5Systems became subject to voluntary administration under Part 5.3A of the Corporations Act on 26 August 2011. Acting by its administrators, Systems filed a notice of appearance in these proceedings indicating an intention to oppose the winding up application on the ground of "ineffective service of the application". 6The contention of Systems is that an element essential to success by Kennards is lacking, being service of the originating process. That contention is based squarely on non-compliance with s 16 of the Service and Execution of Process Act . 7Section 465A(b) of the Corporations Act imposes a requirement on a "person who applies under section 459P ... for a company to be wound up". The person "must ... within 14 days after the application is made, serve a copy of it on the company". 8Kennards is the "person" who, in this case, "applies under section 459P . . . for a company to be wound up". Kennards accepts that the originating process in these proceedings is, in terms of s 15(1) of the Service and Execution of Process Act , "[a]n initiating process issued in" New South Wales . Because of the Service and Execution of Process Act , it follows, first, that that originating process "may be served in another State" (s 15(1)); second, that service in the other State on a company "is to be effected by leaving it at, or by sending it by post to, the company's registered office" (s 15(3) and s 9(1)); and, third, that service in that way is, in terms of the Service and Execution of Process Act , "effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served" (s 16). The prescribed notice referred to in s 16 was in fact not attached to the originating process posted to Systems' registered office in Queensland. 9Because of Kennards' failure to comply with s 16 of the Service and Execution of Process Act , there was no "effective" service of the originating process on Systems. 10Does it follow that the court must accept that there is an insurmountable obstacle to the grant of the relief Kennards seeks? 11That view has certainly been taken in cases where an originating process purportedly under s 459G has been served in another State without compliance with s 16: see R H Mortgage Corporation Ltd v Kerry Ann Properties Pty Ltd [2011] NSWSC 298; Sustainable Organics (Wooshaway) Pty Ltd v Ranger Loaders Pty Ltd [2011] QSC 45; Everkind Pty Ltd v Hazenforn Pty Ltd [2010] NSWSC 1031; Fresh Express Australia Pty Ltd v Mary Peter (NT) Pty Ltd [2009] NSWSC 277; Energy Conservation Systems v Downer EDI Engineering Electrical Pty Ltd [2008] NSWSC 1139; (2008) 221 FLR 393; Global Cement (North Queensland) Pty Ltd v Benchmark Debtor Finance Pty Ltd [2007] QSC 143; Elan Copra Trading Pty Ltd v JK International Pty Ltd [2005] SASC 501; (2005) 226 ALR 349; Australian Ophthalmic Supplies Pty Ltd v Klas Pty Ltd [2005] VSC 106; (2005) 53 ACSR 496; Dominion Capital Pty Ltd v Pico Holdings Inc [2001] VSC 458; (2002) 4 VR 195; Marlan Financial Services Pty Ltd v New England Agricultural Traders Pty Ltd [1999] VSC 435; (1999) 158 FLR 256. 12There is, however, an important distinction between a s 459G application and a s 459P application. Section 459G makes service of a copy of the application an essential and indispensable element of the making of the application, in the sense that, in the absence of such service, no application has been made. This is the effect of s 459G(3)(b): "An application is mad e in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affid a vit, are served on the person who served the demand on the company." 13The words "An application is made in accordance with this section only if ..." mean that, if there is no service, no application has been "made". 14Section 459P proceeds on a quite different basis. Under that section, service is not an essential and indispensable element of the making of the application - by which I mean that an application that has been filed has been made (and therefore exists) whether or not it has been served. The opening words of s 465A ("A person who applies under section 459P ... for a company to be wound up") are followed, in s 465A(b), by the requirement that the application be served, thus making it clear that a person is to be regarded as having applied under s 459P even though no copy of the application has been served. The step contemplated by s 465A(b) is service of an application already made and thus having an established existence. 15I am satisfied, therefore, that the present case is to be approached on the footing that a valid and subsisting application under s 459P is in existence, albeit one that, having regard to s 16 of the Service and Execution of Process Act , has not been effectively served. 16The winding up application obviously came to the actual notice of Systems. I say this because those now having the ability to activate Systems (being its administrators) have caused Systems to file the notice of appearance I have mentioned and to instruct counsel to appear on the return of Kennards' application for the purpose of making submissions on the Service and Execution of Process Act matter. 17The circumstance just mentioned raises the question whether parties may waive the formalities of the Service and Execution of Process Act and whether that Act's provisions leave any scope of the operation of principles of informal service. I noted that question in Energy Conservation Systems Pty Ltd v Downer EDI Engineering Electrical Pty Ltd (above) at [21] - [23]. But there will be no need to address it if, as counsel for Kennards submitted, the court has power to dispense with the service requirement and exercises that power. 18Such a dispensing power is created by s 467(3) of the Corporations Act which, by virtue of s 467(1), allows the court to do any of several things "on hearing a winding up application". Section 467(3) provides: "The Court may, on the application coming on for hearing or at any time at the request of the applicant, the company or any person who has given notice of intention to appear on the hearing of the application: ... (b) dispense with any notices being given or steps being taken that are required by this Act, or by the rules, or by any prior order of the Court; ..." 19Relevant, for present purposes, is the part of s 467(3)(b) allowing the court to "dispense with any ... steps being taken that are required by the Act". Service of the winding up application in obedience to the s 465A(b) command is one such "step". 20I am satisfied that the court may, under s 467(3)(b), dispense with the requirement for service imposed by s 465A(b) (for a recent example, see Deputy Commissioner of Taxation v Australian Securities and Investments Commission; Re Civic Finance Pty Ltd [2010] FCA 1411); and that, if such dispensation is granted, the failure by Kennards to proceed in accordance with s 16 of the Service and Execution of Process Act will be of no moment or consequence. This is because the whole matter of service with which that Act is concerned will play no part in this case and the need for compliance with s 16 will disappear with the need for service itself. 21The requirement of s 16, already mentioned, is that the prescribed notice be attached to the originating process. The prescribed notice is Form 1 under the Service and Execution of Process Regulations 1993 (Cth). That form tells the defendant to whom it is directed that if a court of a State or Territory other than that in which the proceeding is brought is "the appropriate court" to determine the particular claim, the defendant may apply to have the proceeding stayed or transferred to a court in another jurisdiction. The form also tells the defendant that if he or she wishes to defend the claim, an appearance must be filed in the issuing court within 21 days of receipt of the process. There is also a statement about the need to include an address in any such appearance. 22The fact that Systems has filed an appearance and that its counsel made submissions to the court when counsel for Kennards pressed for the making of a winding up order shows that, despite the absence of a Form 1, Systems was aware of the matters to which a Form 1 would have alerted it. If the court, acting under s 467(3)(b), dispenses with the "step" of service under s 465A(b), Systems will be in no way deprived of an opportunity or benefit that compliance with s 16 in connection with that "step" would have secured to it; nor will Systems be in any other way prejudiced. 23That being so, the justice of the case will be served by a dispensing order and such an order will be made. 24I proceed now to the consequence of the circumstance that Systems became subject to Part 5.3A administration on 26 August 2011. Section 440A(2) requires the court to adjourn a winding up application if the company concerned is under administration and the court "is satisfied that it is in the interests of the company's creditors to continue under administration rather than be wound up". 25No submission has been made that the court should be so satisfied. Furthermore, counsel for the Kennards points to an unserved affidavit sworn by one of the administrators from which it may safely be inferred that, according to the deponent's assessment, Systems has not carried on any business since mid-2009, that its business was transferred to an apparently associated company which itself ceased operations in August 2011 and that both companies are insolvent in fact. 26In these circumstances, there is no basis for forming an opinion of the kind referred to in s 440A(2). There will be no adjournment. 27Kennards has proved service of and non-compliance with a statutory demand. It has filed a consent of Mr Woodgate to act as liquidator and proved all other relevant matters except, as stated, compliance with s 16 of the Service and Execution of Process Act . A ground for winding up is clearly established and there is no factor militating against the making of the order. 28The orders are as follows: