- Clark v Murray

- Clark v Murray - [2024] NSWSC 942 - NSWSC 2024 case summary — Zoe

Affidavit evidence

NWE relied on the affidavit dated 25 March 2024 of its director, Mr Martino, although it did not read all of that affidavit. The part of the affidavit which NWE read referred to correspondence, from 11 March 2024 onwards, in respect of the Demand and the basis on which NWE sought to dispute the debt claimed in the Demand. BDO in turn tendered the paragraphs of that affidavit and an annexure which were not read by NWE. Those paragraphs were as follows: "The statutory [D]emand was served by [BDO] on [NWE] on 22 February 2024 and was deemed served 4 March 2024." On 28 February 2024 I wrote to the Solicitors of [BDO] seeking particulars of the alleged debt claimed by [BDO]. Annexed hereto and marked with the letter "A" is a copy of the letter sent to BDO's Solicitors. On 8 March 2024, I further wrote to [BDO's] Solicitor seeking a reply to my letter of 28 February 2024 and should a satisfactory reply not be received seeking the withdrawal of the [D]emand."
The first paragraph which I have quoted above implicitly acknowledged receipt of the Demand on 22 February 2024, although it sought to draw a distinction between actual service and deemed service, implicitly by post, on 4 March 2024. Those paragraphs also refer to a letter sent on 28 February 2024, although undated, from NWE (signed by Mr Martino as its director) to BDO and emailed on that date by Mr Martino to BDO's solicitor (Ex P2) which relevantly stated: "I refer to your letter and attached [D]emand of 22 February 2024".
That letter went on to refer to the fact that Mr Martino was recently appointed as a director of NWE and to a question as to the authority of previous directors to enter into particular transactions and sought information as to whether the relevant transaction or transactions were "valid authorised transactions". That letter plainly acknowledged receipt of the letter serving the Demand or NWE and the Demand itself, because it referred to it, and Mr Martino could not have referred to that letter and Demand without receiving it. It also indicated that NWE then knew the content of the Demand, so far as it sought information about the transaction or transactions referred to in the Demand. In these circumstances, Mr Haines, who appears for NWE, rightly acknowledges that there is no basis on which NWE could put that the Demand had been received by it, by its director, Mr Martino any later than 28 February 2024 when that letter was sent.
NWE also reads an affidavit dated 9 March 2024 of Mr Martino which refers to service of the Originating Process seeking to set aside the Demand and a supporting affidavit, both dated 25 March 2024, on BDO's solicitors, on 25 March 2024. It will immediately be apparent that, if the Demand was served on NWE on or before 28 February 2024, and excluding the date of service in accordance with the case law, then the filing and service of the application to set aside the Demand on 25 March 2024 was not within the 21 day period specified in s 459G of the Act.
NWE also reads Mr Martino's affidavit dated 24 May 2024, which addresses the circumstances in which BDO was retained in respect of the relevant transaction, and an affidavit dated 11 July 2024, where Mr Martino indicates that he was not a director of NWE at the time the work, which is the subject of the Demand, was undertaken. Those matters do not take the question of receipt of the Demand, or whether the application to set it aside was brought within time, any further.

[4]

The applicable principles and determination

The principles that apply in circumstances of this kind are well established. Mr Gandar, who appears for BDO, refers to the decision of Helman J in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] 1Q d R 140; [2003] QSC 98 ("Parklands Blue Metal"), which addressed a factual situation which is virtually indistinguishable from this case. There, a creditor served a creditor's statutory demand, intending to rely on s 109X of the Act which provides, inter alia, for service at the company's registered office. The Court found, on an admission made by the company, that it had received a facsimile transmission of the statutory demand and accompanying affidavit prior to service of the demand at the registered office; the valid service of those documents occurred on the earlier date notwithstanding s 109X of the Act did not provide for that mode of service; and, in those circumstances, an application to set aside the creditor's statutory demand, which was not filed within 21 days of the earlier date of service of the demand, did not establish the Court's jurisdiction to hear the application. Helman J there referred to the consideration of the circumstances in which service could be effected informally by Young J in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542, in that case dealing with the service of a summons seeking to set aside the creditor's statutory demand.
Mr Gandar also draws attention to the observations of Palmer J in Woodgate v Garard Pty Ltd [2010] NSWSC 508, where his Honour held a statutory demand had come to the attention of a company through its director, who was authorised to deal with the demand, and the company was therefore validly served at the point at which that occurred. Each of those factors are established here, where it is plain that the Demand here had come to the attention of Mr Martino by 28 February 2024, and that he was authorised to deal with the Demand on NWE's behalf, which he did by commencing correspondence in respect of the Demand from that date.
Mr Haines, who as I noted above appears for NWE, did not seek to contest the application of that case law, and there was no basis on which he could have done so, given the subsequent cases which have referred to and applied it. In V & M Daidovic Pty Limited v Professional Services Group t/a Rosier Partners Lawyers [2012] NSWSC 134, I also dealt with the position where service by creditor's statutory demand had been effected by facsimile; I found that service in that manner was effective, in that case, where it brought a creditor's statutory demand to the attention of the director of the company, although facsimile service was not one of the methods of service set out in s 109X of the Act and I followed Parklands Blue Metal, in holding that in the particular circumstances, the application to set aside the demand had not been brought within the 21 day period specified in s 459G(3) of the Act. I held (at [5]) that that was sufficient in that case to establish that the Court did not have jurisdiction to entertain the application to set aside the statutory demand, although I there went on to determine other aspects of the application.
The approach adopted in Parklands Blue Metal has since been applied in other contexts. In Clark v Murray [2017] WASCA 88, Mitchell JA referred to that decision, in holding that the receipt of a Court process amounted to personal service, where the party to whom it was directed had acknowledged that receipt, and observed that: "Once the recipient receives the [document], the requirement for personal service has been achieved. A person who the evidence establishes has actually received the document cannot validly complain that he or she has not been personally served."
That approach was followed, in this Court, in Smith v Shilkan (No 2) [2019] NSWSC 969, again in respect of the service of a Court document.
Here, there can be no doubt that, where the Originating Process and supporting affidavit was not filed or served within the 21 day period specified in s 459G(3) of the Act, the Court does not have jurisdiction to determine the application to set aside the Demand. That proposition follows, not only from the earlier cases to which I have referred, but from the decision of the Court of Appeal in Chief Commissioner of State Revenue v Boss Constructions (NSW) Pty Limited [2018] NSWCA 270 ("Boss Constructions"). Bathurst CJ, with whom Leeming JA and Sackville AJA agreed, there referred to the Court of Appeal's observations in TQM Design and Construct Pty Limited v KCL Developments Pty Limited [2011] NSWCA 7 at [29] as to the structure of the creditor's statutory demand regime, as constituting "a carefully formulated series of interlocked steps which have substantial consequences and the objects of which require precise compliance for their attainment". The Chief Justice (as his Honour then was) also there referred to David Grant and Co Pty Limited v Westpac Banking Corporation (1995) 184 CLR 265 at 270; [1995] HCA 43, as authority that the statutory demand regime constituted: "a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the entered position of disputes about debts, unless they are raised promptly".
The High Court's decision is authority, and the Court of Appeal there treated it as authority, that the time limit in s 459G of the Act cannot be extended by the Court under s 1322 of the Act; and Boss Constructions also establishes, and Mr Haines properly accepted, that that time limit cannot be extended by an estoppel, even if, as here, the defendant's solicitor at some point also proceeds on a mistaken basis that the expiry date for service of an application to set aside the creditor's statutory demand was a later date. The principle that the Court did not have jurisdiction to consider an application to set aside a creditor's statutory demand, where it was not filed within that 21 day period, has again recently been applied in the Supreme Court of Western Australia in Flintel Pty Ltd v Flexible Telecommunications Pty Ltd [2024] WASC 63.
For completeness, I should note that an application to set aside a creditor's statutory demand under s 459J of the Act for some other reason, is also not available where the application to set aside the demand was not served within the 21 day period, and I recognise that Mr Haines did not contend to the contrary: Re LDW Constructions Pty Ltd [2019] NSWSC 1159; Re Hengji Developments Pty Ltd [2019] NSWSC 1515 at [16].
Mr Haines foreshadowed that, where the application to set aside the Demand could not be determined for these reasons, NWE may in due course seek leave under s 459S of the Act to raise these matters in a winding up application. That is, of course, a possibility that has been recognised in the case law, and should be addressed if and when any winding up application is made by BDO, relying on a presumption of insolvency which may arise from any non-compliance with the Demand.

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Legislation Cited (1)

Cases Cited (13)