Corporations law - Application to set aside statutory demand - "Copy" of application not served within 21 days - Application not properly on foot

AWA Ltd v Daniels (1992) 10 ACLC 933

BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 52 ALJR 20

Brady v Barrow Steel Works Ltd [1965] 2 QB 182

Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Commonwealth Bank of Australia v Friedrich (1991) 9 ACLC 946

Daniels v Anderson (1995) 13 ACLC 614

Davies v Alliance Acceptance Co Ltd (1993) 110 FLR 153

Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669

Gamble v Hoffman (1997) 15 ACLC 1,314

Gould v Mount Oxide Mines Ltd (In Liq) [1916] HCA 81; (1916) 22 CLR 490

Heide v Lester (1990) 8 ACLC 958

Hussein v Good (1990) 8 ACLC 390

John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716

Mibor Investments Pty Ltd v Commonwealth Bank [1993] FCA 455; (1993) 11 ACLC 1,062

Re Broadway Motors Holdings Pty Ltd (In Liq) (1986) 4 ACLC 598

Scanhill Pty Ltd v Century Australasia Pty Ltd [1993] FCA 618; (1994) 12 ACLC 111

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1,001

Statewide Tobacco Services v Morley (1990) 8 ACLC 827

1 MASTER SANDERSON: This is an application to set aside a statutory demand. The application is brought under s 459G of the Corporations Law. The applicant claims that the full amount referred to in the statutory demand is not due and owing and further that it has an offsetting claim equal to or greater than the amount of the debt. However, before considering the merits of the application, the respondent raised a preliminary point. It was alleged that the application was not properly brought because the applicant had not complied strictly with the requirements of the statutory demand procedure. It is well settled that the Corporations Law Ch 5 Pt 5.4 Div 3 sets up a code pursuant to which a party served with the statutory demand can apply to have that demand set aside: see David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265. Section 459G(3) is in the following terms:

"An application is made in accordance with this section only if, within those 21 days (after a statutory demand is served):

(a) an affidavit supporting the application is filed with the Court; and

(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company." (My emphasis.)

2 It is the respondent's contention that the applicant has not complied with the requirements of the section. The relevant facts may be summarised in the following way. The statutory demand is dated 16 December 1999 and it was served on the applicant on that same day. On 6 January 2000 an articled clerk employed by the applicant's solicitors, filed with the Court an application to set aside the statutory demand and an affidavit in support of that application sworn by Diane Barbara Lee. That affidavit was sworn 6 January 2000. On the same day the articled clerk attended at the offices of Clayton Utz, solicitors for the respondent, to serve the application and the affidavit. She approached the reception desk and spoke with a Ms A Bozonich. It would appear, although it is not expressly stated in the affidavit, that she showed Ms Bozonich a copy of the duly completed application and left a copy of that application together with the affidavit of Ms Lee with Ms Bozonich. Ms Bozonich signed the properly completed copy of the application acknowledging receipt of the document. However, what was left with Ms Bozonich was an incomplete copy of the application. It did not have the action number on the top right hand corner of the document and, perhaps most significantly, did not have the date and time on which the application would be heard. The service copy of the document did not bear a mark denoting the seal of the Supreme Court.

3 The respondent says that the applicant has failed to comply with s 459G(3) because it has not served "a copy of the application". The failure to comply with the section, it was submitted, was fatal and consequently no application to set aside the statutory demand was properly on foot.

4 In support of this submission, counsel for the respondent, apart from relying on what he said was the clear words of the section, referred to the decision of Benonyx Pty Ltd v Fetrona Pty Ltd [1999] NSWSC 1181. This decision concerned an application to set aside a statutory demand where the copy of the application, when served, did not include the return date. His Honour concluded that in such circumstances there had not been compliance with the section. His Honour said (at par 7 and par 8):

"7 Had the copy been served in advance of the filing of the identical application but with a notation of the return date written thereon in some fashion, assuming that that information could be obtained in advance of filing, I might have concluded that the Plaintiff had done what it needed to do to conform to s 459G of the Corporations Law - on the basis that there is no magic in the order of the events that have to take place within the twenty-one days, though the argument is still open that the Defendant needs to know for certain it has been filed and not simply rely on an anticipated return date turns out to be correct. But regrettably not even that occurred. That is not altered by the fact that the Defendant was appraised of the return date later, since that was some six days after the twenty-one days and that is too late.

8 While this result appears productive of hardship and unduly technical, it is my view regrettably unavoidable ... "

5 It appears from the decision, although it is not entirely clear, that although the application in the Benonyx case was served without the return date being endorsed on the copy of the application, the respondent was advised prior to the hearing of the application of the return date. That is precisely what happened in this case. The solicitor for the applicant phoned the respondent's solicitors prior to the return date to be told that the return date had not been endorsed on the copy of the application served on the respondent's solicitors. Once the applicant's solicitors realised what had occurred they served a complete copy of the application on the respondent's solicitors. The respondent's solicitors attended on the first return date. Further, although the action number was not completed on the application, the number is COR 2 of 2000. Clearly, it would not have been difficult for the respondent's solicitors, had they chosen to do so, to search the Court records to ascertain the return date on the application. It is clear, then, that the respondent suffered no prejudice as a consequence of the applicant's omission to serve a copy of the application. Counsel for the respondents did not suggest anything to the contrary. Counsel still made the point that the applicant had failed to comply with the requirements of the section.

6 In response, counsel for the applicant relied upon s 467A. That section reads as follows:

"An application under Part 4.5 or 5.4A must not be dismissed merely because of one or more of the following:

(a) in any case - a defect or irregularity in connection with the application;

(b) in the case of an application for a company to be wound up in insolvency - a defect in a statutory demand;

unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied (for example, by way of an adjournment or an order for costs)."

7 Section 467A is not mentioned by Santow J in his decision in the Benonyx case. However, his Honour did refer to Howship Holdings Pty Ltd v Leslie [1996] NSWSC 314; (1996) 41 NSWLR 542. This case dealt with a slightly different question. The facts were that the plaintiff had despatched a summons to set aside a statutory demand with a covering letter and the supporting affidavit to the defendants, who were solicitors, by putting the letter into the document exchange addressed to the defendants in Sydney. It was submitted that this was not service within the meaning of s 459G(3). His Honour concluded that while service through the document exchange was not good service, the fact that the document had come to the attention of the respondent within the 21 day period meant that the requirements of the section were satisfied. In my view, the Howship Holdings decision is of little assistance to the applicant. It concerns an altogether different question than the one that is raised by this application.

8 It was the respondent's submission that s 467A was not relevant because there was, properly speaking, no application on foot. It is only after compliance with s 459G(3) it was submitted that any defect or irregularity could be cured by operation of s 467A. In my view, that submission is correct. If an application was properly made and a copy properly served, then any defect such as to form or the like might be cured by reference to s 467A. But unless and until there is an application properly on foot, s 467A can have no effect.

9 Not without some reluctance, I have concluded that I should follow the Benonyx decision. What s 459G(3)(b) requires is a "copy" of the application. The section does not say that what must be served is an "exact copy". It may then be the case that if the copy served does not contain the seal of the Supreme Court or it does not contain the action number, such omissions may be excused. But a copy of the application must, I think, by implication, require the important information to be included on the served document. In particular, that must mean that the return date of the application and the date upon which the application was filed should be included. Without these two vital pieces of information a respondent is put at a disadvantage. In the one case, it needs to know the date of filing to ensure that the procedure for setting aside a statutory demand has been followed. In the other the respondent needs to know when it should appear in court to answer the application. In this case I am not satisfied that a copy of the application was served within the 21 days permitted by s 459G(3) and I am not therefore satisfied that an application is properly on foot.

10 The proper order is that the application should be set aside and the applicant should pay the respondent's costs. I will hear the parties as to the precise form of orders.