CGU Workers' Compensation (Vic) Limited v Carousel Bar Pty Ltd [1999] VSC 227

Supreme Court of Victoria|1999-06-23|Before: Gillard J

The applicant in the proceeding and the respondent to the summons, CGU Workers' Compensation (Victoria) Limited ("CGU") is a company which carries on business as an insurer.

On 25 May 1999, CGU issued a notice of motion for winding up Carousel Bar in insolvency. In order to prove insolvency CGU relies on the alleged failure of Carousel Bar to comply with a statutory demand to pay a debt.

CGU alleges that Carousel Bar owes it premiums for WorkCover insurance for three years from 1 July 1996 to 30 June 1997, together with interest. The total amount of the alleged debt is $8,895.96. CGU alleges that the demand was served by pre-paid post, addressed to Carousel Bar Pty Ltd, 32 Hardy Street, Lilydale VIC 3140 on 26 March 1999. At that time it was believed that the registered office of Carousel Bar was the said address.

Therein lies the kernel of the dispute. The registered office as at 26 March 1999 was not in Lilydale, Carousel Bar never received the statutory demand, the envelope containing it was returned to CGU's solicitors on 8 April 1999 and Carousel Bar never had the opportunity to comply with the demand or seek to set it aside.

CGU's solicitors knew within the 21 days' period that Carousel Bar did not know of the statutory demand.

Carousel Bar issued the summons seeking to have the notice of motion for winding up dismissed.

Carousel Bar relies upon three affidavits. The first sworn by a director, Harry Mirtsios, and the other two affidavits sworn by its solicitor, Keith Allan Hercules.

CGU did not file any material in answer to the summons of Carousel Bar which was issued on 2 June 1999.

It is convenient to state them in chronological form.

On 9 April 1991 the respondent was registered in Victoria under the Corporations Law. Prior to 29 January 1999 its registered office was 32 Hardy Street, Lilydale.

On 29 January 1999 an officer of Carousel Bar signed the annual return and forwarded it to the Australian Securities and Investments Commission ("ASIC").

The annual return recorded that the respondent's registered office as at 29 January 1999 was "Level 2, 423 Bourke Street, Melbourne, Vic 3000".

ASIC received the annual return on 29 January 1999.

On 26 March 1999 CGU, through its solicitors, obtained an extract from ASIC concerning Carousel Bar Pty Ltd.

Page 1 of the extract shows the company's registered office was "32 Hardy Street, Lilydale, Vic 3140".

On p.4 of the extract there appeared a list of documents received by ASIC. It is noted that a Form 316, being the annual return, was received on 29 January 1999, and that it had not been processed but its effective date was 29 January 1999.

The next entry under the reference to the annual return was -

On 26 March 1999 CGU, through its solicitors, forwarded by pre-paid post a statutory demand seeking payment of the sum of $8,895.96 and enclosed it in an envelope addressed to -

"Carousel Bar Pty Ltd 32 Hardy Street Lilydale VIC 3140"

The envelope contained the name and address of CGU's solicitors.

On 8 April 1999 the envelope was returned by Australia Post to the applicant's solicitor's office bearing a stamped "Return to Sender" and according to the evidence the envelope was marked with the notation - "Left Address".

On 25 May 1999 the applicant, through its solicitors, obtained a further extract of company information concerning Carousel Bar from ASIC.

Page 1 of the company extract revealed that the current registered office was "2ND FL 423 BOURKE STREET, MELBOURNE". It is noted that the start date of the new address was 5 February 1999. Page 4 of the same company extract referring to the annual return noted that it was processed on 29 March 1999.

Despite the fact that the statutory demand had been returned in circumstances where it was clear it was not received by Carousel Bar and secondly, the company extract dated 25 May 1999 revealed that CGU was in error in forwarding the document on 26 March 1999 to the Lilydale address, CGU's solicitors issued the notice of motion on 25 May 1999 seeking an order that Carousel Bar be wound up in insolvency. CGU stated in the notice of motion that it relied upon the failure of the company to comply with the statutory demand.

Shaun Patrick Power swore an affidavit on 25 May 1999 on behalf of CGU. He is an employee. He disclosed that the envelope containing the statutory demand and affidavit under s.459E of the Law had been returned on or about 8 April 1999.

On 28 May 1999, Carousel Bar filed a notice of address for service through its solicitors and the latter forwarded a facsimile on the same day to CGU's solicitors demanding that the motion be withdrawn. By facsimile of the same date CGU's solicitors refused. This caused the solicitors for Carousel Bar to forward another facsimile threatening an injunction to prevent the advertising of the proceeding.

On 1 June 1999, Carousel Bar's solicitors in correspondence denied that it was indebted to CGU and paid the sum of $8,895.96 to CGU's solicitors under protest.

On 2 June 1999, Carousel Bar issued its summons that the applicant's notice of motion be dismissed or struck out as an abuse of process.

By reason of s.459 of the Law, a creditor of a company may apply to the court for a winding up order in insolvency. If it is proven that the company is insolvent the court may make such an order. See s.459A of the Law.

CGU relies upon the fact that Carousel Bar did not comply with the statutory demand to prove insolvency. Section 459E gives a creditor a right to serve a statutory demand and the section sets out the requirements.

By reason of s.459C(2) the court must presume the company is insolvent if the statutory demand is not complied with during the specified period. It is noted that the presumption is rebuttable - see s.459C(3).

Division 3 of Part 5.4 of the Law provides a means by which the company can make application to set aside the statutory demand. A failure to either apply or have the statutory demand set aside brings into play the presumption of insolvency.

Carousel Bar submits that the statutory demand was never served on the company, and therefore it has not failed to comply with it. It follows that CGU has not established a basis for its motion for winding up and it should be dismissed. Further, it is submitted that CGU's solicitors knew on 25 May 1999 that they had made a mistake with respect to serving the statutory demand on Carousel Bar and should not have issued the notice of motion for winding up. It is submitted that in so doing CGU committed an abuse of process of the court.

CGU, for its part, submits that it did serve the statutory demand in accordance with the provisions of the Law and accordingly there had been a failure to comply with the statutory demand even though the evidence clearly establishes that Carousel Bar, during the relevant period, had no knowledge of the demand.

The uncontradicted evidence establishes the following propositions:

(i) That as at 29 January 1999 the registered office of Carousel Bar was in Melbourne.

(ii) That on the day the statutory demand was posted to Carousel Bar, 26 March 1999, the registered office of Carousel Bar was in Melbourne.

(iii) That there was information contained in the company extract dated 26 March 1999 to alert CGU's solicitors that the registered office had been changed.

(iv) That on 8 April 1999 the envelope containing the statutory demand was returned unopened with notations "Return to Sender", and "Left Address".

(v) That during the 21 day period from the date of posting the statutory demand to the Lilydale address, Carousel Bar had no knowledge of the statutory demand.

(vi) That there was information contained in the company extract dated 25 May 1999 that the registered office was in Melbourne, and had been so since 5 February 1999 and there was further information to alert CGU's solicitors that the change of registered office was noted in the annual return which had been processed on 29 March 1999.

(vii) That neither CGU nor its solicitors made any enquiries or took any steps between 8 April 1999 and the time of receipt of the company extract on 25 May 1999 to determine the correct registered office or place of business of Carousel Bar and did not take any steps to bring the statutory demand to the notice of Carousel.

Mr Hercules, the solicitor for Carousel Bar, in his affidavit, stated that the telephone number of Carousel Bar was clearly shown in the Melbourne Telephone Directory. The entry in the telephone directory is -

and the address is given as "Aughtie Drive, Albert Park".

Whilst it does not state "Carousel Bar", nevertheless one might have thought that on 8 April 1999 a telephone call to that telephone number may have clarified the position.

The filing of a notice of motion for winding up a company can have a disastrous effect upon the company and its business. Often the filing of the motion gives rights to parties to take action against the company under loan documents, leases and securities. Often credit facilities are reduced or removed. It can adversely effect the business and the trading reputation of the company.

It follows that a creditor should not issue a motion to wind up a company without proper cause.

It is said by counsel for CGU that even though it was known that the statutory demand never came to the knowledge of the company so that it never had the opportunity to challenge it, the presumption of insolvency was established which entitled CGU to lawfully issue and proceed with a notice of motion for winding up.

In my opinion such a result in the circumstances of this case is unjust and could not be the law. Mr M.W. Sanger of counsel for CGU said that the provisions of the Law and the cases established that CGU was acting lawfully and properly when it issued its notice of motion.

Before considering the provisions of the Law concerning service of a statutory demand, it is necessary to refer to the obligations of the company to notify ASIC of a change to its registered office.

Section 142(2) of the Law requires a company to lodge a notice with ASIC not later than 14 days after the date on which the change to the registered office occurs.

However, that obligation ceases when the company lodges an annual return and it sets out the information required by s.142(2). I refer to s.345(4).

The present practice of ASIC is to send to a company an Annual Return of Company form which is completed by it with respect to information concerning the company including its registered office address. The form invites the company to change, inter alia, the address of the registered office and indicate the date when the change occurred.

The evidence shows that Carousel Bar through its agent completed the annual return for the company and recorded the change of registered office address to date from 29 January 1999. The document was forwarded to ASIC the same day. The evidence shows that the annual return was not processed until 29 March 1999 and the records of ASIC record a change of address as from 5 February 1999.

What caused the delay in the processing by ASIC was not the subject of evidence. After the hearing had completed I informed counsel that I would be assisted by reference to any part of the Law which permitted notification to ASIC by means of the Annual Return of a Company. Mr Sanger indicated that he wished to place material before the court explaining the period of delay by ASIC processing the annual return and I indicated that would be subject to any objection by Mr Hercules. CGU's solicitors sent to the court a memorandum of a discussion had on this topic with representatives of ASIC but Mr Hercules objected to the material forming part of the evidence and accordingly I have ignored it.

Section 459E(1) gives the right to a person to "serve on a company a demand relating to" a debt.

The section does not specify how service is to be effected. The object of service is to bring to the knowledge of the recipient the contents of the document served. It follows that as a general proposition, "service of a document" means personal service. A company being a non-natural entity must act through its servants or agents. Who constitutes the company for the purpose of serving documents on it? Whether a person has authority to accept service on behalf of a company and whether the company has notice of the document will depend on all the circumstances.

In order to facilitate service on a company, legislation concerning companies and rules of court make provision for service of documents. What constitutes service by post is in all Acts dealing with the interpretation of legislation and can be traced back to the 19th century - see s.25 of the Acts Interpretation Act 1958 (Vic) now s.49 of the Interpretation of Legislation Act 1984 (Vic).

Section 109X of the Law deals with, inter alia, service of documents by post and on a director of the company. However, it is noted that its provisions are merely faculative and are not mandatory. In other words, personal service is effective and further as long as it is proven that the document came to the attention of the intended recipient it is good service no matter what form of service is employed.

"(1) For the purposes of any law, a document may be served on a

company or recognised company by:

(a) leaving it at, or posting it to, the company's registered office; or

(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external territory; or

(c) ... ; or

(d) ...

(6) This section does not affect the operation of a law or the power of a court to authorise a document to be served in a different way. (7) This section applies to provisions of a law dealing with service whether it uses the expression 'serve' or uses any other similar expression such as 'give' or 'send'."

Section 109Y defines what is meant by service by post. It provides -

"Where a provision of this Law 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:

(a) the service is taken to be effected by properly addressing and posting (under pre-paid post) the document as a letter to the last known address of the person to be served; and

(b) unless the contrary is proved, the service is taken to have been effected at the time at which the letter would have been delivered in the ordinary course of post."

[Emphasis added]

This provision is similar to s.49 of the Interpretation of Legislation Act 1984 (Vic) which in turn traces its origins back to 1890 and the English Interpretation Act 1889 - see Section 26 of the latter Act.

In Fancourt v. Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, the High Court considered a provision of the Queensland Acts Interpretation Act which is similar to s.109Y. There are minor variations in the text of the Acts but they are of no consequence.

In that case notices were posted to hirers care of a post office pursuant to s.42(1)(c) of the Hire Purchase Act 1959. The question arose as whether it was proper service. The recipients gave evidence that they did not receive the notices. There was no evidence that the documents did not reach their destination.

The High Court after setting out s.39(1) of the Acts Interpretation Act, paragraph (b) of which is to the same effect as s.109Y(b) the court said at p.95 -

"In the present case, the notices were not returned undelivered and there was no other circumstance which suggested that they did not reach their destination. Hence under s.39(1)(b) service is deemed to have been effected at the time when the notices would have been delivered in the ordinary course of the post."

In my opinion the court made it clear that if there was evidence to the effect that there was non-delivery of the document, the contrary was proven and therefore there was no evidence that the document was served at any time.

The High Court referred to a line of English cases commencing with R. v. County of London Quarter Sessions Appeals Committee ex parte Rossi (1956) 1 QB 682.

Although the High Court did not consider the English cases in any detail, nevertheless they did not disagree with them.

In the Rossi case a notice of a court hearing was sent by registered post to a party and was returned to the sender by the postal authorities marked "Undelivered for the reason stated ... no response". Section 26 of the English Interpretation Act contained a provision in the same terms of s.109Y(b) of the Law.

Denning LJ at p.694 summarised the principles as follows -

" ... If the letter is not returned, it is assumed to have been delivered in the ordinary course of post and any judgment or order by default obtained on the faith of that assumption is perfectly regular. ... But if the letter is returned undelivered and nevertheless, notwithstanding its return, a judgment or order by default should afterwards be obtained it is irregular and will be set aside ex debito justitiae."

"But if the primary obligation of giving notice means in this context the giving of some form of notice which reaches the party interested so that he may be present or represented at a hearing, then the permissive user of the post denotes a user so that notice may reach the party interested so that he may be present or represented at the hearing. ... Then by the concluding words of s.26 (the same as s.109Y(b)) the sending of the notice was deemed unless the contrary was proved, to have been effected at the time at which the letter would have been delivered in the ordinary course of post. But here the contrary was proved. It was proved, not merely that the letter was not delivered in the ordinary course of post but that the letter was not delivered at all. Service cannot in this case be deemed 'to have been effected' at some particular time, ie in the ordinary course of post; service was proved not to have been effected at all. When considering the giving of a notice of a hearing of an appeal the element of time is clearly of importance: the notice must be given at such time as will enable a party to be present at a hearing. Here it was not."

The concluding words of Morris LJ are apposite to the present case. The giving of a notice demanding payment is of importance. It is to enable the company to contest the alleged debt if it so desires. Non-receipt means that the company is denied its right to challenge the demand and results in a presumption of insolvency. The importance of receiving notice of the demand cannot be understated.

The reasoning in the Rossi case has been followed in a number of cases. See 154 CLR at p.96.

The High Court in Fancourt v. Mercantile Credits Ltd, supra, at p.96 described the effect of the English cases as follows - "The effect of the cases appears to be that proof of non-delivery means that service cannot be deemed to have taken place under the second limb of the section at the time of delivery in the ordinary course of the post and cannot be established as having taken place at any other time. The consequence is that where it is necessary to establish service at a particular time, proof of non-delivery is as effective as proof of non-service, notwithstanding that service by post is in the circumstances permitted and the requirements of the Interpretation Act are observed."

Nicholson J in Re Gasbourne Pty Ltd [1984] VicRp 70; (1984) VR 801 followed those decisions - see pp.856-7 and Von Doussa J in Re Rustic Homes Pty Ltd (1988) 49 SASR 41 also followed the English cases.

Whilst the High Court, supra, at p.97 stated that it was unnecessary to further consider the English cases it was noted that "they are all cases in which delivery was disproved".

But the reasoning and decision in the High Court case supports the reasoning of the English cases. This is made clear by what the court said concerning the facts when their Honours said:

"As the present case shows, delivery may be different from receipt by the intended recipient and, provided that delivery is not disproved, the fact of non receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of post".

Whether service has been effected in the present matter depends upon whether it is proved that the notice was returned undelivered. It is the disproving of delivery which results in paragraph (b) of s.109Y not applying so that there is no evidence of service at any time. Time does not begin to run. Therefore the purported service of the demand is of no effect.

The evidence with respect to non-delivery is in a small compass. Mr Power, in his affidavit on behalf of CGU swore -

"On or about 8 April 1999 the documents were returned to Purves Clarke Richards by Australia Post marked 'Left Address'."

Mr Power exhibited a photostat copy of the envelope. It has depicted on it a clenched hand with one finger pointing and above it the words "Return to Sender".

I am satisfied that there is proof of non-delivery.

It follows that service has not been effected. Section 109Y(b) does not apply There is no evidence that the notice came to the knowledge of Carousel Bar.

Further, as at 26 March 1999 the registered office of Carousel Bar was not the Lilydale address. It follows that the demand was not sent to the registered office. Service could not be effected at the registered office. No argument was advanced based on estoppel.

Accordingly, the presumption of insolvency has not been established - see s.459C(2). There is no other evidence of insolvency. CGU has failed to establish a basis for the motion to wind up and accordingly it should be dismissed.

In Re Rustic Homes Pty Ltd, supra, Von Doussa J considered the question of proper service of a summons to wind up a company which was sent to the defendant's registered office and was returned by Australia Post as unclaimed. His Honour, following the English cases, and after referring to the High Court case held that because there was non-delivery the summons had not been effectively served and it was dismissed.

I respectfully agree with his Honour's reasoning in that case. The same reasoning applies here.

Mr Sanger of Counsel for CGU relied upon the decision of McLelland CJ in Eq in respect of service by post, in Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559 which followed with a qualification the reasoning of Santow J in F.P. Leonard Advertising Pty Ltd v. K.D. Travel Service Pty Ltd 12 ACSR 136. The decision of Re Future Life Enterprises was followed by Sheppard J in Golden Orchid Pty Ltd v. Komax Pty Ltd (1995) 58 FCR 113.

These cases state that there is a qualification to the effect of ss.109X and 109Y. Those sections establish service by post by delivery in the ordinary course of post. If the documents are returned within the statutory period having been delivered to the registered office address what is the effect of the return on the service which has been effected properly?

The qualification is that unless it is established that the creditor has taken all reasonable steps to bring the demand to the attention of the company after the demand has been returned, it would be an abuse of process to bring a winding up application knowing that the demand never came to the notice of the company. But if all steps were diligently pursued by the creditor to bring the statutory demand to the notice of the company then service would be effective and the proceeding would not be an abuse of process.

Santow J in F.P. Leonard Advertising, expressed the principle as follows -

"That in my judgment should be the proper basis for such an exception to the statutory requirement. Abuse of process underlies the notion of lack of 'fair notice'. Here contrary to the facts in Abberwood, such opportunity for indirect contact was diligently pursued by the plaintiff. There was 'fair notice' - if that be required - and clearly no abuse of process. There is therefore no basis for failing to give force to the clear words of the two sections of the Corporations Law in deeming service to have occurred."

In Re Future Life, supra, McLelland CJ in Eq. agreed subject to a qualification which he expressed at p.134 -

"The qualification is that an abuse of process in the circumstances postulated by his Honour is not strictly speaking an exception to the provisions of s.220(1) (which would suggest that there has been no effective service) but rather constitutes an overriding ground for refusing relief notwithstanding that there has been effective service."

In both those cases the statutory demand was actually delivered to the registered office of the company, and returned by the occupant informing the creditor that the company could not be traced.

Neither case involved non delivery so s.109Y(b) applied.

In each case the creditor upon receiving the demand took steps to bring it to the notice of the company by other means. The court held that there was "fair notice" and hence no abuse of process. Therefore the creditor had proven service.

In the earlier case of DFC of T v Abberwood (1990) 8 ACLC 528 the court set aside a judgment entered in default of appearance ex debito justitiae where the writ was returned in circumstances where it was clear it never came to the notice of the company even though it was served as its registered office which it had vacated some time before. It was actually delivered to the office.

I have some difficulty with the reasoning in the Re Future Life and F.P. Leonard cases because of what was said in Fancourt v. Mercantile Credits Ltd as to the effect of service, and the English cases referred to therein.

Because CGU has failed to prove effectual service the principles stated in the two cases do not assist CGU. If I am wrong in that conclusion, on the assumption that there is a principle of fair notice, in my opinion fair notice has not been established here.

It is accepted by counsel for CGU that it and its solicitors did not do anything after receiving back the statutory demand from Australia Post. A closer perusal of the extract from ASIC dated 26 March 1999 would have alerted them to the error that was made and if a search had been carried out on 8 April of ASIC's records it would have revealed the change to the registered office. It would have been very easy to have served the statutory demand again but this time at the correct registered office. Further, no blame can be attached to Carousel Bar. It changed its registered office on 29 January 1999. It lodged the change with ASIC on that date.

In my opinion if the principle stated by Santow J and refined by McLelland CJ is good law, then it would be an abuse of process to permit CGU to rely upon the posting of the document in the circumstances of this case. There was no fair notice to Carousel Bar.

It follows the notice of motion to wind up Carousel Bar proceeds on a fact which has not been established. Accordingly it should be dismissed.

Indeed, on the reasoning in Re Future Life and F.P. Leonard the issue of the motion after knowledge that Carousel Bar had not received the demand was an abuse of process.

As stated above I have difficulty with the reasoning of the learned judges who decided the Re Future Life and F.P. Leonard cases.

I am of that view because on a strict analysis, if delivery is not disproved then s.109Y(b) applies. Service has been effected "at the time at which the letter would have been delivered in the ordinary course of post". Time begins to run. At the expiration of the statutory period if the demand has not been complied with or application has not been made to set it aside, insolvency is presumed.

If the statutory demand is returned during the 21 days' period in circumstances which show that the document did not come to the knowledge of the company, what is the basis for holding that what is effective service becomes non-effective service?

According to the F.P. Leonard case it would be an abuse of process to issue a winding up motion unless it is proved that fair notice was given of the statutory demand.

In F.P. Leonard's case, supra, the facts were, a statutory demand was posted to the registered office of the company pursuant to s.220(1) of the Corporations Law. The documents were returned by the accountants who occupied the address of the registered office and they advised they no longer acted for the company and did not know the location of the directors. The creditor's solicitor ascertained that a firm of solicitors may be acting for the directors of the company in relation to other proceedings. This was confirmed. A copy of the demand was forwarded to the said solicitors and no reply was received.

On the application for winding up the company did not appear.

"But what is the effect, in the present circumstances, of coming to know after postal delivery that the company no longer resides at the registered office address? Here there may not be even any adventitious connection with that address (whether via the accountants if they have ceased to act or otherwise). One line of authority, based on the doctrine of 'fair notice', would suggest that in cases where there is knowledge that the address is 'false' or 'non existent' then service will not be effective. (Re Gasbourne Pty Ltd [1984] VicRp 70; (1984) VR 801). This has been formulated in different ways including not being misled 'by the register: Re Otway Coal [1953] VicLawRp 74; (1953) VLR 557 at 563 and that it would be an abuse of process to allow judgment in cases where the defendant knew that the statement of claim had not come to the attention of the defendant: DFC of T v. Abberwood Pty Ltd (1990) 8 ACLC 528'."

His Honour then went to say that Abberwood could be distinguished and stated that abuse of process "underlies the notion of lack of fair notice". His Honour said the contrary to the facts in Abberwood, "such opportunity for indirect contact was diligently pursued by the plaintiff."

His Honour then concluded that there was fair notice, accordingly no abuse of process and upheld the service as being effective.

In the case of Re Future Life Enterprises Pty Ltd, supra, McLelland CJ in Eq on similar facts came to the same conclusion. However, he added the qualification which I set out above.

His Honour impliedly criticised the judgment of Von Doussa J in Re Rustic Homes Pty Ltd. With due respect to McLelland CJ in Eq, in Re Rustic Homes Pty Ltd the evidence clearly established non delivery. Accordingly, the second part of the deeming provision in the Act could not apply. This was in accordance with the High Court case of Fancourt v. Mercantile Credits Ltd, supra.

In my respectful opinion Von Doussa J was plainly correct.

The reasoning of Santow J can be stated in propositional form -

(i) Service of the statutory demand effected by post by delivery to the registered office of the company is effective service by reason of ss.109X and 109Y if delivery is not disproved.

(ii) If prior to the issue of the application to wind up, the document is returned to the creditor in circumstances which show that the document never came to the knowledge of the company, it would be an abuse of process to proceed with the application unless steps are taken to give fair notice to the company.

(iii) What is fair notice appears to be taking all steps diligently to give notice of the demand to the company.

McLelland CJ in Eq in Re Future Life Enterprises Pty Ltd, supra, at p.565 said -

"In the present case, there is no possible basis for suggesting an abuse of process on the part of Friends' Provident whose solicitors did all they reasonably could to ensure that fair notice of the statutory demand was given to those in control of the affairs of Future Life."

His Honour described the abuse of process as being "an over-riding ground for refusing relief notwithstanding that there has been effective service."

The difficulty I have with the reasoning in the two cases is that if service is effected and is effective by reason of ss.109X and 109Y then on what basis can it be said that there is an abuse of process if a proceeding is instituted thereafter based upon that effective service?

Santow J refers to "the doctrine of fair notice". He does not state what the doctrine is or its origins. However, he does refer to the Victorian case of Re Gasbourne Pty Ltd, supra.

In that case service of many writs were effected on the registered offices of companies. The registered offices were either non-existent or at a place at which the company was no longer in attendance.

"In such a case there are persons associated with the company who have the duty to give such notification and there is an entity which can be traced and there is a chance that the document served may come to their attention. In the case of a false or non-existent office, the document cannot be physically delivered to it at all and can never come to the attention of any person associated with the company."

His Honour made no mention of any doctrine of fair notice. He referred to Lazard Brothers & Co v. Midland Bank (1933) AC289.

Lord Wright in Lazard Brothers & Co v. Midland Bank, supra, p.307 said -

"What is suggested is a 'domicil' an address where but for other difficulties personal service could be effected, and a suggestion is implied that the method of service might fairly be expected to bring to the proposed defendants the notice of the writ."

That case was concerned with the question of service by post to an address in the USSR.

It is noted that Lord Wright talks about "fairly being expected to bring to the proposed defendants the notice of the writ". He does not refer to a "doctrine of fair notice".

It is apparent from the context in which Santow J and McClelland CJ in Eq employed the phrase "fair notice" that they had in mind a form of service that may bring the document to the notice of the company.

Whether or not there is such a doctrine of fair notice, it seems to me that the true question is whether on the balance of probabilities the court is satisfied that the document came to the notice of the intended recipient?

This will depend upon all the circumstances. In my view it would not be satisfied by showing that the creditor took all diligent steps. The court would have to be satisfied on the evidence on the balance of probabilities that the document came to the notice of the intended recipient.

The High Court case and the English cases therein mentioned were concerned with issues of service of various documents but none were concerned with the service of a statutory demand and the effect of failure to comply with it.

In A/S Cathryneholm v. Norequipment Trading Ltd (1972) 2 QB 314 at 323 Roskill LJ emphasised that in each case it is necessary to focus on what is the particular issue before the court when there is a question of service or no service.

"It seems to me that the difficulty on the authorities arises because (if I may say so with all respect) too much attention has been paid to s.437 of the Companies Act 1948 and s.26 of the Interpretation Act 1889 and too little to R.S.C., Ord 13, r9 which is a relevant rule of the Supreme Court, pursuant to which any application to set aside a default judgment must be made."

In my opinion, when the question is whether service has been effected, it is important to bear in mind what the issues are before the court. Here, there is a motion to wind up a company in insolvency and the proof of the alleged insolvency is based solely on the failure to comply with the statutory demand by Carousel Bar. The applicant does not seek to prove insolvency in any other way. It is in that context that the question must be decided concerning service.

The evidence clearly established that during the 21 days' period CGU was aware that the statutory demand had not come to the notice of Carousel Bar.

In my opinion it was essential to the proof of CGU in the application to wind up that the statutory demand was served on the company and it failed to comply with the statutory demand within the 21 days' period.

If the document had been served by delivery to the registered office on the record and had been returned by the occupant with an indication that it did not come to the notice of the company then in my opinion the true question is, has CGU proven that the company failed to comply with the statutory demand? Part of its proof would have to establish service of the demand on the company. The statutory provisions would establish service but the facts would show no notice.

In this respect I reiterate what the courts have said in the past concerning the obligation of the creditor's legal practitioner to inform the court of the return of the document and the circumstances. See Lazard Brothers & Co v Midland Bank, supra, and Re Gasbourne Pty Ltd, supra.

"If, as at the end of the period for compliance with the statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to have failed to comply with the demand at the end of that period."

The fact is that if the company did not have knowledge of the statutory demand it could not comply with it. It follows that there is no proof that the company has not complied with the demand. The presumption of insolvency which the court is bound to presume occurs "if during or after the three month's ending on the day when the application was made:

(a) the company failed (as defined by s.459F) to comply with the statutory demand."

See s.459C(2).

According to s.459F(1) the company fails to comply if two conditions are satisfied, namely, one, the demand is still in effect and two, the company has not complied with it.

In the circumstances of the present case even assuming that the documents had been delivered and received at the registered office and then returned by whoever occupies the office the fact is that the statutory demand never came to the notice of the company.

In my opinion the company could not fail to comply with a notice if it never had knowledge of it.

Therefore the applicant cannot prove as a fact that the company failed to comply with the demand. That being so the motion to wind up fails.

In my opinion such a conclusion would not be contrary to the reasoning in Fancourt v. Mercantile Credits Limited and the English cases referred to.

I have difficulty with the concept of fair notice expounded in F.T. Leonard Advertising and Re Future Life Enterprises. In my opinion the fact of no notice goes to the question of proof of insolvency. It is not overcome by whether the creditor has acted diligently to bring the demand to the "fair notice" of the company. The question then becomes one of proof of service. That is not to say that service could not be proven by other means.

But in determining whether or not service has been effective the court would have to be satisfied on the balance of probabilities that notice was given to the company. The object of service is to give notice.

"The object of all service was, of course, only to give notice to the party on whom it was made, so that he might be aware of, and able to resist, that which was sought against him, and where that had been done, so that the court might feel perfectly confident that service had reached him, everything has been done that could be required." - see Hope v. Hope (1854) 4 DeG.M. and G 328 at 342.

That is something more than "fair notice" or reasonable steps to bring it to the notice of the intended recipient. In making these observations I am not dealing with a company seeking to evade service and I have not adverted to estoppel based upon the public register - see Re Third Lajebo Pty Ltd [1982] VicRp 36; (1982) VR 379.

It is unnecessary for me to come to any final conclusion in respect to the issues of fair notice and abuse of process raised by the reasoning in the two cases, because in my opinion service was not effected or if it was, in accordance with the principle stated in F.P. Leonard, supra, fair notice was not attempted, let alone given.

It follows that Carousel Bar is entitled to have the notice of motion for winding up in insolvency dismissed as it relies upon the failure to comply with the statutory demand.

Carousel Bar in addition to seeking an order that the notice of motion be dismissed, also sought an order that Carousel Bar's costs of the proceeding should be paid on an indemnity basis.

The notice of motion for winding up was issued on 25 may 1999 and relied upon a statutory demand which was returned unclaimed on 8 April 1999. CGU and its solicitors took no steps to bring the statutory demand to the attention of Carousel Bar. As I have already adverted to in my reasons, steps could have been taken on and after 8 April 1999 which would have quickly demonstrated that an error had been made. It would have involved little expense and little loss in time to have served the demand again. Instead, CGU issued the notice of motion knowing that the demand had not come to the notice of Carousel Bar. Further, CGU issued the notice of motion after making a search on 25 May 1999 which demonstrated that an error had been made with respect to the attempted service of the statutory demand.

Within three days of the issue of the motion Carousel Bar's solicitors wrote to CGU's solicitors alleging that the proceeding was an abuse of process demanding that it be withdrawn and that CGU pay indemnity costs of the proceedings. CGU's solicitors refused the demands and accordingly it was necessary for Carousel Bar to issue the summons.

As Carousel Bar has been successful in its application in accordance with the usual rule it would be entitled to its costs. I will hear counsel on the form of order and the question of costs.

Interpretation Act 1958

Legislation Act 1984

English Interpretation Act 1889

Hire Purchase Act 1959

Interpretation Act 1889

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