This is an application to set aside a creditor's statutory demand which was filed on 28 September 2017 by Edifice Australia Pty Ltd ("Company") in respect of a creditor's statutory demand dated 5 September 2017 ("Demand") issued by AFM Masonry Pty Ltd ("AFM"). I will first refer to the nature of the Demand and then to the affidavit evidence led in the application before turning to the matters in issue between the parties.
Commonwealth v Verwayen [2017] NSWSC 1620 | Case summary | Zoe
By the Demand, AFM demanded payment of $51,899.77 being the amount described in a Schedule to the Demand. That Schedule referred to the judgment of Magistrate Virgo given on 7 March 2017 in the Local Court of New South Wales in the amount of $81,899.77, less instalments paid on five occasions, each of $6,000 and totalling $30,000, reducing the amount of the debt claimed to $51,899.77. The Demand was supported by an affidavit of AFM's solicitor, Mr David Sachs, dated 5 September 2017, which recorded the fact of the judgment in the Local Court in favour of AFM against the Company; referred to the several instalment payments made by the Company; expressed the view that the Company had failed to pay on time and failed to comply with instalment orders made by the Local Court on 27 April 2017; and expressed the view that the debt claimed in the Demand was due and payable by the Company and that there was no genuine dispute about the existence or amount of the debt.
I should pause to note that there is evidence that, since the date the Demand was issued, two further instalment payments have been made on 6 October 2017 and 1 November 2017, each in the amount of $6,000. If the Demand is not set aside, it will be necessary to hear the parties as to whether it should be varied under s 459H of the Corporations Act 2001 (Cth) to address that matter. No submissions were made by the parties in that respect.
On 28 September 2017, as I noted above, the Originating Process was filed to set aside the Demand. The application to set aside the Demand was supported by an affidavit of the solicitor for the Company, Mr Hector Ekes, dated 28 September 2017 which referred to service of the Demand, asserting that service took place on or about 8 September 2017; referred to the fact that the Company had sought an order to pay by instalments in the Local Court, which was granted on 5 April 2017 and subsequently varied on or about 27 April 2017 to provide for instalments of $6,000 per month to be payable; and referred to the fact of subsequent payments made by the Company.
It is apparent from Mr Ekes's evidence, although he did not specifically draw attention to the significance of this matter, that no instalment payment was made by the Company on or about 4 July 2017, when an instalment payment was due under the relevant orders, and two instalment payments were made on 1 and 4 August 2017, apparently referable to the instalment payments due on 4 July 2017 and (if the instalment order had not terminated on non-payment of that amount) on 4 August 2017.
The Company also relies on the affidavit of its sole director, Mr Taouk, dated 2 November 2017, which also refers to the order made by the Local Court varying the instalment order on 27 April 2017 and two subsequent payments made. Mr Taouk's affidavit also confirms, again without referring to the significance of the matter, the fact that payments were made on 5 June 2017, 1 August 2017 and 4 August 2017 in respect of relevant instalments, implicitly acknowledging that no payment was made in respect of the instalment that fell due on 4 July 2017, until the payment made in early August 2017. Mr Taouk's evidence, which can at best be a submission, is that:
"I say the Instalment Order is current and being complied with and all the payments I have made have been accepted. No payments have been returned."
The Company relied on an affidavit of service of Ms Helen Wang dated 3 November 2017, initially filed in AFM's case, which referred to the fact that the Demand had been sent by express post, with its accompanying affidavit, on 5 September 2017 and refers to an online search undertaken by Ms Wang on 6 September 2017 which referred to the relevant item having been "delivered" at "10.29am Wed[nesday] 6 Sep[tember 2017] Kingsgrove, NSW." I pause to note that Ms Wang's affidavit also annexes a company search that records the address of the registered office of the Company at the address of its accountants in Queen Street, Hurlstone Park, NSW.
The Company also relies on an affidavit of its accountant, Mr Nguyen, dated 15 November 2017 which records that Mr Nguyen's usual practice is to collect mail from the mail box "first thing in the morning on Monday and Friday on weekly basis, then open the mail and attend to its distribution." Although Mr Nguyen's evidence as to that practice is not particularly clear - since it appears to refer to two collections of mail a week, which is not easily reconciled to the reference to collection on a "weekly basis" - it appears that Mr Nguyen's practice is to collect mail twice a week, on Mondays and Fridays. Mr Nguyen's evidence is also that he received the Demand on 8 September 2017, by picking it up from the mail box. That evidence, is, of course, equivocal as to when the Demand was delivered, since that could have occurred at any time between 6 September 2017 and 8 September 2017, given that Mr Nguyen's evidence was he did not, implicitly, collect mail between the Wednesday and the Friday. Mr Nguyen's evidence is that, immediately upon receipt, he scanned the Demand and forwarded it to the sole director of the Company, and there is evidence that that director then forwarded the Demand to the Company's solicitor.
Finally, the Company relies on a second affidavit of its solicitor, Mr Ekes, dated 14 November 2017, which confirms the receipt of email correspondence from the Company attaching the Demand, presumably after the Company's director had received it from its accountant, on 8 September 2017. Mr Ekes also refers to a letter sent on 15 September 2017, although dated 14 September 2017, to AFM's solicitor which stated, inter alia:
"We confirm the date of service of your client's Statutory Demand to be 8 September 2017.
We note your client's recognition of the Instalment Order confirmed on 27 April 2017 by Registrar M McTegg. Your client has further acknowledged that $30,000 has been paid under this Instalment Order...
Given the validity of the Instalment Order, your client's Statutory Demand is inappropriate and an abuse of process. We require your client immediately withdraw the Statutory Demand."
Plainly, the Demand was not withdrawn and, as I have noted above, an application has now been made to set it aside. That application raises several issues, which have been identified by Mr Patterson, who appears for the Company, and Mr Fernandes, who appears for AFM, and addressed in submissions.
[3]
Whether the application to set aside the Demand was filed and served within the time specified in s 459G of the Corporations Act
The first issue raised in the application is whether the application to set aside the Demand was filed within the 21-day period specified in s 459G of the Corporations Act. It is common ground between the parties that, if the application were not filed within that 21-day period, then the Court would not have jurisdiction to determine it. It is also common ground that, if the Demand were served on 6 September 2017, then the application was not filed within the 21-day period; and if it were served on 8 September 2017, when it was collected by the Company's accountant from his mail box, then the application was within that 21-day period. It is also common ground between the parties that, if AFM must rely on the presumptions as to the time for service arising under s 160 of the Evidence Act 1995 (NSW), which presumes service on the fourth working day after posting, then the application to set aside the Demand was filed within time.
AFM seeks to establish, by a similar approach to that which was adopted by the defendant in Re Futre Developments Pty Ltd [2014] NSWSC 1712, that it had served the Demand on 6 September 2017, by reliance on the record of delivery by Australia Post to which I have referred above. That is a question of fact and no evidence of substance was led in this case as to Australia Post's practice in respect of recording the delivery of express post items, or to explain the significance of the reference to "delivered" at Kingsgrove in the tracking record on which AFM relies. Although it is certainly plausible that the Demand was in fact delivered to the Company's registered office in Hurlstone Park on 6 September 2017, and that the reference to "Kingsgrove" in the tracking receipt is not, for example, to a mail sorting centre or a local post office rather than a street address in Hurlstone Park, the evidence that is presently available does not seem to me to establish that matter on the balance of probabilities. It seems to me that the present state of the evidence established only that the Demand and accompanying material were delivered to the Company's registered office at some time between 6 September 2017 when Australia Post recorded delivery to Kingsgrove and 8 September 2017 when the accountant collected the Demand and accompanying material from the relevant mail box. Where delivery to the Company's registered office on 6 September has not been established, as a matter of fact, then it has not been established that the filing and service of the Company's application to set aside the Demand was outside the 21-day period specified in s 459G of the Act. I proceed on the basis that AFM bears at least an evidentiary onus of establishing that matter, in order to displace the jurisdiction that the Court prima facie has when an application is filed to set aside a creditor's statutory demand.
[4]
Estoppel
Next, the Company relied on the statement made in its solicitor's letter dated 14 November 2017, to which I referred above, that:
"We confirm the date of service of your client's Statutory Demand to be 8 September 2017."
The Company submitted that this statement, and AFM's failure to contradict it, gave rise to an estoppel which would prevent AFM contending that the Demand had been served prior to 8 September 2017, or that the Court lacked jurisdiction to deal with the application to set aside the Demand as a result of that matter. It is not strictly necessary to determine that question, where I have concluded above that it was not established that the Demand was served prior to 8 September 2017. I should, however, make some comments as to that matter which is potentially of some importance.
Mr Patterson relied, for this submission, on the decision of Brereton J in Re Boss Engineering (NSW) Pty Ltd [2017] NSWSC 1334. In that case, his Honour first had to determine the question of the date on which a creditor's statutory demand was served, and found that that demand had been served more than 21 days before the application to set aside the demand was made, which would ordinarily have the result that the Court had no jurisdiction to determine the application to set aside that demand. His Honour then referred to several dealings between a self-represented director of the company in that case, and the Office of State Revenue, in which the director had expressed a belief as to the time by which he could file an application to set aside the demand; the Office of State Revenue had not controverted that belief; and the director had then made a payment, in respect of a possible settlement of the matter, before being advised that the company was outside the time in which to bring an application to set aside the demand. The Office of State Revenue subsequently kept that payment and nonetheless proceeded to contest the application to set aside the demand on the basis that the Court lacked jurisdiction.
In those circumstances, Brereton J referred to the principles applicable to establishing an equitable estoppel, as articulated by the High Court of Australia in Waltons Stores (Interstate) Ltd v Maher [1998] HCA 7; (1988) 164 CLR 387. His Honour observed (at [31]) that:
"a party will be estopped in equity from denying the truth of an assumption on which the other has acted to his or her detriment, if the first party has played such a part in its adoption that it would be unfair or unjust if he or she were left free to ignore it, on the footing that it would be unconscionable for the defendant to deny the truth of the assumption."
His Honour also noted that the knowledge or intention that a party will act on such an assumption may be found where that party encourages the other party to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when, in conscience, objection ought be stated.
It is by no means apparent to me that the position in this case is analogous to that addressed in Boss Engineering (NSW) Pty Ltd above. The letter dated 14 September 2017 from the Company's solicitor "confirm[ed] the date of service of the Demand to be 8 September 2017". Given the facts to which I have referred above, that was the date on which the Company had received the Demand from its accountant, and the solicitor had received the Demand from the Company, but may or may not have been the date on which the Demand was served at the Company's registered office. It is by no means apparent that, when the Company's solicitors advised AFM's solicitors of the Company's position as to that matter on 14 September 2017, AFM would have had the capacity to contradict, one way or the other, the Company's assertion as to when the Demand was served. By that date, Ms Wang had at least performed the online search at the Australia Post website to which I have referred above, indicating the record of delivery on 6 September, but some further legal analysis would have been required to determine the question as to when service was effected in those circumstances, and it is not apparent whether AFM's solicitors had undertaken that analysis at that stage.
Second, the Company's solicitors did not then seek a response from AFM's solicitors as to whether they agreed or disagreed with the position that the Company had put, and it is by no means apparent to me that AFM's solicitors were obliged to initiate a debate as to that matter, when the Company had expressed its position without seeking comment from them as to the correctness of that position.
Third, it seems to me that the facts of this matter are also distinguishable from those at issue in Re Boss Engineering (NSW) Pty Ltd above where what is involved here is a statement made by one solicitor, to which no response is made by another solicitor, as distinct from a dealing between a director without legal representation and a government body. There is no reason to assume that Mr Ekes, when he wrote his letter dated 14 September 2017, would have been under any misapprehension that the date of service of the Demand was necessarily the same date as the date on which the Company's accountant had collected the Demand from his mail box, and it is not clear whether the Company was at any time under a misapprehension as to that matter, as distinct from adopting a position that was consistent with its interests in respect of that matter.
Fourth, there seems to me to be a question whether an estoppel can found the jurisdiction of the Court, which is otherwise absent, in an application of this character, although it is not necessary that I determine that question in this application, where it does not arise given the findings I have reached above. The Court's jurisdiction to set aside a creditor's statutory demand on an application under s 459G of the Act exists where that application is filed and served within 21 days after the creditor's statutory demand is served, and the Court has no power to extend the time for such an application under that section or validate defective service of an application or affidavit in support outside the 21-day period: David Grant & Co Pty Ltd (rec apptd) v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265; 18 ACSR 225 at 234.
I recognise that, in Re Boss Engineering (NSW) Pty Ltd above at [32], Brereton J referred to the application of principles of estoppel to deny reliance on a limitation period, for example in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394. However, it may be arguable that principles of limitation are defences, which a defendant may choose to raise or not raise, and are distinct from limits to a court's statutory jurisdiction to determine a matter. There seems to me to be a question whether, if an application to set aside a demand is in fact not filed or served within the 21-day period, and the court would not otherwise have jurisdiction to determine that application under s 459G of the Corporations Act, that jurisdiction can be established because one party has made a representation to the other, or has failed to correct a misapprehension by the other, as to the availability of the jurisdiction. There may also be a question how the conduct of the parties can confer a jurisdiction on the Court by estoppel, which it does not have by statute, if they could not confer that jurisdiction on the Court by express agreement. It is not necessary to determine that question in this case, given the findings that I have reached above that it has not been established that the Court lacks jurisdiction in this matter.
[5]
Whether there is some other reason the Demand should be set aside
The next issues raised in the application can be determined more briefly. The application was put on the basis that the Court has jurisdiction to set aside the Demand under s 459J(1)(b) of the Corporations Act, because there is some other reason why the Demand should be set aside. The Court's power to set aside a demand for some other reason under that section exists to maintain the integrity of the process provided under Pt 5.4 of the Corporations Act and is to be used to counter an attempted subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd [1996] NSWSC 199; (1996) 20 ACSR 746; Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229; Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466 at [16]. In Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 at [83], the Court noted that s 459J(1)(b) will be rarely employed, but when employed, that will be for the purpose of meeting the demands of justice; see also Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262 at [25].
While an instalment order is in effect, it has the effect of staying execution upon a judgment. However, r 37.7 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, subject to a matter that is not presently relevant, an instalment order ceases to have effect if the judgment debtor fails to comply with the order. In Murdaca v Accounts Control Management Services Pty Ltd [2007] FCA 577, Stone J read that rule, in accordance with its terms, to indicate that a failure to make instalment payments on the dates provided in the instalment order meant that the order ceased to have effect. The evidence to which I have referred above here establishes a material non-compliance by the Company with the instalment order, by a failure to make a payment that was due on 4 July 2017, but in fact not made until early August 2017.
I recognise that Mr Patterson drew attention to r 37.6 of the Uniform Civil Procedure Rules, which provides for variation or rescission of an instalment order, in the case of an improvement in the judgment debtor's financial circumstances. However, that rule is not applicable here, where the relevant issue is not an improvement in the Company's financial circumstances, but a failure to make a payment required under the instalment order which continued for a substantial period and had the consequence specified in r 37.7 of the Uniform Civil Procedure Rules.
In these circumstances, it seems to me the instalment order ceased to have effect upon the Company's continuing failure to make payment through July, and notwithstanding that further payments have been made since that date. There is therefore no room for the application of the principle that, while an instalment order is in place, a creditor's statutory demand for the balance of the amount claimed that is inconsistent with that instalment order can be set aside under s 459J(1)(b) of the Act: Tatlers.com.au Pty Ltd v Davis [2006] NSWSC 1055.
I recognise that, on one view, it may seem harsh that AFM should now proceed by way of a creditor's statutory demand, after it has received and apparently retained several payments since that date. However, it does not seem to me that there is any inconsistency between its doing so and the structure of Pt 5.4 of the Corporations Act and, as I noted above, the jurisdiction under s 459J(1)(b) of the Corporations Act does not give effect to a judge's subjective notions of what may be fair in the particular case. To the extent that the Company has made payments, since August 2017, which have not already been reflected by deductions from the amount claimed in the Demand, then they may be addressed by a variation of the Demand as appropriate.
[6]
Conclusion and orders
For these reasons, I am satisfied the Court has jurisdiction to determine this application. The application to set aside the Demand, so far as it relied on the continuing instalment order, must fail, and no other basis to set aside the Demand is established under s 459J(1)(b) of the Corporations Act. Following the delivery of my judgment, the parties agreed that I should make the following orders to give effect to my judgment, which I now make:
The creditor's statutory demand issued by the Defendant on 5 September 2017 be varied under s 459H(4)(a) of the Corporations Act 2001 (Cth) by substituting the sum of $39,899.77 for the sum of $51,899.77 as the total amount of the debt.
The proceedings otherwise be dismissed.
The Plaintiff pay the Defendant's costs on the ordinary basis as agreed or as assessed.
[7]
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: 24 November 2017