Bentley Smythe Pty Ltd v Anton Fabrications

Affidavit evidence

1. Hengji relied on an affidavit of a consultant, Mr Guo dated 21 June 2019 which claimed, relevantly, that there was a defect in service of the Demand on the second occasion when the Demand was sought to be effected, on that occasion by a process server, on 1 May 2019. Mr Guo referred to a report of service which records that the process server had then been advised that the premises were vacant. Mr Guo attributed that matter to the fact that Hengji had previously vacated the premises and had instructed its accountant to change its registered office address but that had not been done. Mr Guo referred to the fact that an email was subsequently sent by solicitors acting for Network on 31 May 2019, in respect of a claim on another company associated with Hengji which drew attention to the Demand, and contended that Hengji became aware of the Demand at that time. If that was the date of effective service of the Demand, at least by way of informal service, then the application to set aside the Demand was brought within time. Mr Guo also addressed matters, in that affidavit, relating to the alleged genuine dispute as to the Demand, which it is not necessary to address for the purpose of the separate issue. By a second affidavit dated 25 July 2019, Mr Guo again addressed issues as to allegedly defective service, in substantially the same terms as in his earlier affidavit.
2. Network in turn relied upon the affidavit dated 31 July 2019 of its solicitor, Mr Mahony, which set out the two occasions on which it contended that it had served the Demand on Hengji. Mr Mahony referred to an attempt to serve the Demand by registered post to Hengji's registered office, under cover of a letter dated 5 April 2019, and annexed records relating to, as will emerge below, the non-delivery of that letter on that date.

Whether service of the Demand was effected by post in early April 2019

1. First, Network relies on service by post of the Demand under a letter dated 5 April 2019. Mr Phillips drew attention to s 109X(1)(a) of the Corporations Act, which provides for service of a document on a company by, relevantly, leaving it at, or posting it to, the company's registered office. The various presumptions which may arise as to when service is effective do not assist Network here since, as will emerge below, any presumption of service was displaced by evidence that service by posting the Demand to the company's registered address was not effective.
2. An email sent by a member of Mr Mahony's staff dated 29 April 2019 recorded that, as at 10 April 2019, the Demand was then awaiting collection at Strawberry Hills post shop. A tracking history, also annexed to Mr Mahony's affidavit, recorded that the Demand had reached Alexandria, New South Wales, apparently for delivery to Hengji's registered office address at Zetland, on 9 April 2019, and that Australia Post attempted delivery but no-one was in attendance. It is apparent from that tracking record that the Demand was not left at Hengji's registered office, because it was shown as awaiting collection at the Strawberry Hills post shop, and was subsequently returned to sender when the item was not collected from that post shop. Even if a presumption as to delivery might otherwise have been applicable, that presumption is displaced by evidence of non-delivery, since Australia Post sought to deliver the document to the premises, but did not do so, and removed it so as to hold it for collection at the post shop before returning it to sender. On that basis, I am not satisfied that the Demand was served by delivery on the earlier of the dates in early April 2019.

Whether delivery was effected by leaving the Demand at the Company's registered office on 1 May 2019

1. The next question relates to whether service was effected by delivery of the Demand by a process server to Hengji's registered office. By an affidavit dated 7 May 2019, a process server retained by Network recorded that, on 1 May 2019, he duly served Hengji with the Demand and the supporting affidavit, "by delivering and leaving a true copy in a sealed addressed envelope, and placing it in the mail box at Unit 26, [street address omitted], Zetland, New South Wales", which is the address that then appears to have been, but is no longer, recorded as Hengji's registered office. On the face of it, that affidavit indicates that delivery was effected at a mailbox, which mailbox was, in the terms of the affidavit, at unit 26 of the relevant premises. It is common ground between the parties that the relevant premises are in fact a residential unit block, and it seems to me that the Court can infer in those circumstances that the mailbox was not physically connected to the unit but was, in the ordinary course, at a central and accessible location for the unit block.
2. By a further service report dated 10 May 2019, the process server advised Mr Mahony that he had attended the relevant address, and met a real estate agent who advised the relevant property was up for lease and was currently vacated, and that a copy of the Demand was left at the time of the attempt. That document did not further identify the manner in which that Demand was left at the premises. Neither the affidavit of the process server, nor the evidence of Mr Guo led for Hengji, provides any further physical information as to the structure of the mailboxes at the relevant premises, beyond what can be inferred from the nature of the premises, being a residential unit block.
3. Issues of this kind have arisen, more than once, in the authorities, to which Counsel have taken me in submissions. It is not necessary for me to review those authorities in detail, because other judges have undertaken that task at considerable length. In Brand & Media Pty Ltd v Aeropack Australia Pty Ltd [2007] NSWSC 854; (2007) 212 FLR 357 at [17]-[18], Hammerschlag J treated delivery to a mail room some distance from a company's registered office, by post, as not constituting delivery by post to that registered office. In Jin Xin Investment and Trade (Australia) Pty Ltd v ISC Property Pty Ltd [2006] NSWSC 7; (2006) 196 FLR 350, Barrett J accepted that a place of business may be taken to include delivery facilities that were not within its boundaries as such, but did not accept that leaving documents in a letterbox on the ground floor of an office building could be regarded as the equivalent of service at the relevant registered office on a particular floor of that building. In James v Ash Electrical Services Pty Ltd [2008] NSWSC 1112; (2008) 73 NSWLR 95, Barrett J rejected a submission that a letterbox outside a building could be regarded as part of a registered office which was identified by reference to a particular suite in the building, having regard to the fact that a registered office involves a concept of premises which are open to the public, or at least are required to be open to the public, under the Corporations Act. In Career Training on Line Pty Ltd v BES Training Solutions Pty Ltd [2010] NSWSC 460, Barrett J distinguished that position, by reference to the fact that earlier cases had identified the location of the registered office by reference to a particular location on a particular floor of the relevant building. Here, of course, the registered office is identified by reference to a particular unit in the building.
4. In Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186, Ward J (as her Honour then was) undertook a detailed review of several of the authorities to which I have referred above and (at [38]), identified the relevant question as what was the place identified as the company's registered office, at which documents could be left by way of service, and whether the creditor's statutory demand had been left at that place. Her Honour distinguished the position where, in that case, the premises were a house used for residential purposes, as distinct from a particular unit in an apartment building, and held that a document left in the letterbox of that house amounted to service at the registered office.
5. The question again was considered by Bergin CJ in Eq in Re Carbon and Energy Reductions Pty Ltd [2014] NSWSC 923, where there was evidence that the document had been left at a mailbox near the entrance to a property. Her Honour there referred to Barrett J's decision in Jin Xin above, and noted his Honour's observations that leaving documents in a letterbox on the ground floor of an office building could not be treated as the equivalent of leaving them at the particular suite which was the Company's registered office. Her Honour there held that, although the correspondence from the person who had left the demand indicated that he had done so "near the entrance of the property", there was no evidence of whether this was a reference to the entrance of unit 14, the registered office in that case, or the entrance to the residential complex of which the registered office was part. Implicitly, her Honour there treated the person who sought to establish service in a particular way as having at least the evidentiary onus of establishing the circumstances of service.
6. In Re Futre Developments Pty Ltd [2014] NSWSC 1712, where the issue was service by post rather than service by delivery at the registered office, Robb J observed that the decision in Re Carbon and Energy Reductions Pty Ltd above (at [42]) was authority that: "If a document is required to be left at the company's registered office, then the document may not be properly served by being left at the registered office, if it is placed in a letterbox that is not actually part of the premises that constitute the registered office."
7. It seems to me that Hengji has here established that service was not effected by delivery to its registered office when the process server sought to effect service in May 2019. The evidence, so far as it goes, is that the process server recorded, in his affidavit, that he had left a sealed addressed envelope containing the Demand and supporting envelope "in the mail box at Unit 26" of the relevant property. That statement is ultimately ambiguous, since it could equally well be made if the envelope had been placed in the mailbox for unit 26 at the front of a unit block, as if it had been placed in a mailbox at the door of the relevant unit. Each of the process server and Mr Guo could have led further evidence to clarify the physical structure of the relevant premises, but neither has done so, and any inference that their respective evidence would not assist the relevant parties applies both ways. Where it is common ground that the building is a residential unit block, evidence that the Demand was placed in the mailbox "at" the unit is not sufficient is to establish that it was placed in a mailbox that forms part of the registered office, still less in the registered office itself. For these reasons, I am not satisfied that it has been established that service was effected at the registered office, or by delivery to Hengji's registered office on 1 May 2019, for the purposes of s 109X of the Act.

Later informal service of Demand

1. As I have noted above, it is common ground that the Demand did later come to the attention of Hengji, when an email and letter dated 31 May 2019 (Ex P1) were sent to its director in respect of a claim upon an associated entity. The parties have treated the Demand as validly served by informal service at least at that time, and treated the application to set it aside filed on 21 June 2019 as within the 21 day period required under s 459G of the Act. Where the application to set aside the Demand was brought within time, it follows from the concession made by Mr Phillips as to the existence of an offsetting claim which would reduce the amount of the debt claimed in the Demand to below the statutory minimum that the Demand should be set aside.

Whether s 459J of the Act could be relied on if the application was brought out of time

1. For these reasons, it is not strictly necessary for me to address a further question which arose in submissions as to whether, if the Demand had been effectively served at the registered office in either April or May 2019, it could still be set aside under s 459J of the Act in proceedings that were commenced outside the 21 day period, by reference to any concept of lack of fair notice, where the process server and, through the report of the process server, Network's solicitor had been aware that the registered office was then vacant. I have addressed that question in Re LDW Constructions Pty Ltd [2019] NSWSC 1159. I did not there follow the approach adopted by Palmer J in Mangraviti Pty Ltd v Lumley Finance Ltd [2010] NSWSC 61; see also Woodgate v Garard Pty Ltd [2010] NSWSC 508. I am not presently persuaded that the result I reached in that decision was incorrect. I would have followed the approach in Re LDW Constructions Pty Ltd above, had it been necessary to do so, while recognising that that question may in due course require further consideration at appellate level.
2. Ms Scott, who appeared for Hengji, also contended that abuse of process principles might be applicable. It is not apparent to me those principles could apply here, if service was effected at a registered office at which s 109X of the Act contemplates that it may properly be effected, or could apply outside the context of s 459J of the Act. As I noted in Re LDW Constructions Pty Ltd above, matters of that kind, if they could not now be raised in an application to set aside a creditor's statutory demand, by reason of the time limit under s 459G of the Act, would be relevant at the time a Court is required to consider whether to make orders to wind up a company, arising from any presumption of insolvency based upon a creditor's statutory demand as to which such issues existed.

Order as to application to set aside creditor's statutory demand and costs

1. For these reasons, I ordered that the creditor's statutory demand issued by the Defendant dated 5 April 2019 be set aside.
2. I also heard the parties as to costs. The principles applicable to the making of a costs order are well established. The Court has discretion to determine by whom, to whom and to what extent costs are to be paid, and costs will ordinarily follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs, in accordance with r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). The case law recognises that a successful party has a reasonable expectation of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. However, these principles reflect a wider approach, namely, that costs should be paid in a way that is fair, having regard to what the Court considers to be the responsibility of each party for the incurring of the costs: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], cited with approval by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34.
3. The Plaintiff has ultimately succeeded in setting aside a creditor's statutory demand, and there is therefore at least a starting point, that it would have the costs of the application. I am, however, satisfied that there is good reason for that presumption to be displaced. First, Mr Phillips submits, and I understand Ms Scott to broadly accept, that the issue of service, at least as a question of fact, emerged squarely only today. That has resulted from a sequence of steps, by which Network initially contended that the application to set aside the Demand was brought out of time, thereby raising the question of when the Demand had been served; Ms Scott in turn put an argument based on fair notice, relying upon Mangraviti Pty Ltd above and Woodgate v Garard Pty Ltd above; my Associate then drew the parties' attention to my judgment, published yesterday, in Re LDW Constructions Pty Ltd above; and Ms Scott in turn contended that the Demand had not been served on the earlier dates for which Network contended. That last argument has prevailed. It seems to me that, in those circumstances, there would be a significant degree of unfairness in ordering the entire costs of the application in favour of Hengji, where Mr Phillips had no opportunity to address that argument until it was first raised today.
4. Mr Phillips develops an alternative proposition that Hengji should not have its costs, because the issue arises because it had failed to advise of a change in the address of its registered office. Ms Scott responded, and I accept, that that breach of statutory requirement ultimately had nothing to do with the matters in issue in this case, since Network's failure resulted from it not having effected service, either by post or by actual delivery to the registered office at the earlier address that had been notified in April and May 2019, rather than at the address to which Hengji's registered office had moved.
5. I am satisfied that it would not be a proper result, on one hand, to allow Hengji the entire costs of the application, where it succeeded on an argument which was first raised today. It would equally not be a proper result to allow Hengji no costs of the application, where it did raise that argument today and was successful in that regard. In these circumstances, it seems to me that the proper course is, as I had initially foreshadowed as a preliminary view, to order that the Defendant pay the Plaintiff's costs, limited to the costs of the hearing today, as agreed or as assessed. I make a further order to that effect.

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: 06 November 2019