Brown v Bluestone Property Services Pty Ltd [2024] NSWSC 1684 | Case summary

Brown v Bluestone Property Services Pty Ltd [2024] NSWSC 1684 | Case summary | Zoe

[3]

Affidavit evidence

The Originating Process was supported by an affidavit dated 11 July 2024 of Mr Kalistratov, who is the Second Plaintiff, who contends that, on 9 May 2024, the Company was indebted to the Plaintiffs in the amount of $27,615.75 due and payable under a Deed of Settlement and Release executed by the Company on 5 April 2023. Mr Kalistratov refers to the Demand which, he contends, his solicitor, Mr Jerdetski, "served", referring to Mr Jerdetski's affidavit dated 11 July 2024 in that respect. That can, of course, be no more than a contention, so far as Mr Kalistratov is concerned, and cannot prove the fact, where there is no hint in Mr Kalistratov's affidavit that he had any personal knowledge of the steps taken by Mr Jerdetski in respect of service of the Demand, although he had read Mr Jerdetski's affidavit in that respect. Mr Kalistratov there indicates that the amount claimed then remained due and payable by the Company.
The Company also reads the affidavit dated 11 July 2024 of Ms Kalistratova, who also indicates that the Company was indebted to the Plaintiffs in the amount claimed under the Deed of Settlement and Release. She also indicates her understanding that the Demand was served, again referring to Mr Jerdetski's affidavit in that regard. Her evidence can also go no higher than a submission to that effect, where there is also no suggestion that she has independent knowledge of the service of the Demand, beyond what is said in Mr Jerdetski's affidavit. Her evidence is also that the amount of the Demand remains due and payable by the Company. As I understand it, Ms Kalistratova's affidavit is properly read in circumstances that both Mr Kalistratov and Ms Kalistratova are the claimants in respect of the debt claimed in the Demand.
So far as service of the Demand is concerned, the Plaintiffs read the affidavit of their solicitor, Mr Jerdetski, dated 11 July 2024, to which the two affidavits noted above referred. Mr Jerdetski indicates that, on 20 May 2024 he "served" the Demand on the Company by placing an envelope which contains specified documents in a post box. His affidavit evidence indicates that the envelope was addressed to the Company at a specified address, and there is a company search in evidence that indicates that specified address was the then Company's office. It seems to me that that evidence is sufficient to establish that the letter containing the Demand was correctly addressed to the registered office of the Company, which provides a starting point, although not all the elements of, a presumption of service by post. Mr Jerdetski's evidence is also that the envelope contained a letter, together with the Demand, and the affidavit of Ms Kalistratova supporting the Demand. Mr Jerdetski's affidavit does not address the manner in which postage had been applied to the letter, whether to indicate the amount of postage which was required to post a letter from George Street, Sydney to Beresfield, NSW or the amount of postage by way of stamps which had been applied to the letter. There is a photograph of the envelope annexed to Mr Jerdetski's affidavit where the address is not entirely legible but, on close review, is consistent with that set out in Mr Jerdetski's affidavit, which is in turn the Company's registered office. However, the postage stamps shown in that photograph are illegible, so it is not possible to determine the amount of postage which was applied to the letter, even if the amount of the necessary postage was known, which the evidence does not establish.
The Plaintiffs also read an affidavit dated 8 August 2024 of Mr Khall which is directed to service of the Originating Process for the winding-up. I do not understand that to be contested, where the Company is represented in, and opposes, the winding-up application. A second affidavit of Mr Khall dated 2 August 2024 proves lodgement of a Form 519 in respect of the winding-up with the Australian Securities and Investments Commission ("ASIC").
The Plaintiffs also read an affidavit dated 2 December 2024 of Mr Jerdetski, which annexes a consent of liquidator of Mr Asper dated 20 November 2024, and proves service of that consent of liquidator upon the Company by its solicitors. A second affidavit of Mr Jerdetski dated 2 December 2024 addresses the publication of the winding-up application on ASIC's insolvency website.
I pause to note that the Plaintiffs do not prove two matters that would ordinarily be essential to a winding-up application, namely, that the debt remains unpaid as at the date of this application, although Ms Levi (who appears for the Plaintiffs) contends, possibly correctly, that there is no dispute as to that matter. Perhaps more importantly, the Plaintiffs also do not also read evidence of a current company search, so that the Court can be satisfied, as it would ordinarily need to be satisfied, that a winding-up order has not already been made by another Court. Having said that, no question of adjourning the application to lead further evidence of either or both of those matters arises, where those matters would not lead to any different result in the application, given the findings which I reach on other grounds.
The Company reads an affidavit dated 14 August 2024 of Mr Romanov, who is its director , who refers to the circumstances in which he contends that he became aware of the Demand, on receipt of a letter from a third party law firm on 9 August 2024. Importantly, Mr Romanov's evidence is inconsistent with service of the Demand, or at least the Company's receipt of the Demand, in May 2024, when the Plaintiffs claim to have served it, so far as he contends that he first became aware of it in August 2024. Importantly, that date was also after the Originating Process seeking the winding-up of the Company had been filed on 16 July 2024. Ms Levi, rightly, did not contend that a winding-up could be brought on the basis of service of a creditor's statutory demand, said to give rise to a presumption of insolvency, which only occurred after the winding-up had already been brought at a time when no presumption of insolvency existed. That concession was properly made. Returning to Mr Romanov's affidavit, he refers to subsequent attempts to seek to obtain documents relating to the service of the Demand and the winding-up, which I need not address, makes several allegations in that respect which I also need not address, and annexes correspondence relating to those matters.
In a second affidavit dated 19 November 2024, Mr Romanov contends that the Demand was never properly served on the Company's registered office under s 109X of the Corporations Act 2001 (Cth) ("Act"), to which I refer below, and he refers, albeit in relatively brief evidence, to the fact that the Company regularly receives registered and ordinary post at its registered office, and to other correspondence between the parties at the relevant time.

[4]

Submissions and determination

Ultimately, this application turns on a short and narrow point. If the Plaintiffs have proved that the Demand was served in May 2024 by reference to s 109X of the Act and s 29 of the Acts Interpretation Act 1901 (Cth), then they have proved the matters necessary to a winding-up, other than that the debt is presently unpaid and that the Company has not already been wound up by another Court. As I noted above, had the latter matters been determinative, I may well have taken steps to allow further evidence to be led as to them. If, on the other hand, they had not proved service of the Demand in May 2024, then there was no possibility that a presumption of insolvency existed as at the date of commencement of the winding-up and, as Ms Levi properly accepted, the fact that the Demand may have been provided to the Company at some point after the winding-up was commenced, would not support a winding-up application brought at a time that no presumption of insolvency existed.
Here, this raises a short matter of the application of two statutory provisions, as construed in several cases. Section 109X of the Act relevantly includes a creditor's statutory demand may be served on a company by, inter alia, posting it to a company's registered office. Section 29 of the Acts Interpretation Act in turn defines what is necessary to prove that a document has been posted to the company's registered office, providing that: "Where an Act authorises or requires any document to be served by post, whether the expression "serve" or the expression "give" or "send" or any other expression is used, then 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 a letter would be delivered in the ordinary course of post."
For completeness, s 29(2) provides that the section does not affect the operation of s 160 of the Evidence Act 1995 (NSW), but the latter section is directed to the timing of delivery of a document, where a postal article is sent by prepaid post, and does not remove the requirement to prove that the document was in fact sent by prepaid post, necessarily requiring that the proper postage be applied.
Ms Levi, who appears for the Plaintiffs, and Mr Thomas, who made written submissions for the Company but was unable to be present today by reason of illness, addressed the relevant case law in submissions. In Brown v Bluestone Property Services Pty Ltd [2010] NSWSC 869 Barrett J, with customary conciseness and precision, set out what was required to establish proof of service by post, by reference to earlier case law, observing at [13]: "In order to prove service by post, it is necessary that the evidence of one or more witnesses establish a number of core and indispensable matters, that the document said to have been served by posting of it to a given address was placed inside an envelope, that the envelope had that address written or typed on its face, that a postage stamp or franking of the necessary amount was affixed to the envelope and that the envelope so addressed and stamped or franked was physically deposited in the post either at a post office or being dropped into a postbox for the reception of mail articles." [emphasis added]
Several things are notable about that observation by an experienced judge who previously sat in this list. First, his Honour contemplates, unsurprisingly, that service by post will be proved by evidence, not by speculation. Second, his Honour contemplates that the Plaintiff must prove that the necessary postage was affixed to the envelope by postage stamp or franking, and that is unsurprising, where s 29 of the Acts Interpretation Act contemplates prepayment of the postage in order to establish service in the ordinary course of post. I also addressed the question whether a letter containing a creditor's statutory demand was properly addressed so as to comply with s 29 of the Acts Interpretation Act in my judgment in Re VO Group Australia Pty Ltd [2023] NSWSC 852.
Ms Levi also refers to the judgment of Hetyey AsJ in Thomas Patterson t/as Tom Patterson Roofing and Carpentry v Roxton Commercial Builders Pty Ltd [2024] VSC 289, where the Associate Justice noted that: "Although the defendant notes that there is no express reference in the first Kozakis affidavit to the correct cost postage, I am prepared to infer the envelope was properly pre-paid because the plaintiff's former lawyers made use of the registered post service and a tracking number was assigned to the envelope containing the documents."
The Associate Justice there referred to a similar approach taken by Gardiner AsJ in an earlier case. The Associate Justice then noted that: "There is nothing to suggest in any of the documentation before the Court that Australia Post returned the envelope on account of there being a problem with the cost of postage."
It does not seem to me that that approach is applicable here, for several reasons. First, as Barrett J noted in Brown v Bluestone Property Services Pty Ltd, proof of service by post is a matter of evidence. Second, Hetyey AsJ was there dealing with service by registered post. It is understandable that, in respect of registered post, where a document is lodged with the post office, receives an individual identification by way of tracking number, and delivery of that specific item is then tracked, an inference could be drawn that the proper postage was applied, because otherwise Australia Post would not have accepted the relevant document for the tracking service. No such inference can be drawn, in respect of a document that is simply placed in a post box, where there is no evidence of the amount of postage applied. Third, I do not read the Associate Justice's judgment as expressing any general principle of law, as distinct from the finding of fact which the Associate Justice reached in the particular case. If Hetyey AsJ was, contrary to my view, expressing the view that correct postage should generally be presumed, absent evidence, then I would respectfully not follow that approach. The service of a creditor's statutory demand is a significant matter; if not complied with, it gives rise to a presumption of insolvency; if the presumption of insolvency is not displaced, it may support a winding-up, with significant effects upon a company, its employees and the wider community. It is, of course, hardly impossible that a creditor may place an envelope in the post with insufficient postage; it is hardly then impossible that Australia Post will not deliver that envelope if that occurs; and, it seems to me, there would be a real risk to the integrity of the winding-up regime if creditor's statutory demands could be served, with insufficient postage applied to them, raising the risk that they were not delivered but a presumption of insolvency would arise from non-compliance with a demand which was never known to the company, because the Court inferred that proper postage was applied without evidence of that fact. I would not adopt that approach. I should emphasise, in fairness, that I also do not understand Hetyey AsJ to have taken that approach in Roxton Commercial Builders.

Brown v Bluestone Property Services Pty Ltd

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