David Grant & Co Pty Ltd v Westpac Banking Corporation

Judgment 1By Originating Process dated 8 May 2013, the plaintiff, 8D Pty Ltd (as trustee for the Confianca Trust) ("8D") applied to set aside a creditors' statutory demand dated 14 March 2012 served by the defendant, DMH Assets Pty Ltd (as trustee for DMH Assets Superannuation Trust). The parties have agreed that it is convenient first to determine a preliminary question, whether the application to set aside the creditors' statutory demand was served within the 21 day period specified in s 459G of the Corporations Act 2001 (Cth), on the basis that the decision as to that question may finally dispose of the application. 2By way of background, the creditors' statutory demand was posted by DMH from Queensland to 8D's registered office, also in Queensland, on 14 March 2013. On 2 April 2013, 8D filed an application to set aside the creditors' statutory demand under s 459G of the Corporations Act in this Court, rather than in the Supreme Court of Queensland. 8D's solicitors sent that application to DMH's solicitors by facsimile and email on 2 April 2013, within the 21 day period specified in s 459G of the Corporations Act. That application was also served by courier on DMH's solicitors on 3 April 2013, at the address for service specified in the creditors' statutory demand. 3It follows that, had the application to set aside the creditors' statutory demand been brought in the Supreme Court of Queensland, then the application to set aside that demand would have been effectively served at the address specified in the creditors' statutory demand within the 21 day period specified by the Corporations Act. However, that address was not the address of DMH's registered office, a matter which will assume further significance below. 4Subsequently, and after an issue had arisen as to the effectiveness of service of the application to set aside the creditors' statutory demand, on 17 May 2013, 8D's solicitor sent a letter to DMH enclosing the originating process filed 2 April 2013, the affidavit in support of that originating process and a notice under the Service and Execution of Process Act 1992 (Cth) ("SEPA"). That was the first occasion on which notice was given under SEPA, and it was plainly given after the time period specified in s 459G of the Corporations Act. 5The preliminary issue which the parties seek to have determined raises a narrow question of law. DMH points out that an application to set aside a creditors' statutory demand is only effective under s 459G of the Corporations Act if the application and supporting affidavit are both filed and served within the 21 day period specified in that section, and 8D does not contest that proposition. DMH also points out that the manner of service of such an application is determined by the rules of Court, the general law in respect of service, s 109X of the Corporations Act where applicable and SEPA where applicable. 6DMH acknowledges that the service of an application to set aside a statutory demand will generally be valid if served at the address for service specified in the demand, here the address of DMH's solicitors in Queensland. However, DMH contends that service cannot be effected outside the jurisdiction, relevantly New South Wales, at general law and can only be effected in accordance with s 9 of SEPA, which provides for service by leaving an originating process at or sending it to a company's registered office or delivering it personally to a director, and which excludes the operation of s 109X of the Corporations Act. Section 15 of SEPA in turn permits an initiating process to be served in another State, but requires that service to be effected in accordance with SEPA s 9. Section 16 provides that service is effective only if the prescribed notice, in Form 1 prescribed by Regulation 4 of the Service and Execution of Process Regulations 1993 (Cth), is attached to the process. 78D accepts that a plaintiff serving an application to set aside a creditors' statutory demand interstate must comply with s 459G(3) of the Corporations Act and the requirements of SEPA, as to the case law to which I will shortly refer makes clear, but does not accept that compliance with SEPA must take place in the 21 day period specified in s 459G(3) of the Corporations Act. 8D submits that the application to set aside the creditors' statutory demand can be treated as validly served on DMH by service by email, facsimile or courier to the address for service specified in the creditors' statutory demand for the purposes of s 459G where the requirements of SEPA will be complied with if and when the documents served by 8D's solicitor on 17 May 2013 are received at DMH's registered office. In other words, 8D seeks to combine "informal" service within the 21 day period specified in s 459G of the Corporations Act, at the address specified in the creditors' statutory demand, with service in accordance with SEPA outside that 21 day period so as to establish effective service for the purposes of s 459G of the Corporations Act. The principle of informal service, at least so far as statutory demands and applications to set them aside, is of course well established where no question of service interstate arises: Woodgate v Gerard Pty Ltd [2010] NSWSC 508; (2010) 78 ACSR 468. 8I turn now to the case law dealing with issues as to interstate service of applications to set aside creditors' statutory demands. In Marlan Financial Services Pty Ltd v New England Agricultural Traders Pty Ltd [1999] VSC 435; (1999) 158 FLR 256 at [15], Byrne J observed that: "Where, as in the present case, the creditor to be served is interstate, it is necessary to have regard also to the [SEPA]. By s 15(3) service of initiating process, which includes the s 459G application, must be effected in accordance with s 9. Likewise, the affidavits: s 55(3). Section 9(1) specifies that the service is to be effected by leaving the documents at or by sending them by post to the company's registered office or by personal service of them on a director who resides in Australia. Section 16 requires that, for service to be effective, certain prescribed notices are to be attached to the initiating process... Section 9(9) expressly provides that s 109X of the Corporations Law has no application to process which may be served under the [SEPA]. See, also, Corporations Law s 109X(3). Section 8 of the [SEPA] also provides that the Act applies to the exclusion of a law of a State, so that there can be no question of serving the application under the Victorian Rules of Court". His Honour also there expressed the view (at [16]) that service interstate at an address for service specified in a creditors' statutory demand, other than a company's registered office, would not be effective where it did not comply with SEPA. A similar view was taken by the Full Court of the Supreme Court of South Australia in Elan Copra Trading Pty Ltd v J K International Pty Ltd [2005] SASC 501; (2005) 195 FLR 229. 9In Energy Conservation Systems Pty Ltd v Downer EDI Engineering Electrical Pty Ltd [2008] NSWSC 1139, Barrett J in turn referred to Marlan Financial Services and Elan Copra Trading and noted that both s 9(1) and s 15(3) of SEPA are mandatory, precluding any means of service on a company in any part of Australia outside New South Wales other than service in accordance with SEPA s 9 and precluding service other than at the registered office or in accordance with the other means specified in s 9, none of which occurred in this matter within the time specified in s 459G(3) of the Corporations Act. Barrett J there noted that the defendant had not argued that informal service had taken place, but went on to note that there would be difficulty with the parties contracting out of the SEPA and also to express the view (at [23]) that there was no service if SEPA ss 15 and 16 were not complied with, irrespective of actual receipt and actual notice. 10In this case, 8D's argument is ingenious and was ably developed by Mr Kidd of Counsel. However, it does not seem to me that it can be accepted. It seems to me to have a simple and fundamental flaw, to which Mr Maconachie who appears for DMH refers, and which had already been foreshadowed by Byrne J in his treatment of informal service in Re Marlin above at [34] and by Barrett J in Energy Conservation Systems at [23]. The fundamental difficulty for 8D's argument is that compliance with SEPA is necessary to achieve effective service of the application to set aside the creditors' statutory demand interstate where, as Byrne J pointed out in Re Marlan, service of that application outside the jurisdiction would not be recognised at common law. Where 8D had not complied with SEPA on 2 or 3 April 2013, the purported service effected on those dates was not effective, since it could not be effective at general law outside New South Wales and was not effective under SEPA, even where it in fact brought the application to the attention of DMH's solicitors and very likely to the attention of DMH. Where the Court's jurisdiction was not invoked within the 21 day period specified in s 459G(3), because service was not effected as required within the 21 day period specified in that section, subsequent service of the application in accordance with SEPA will not validly invoke that jurisdiction: David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 276-277. 11As the earlier cases dealing with this issue have recognised, this result is undoubtedly odd, where service was effected at the address specified in the creditors' statutory demand, but it could not be said to be surprising where it is the logical outcome of the mandatory time limit in s 459G(3) of the Corporations Act and the mandatory provisions for service interstate in SEPA, and that consequence has been recognised in the case law to which I have referred. In this case, that odd result has arisen, at least in part, because of the equally odd fact that one Queensland company which received a creditors' statutory demand from another Queensland company at its registered office in Queensland sought to bring proceedings to set it aside in this Court, thereby exposing itself to the need to comply with SEPA. 12The application to set aside the creditors' statutory demand must be dismissed. Costs 13Subject to hearing from the parties, the plaintiff must pay the defendant's costs of that application, as agreed or as assessed. 14Mr Maconachie has contended that, in these circumstances, the proper order for costs is an order for costs on an indemnity basis. Mr Maconachie draws attention to correspondence, since at least 27 April 2013, from the defendant's solicitors to the plaintiff's solicitors drawing attention to the authorities which I have applied in holding that service was ineffective, in respect of the application to set aside the statutory demand. He also contends that the attempt to distinguish those authorities, on the basis of service of the originating process and affidavit in support effected by post in accordance with SEPA, shortly before the hearing, was, in his words, a "last ditch" attempt to sustain the service of the application. 15Mr Kidd, who appears for the plaintiff, contends that this is not a matter for indemnity costs, because there was no unreasonableness in respect of the plaintiff's position. The argument which was put, Mr Kidd contends, was open to it and was directed to avoid a result which I have, in my judgment, noted was in one respect an odd result. 16The usual position recognised by Uniform Civil Procedure Rules 2005 (NSW) r 42.1 is that the Court will order that costs follow the event, and such an order would ordinarily be made on the ordinary basis. The Court may, however, make an order for indemnity costs where there is relevantly, unreasonable conduct in pursuing the application, such as to distinguish the case from the ordinary run of cases. 17In this case, I can see some force in Mr Maconachie's contention that, having regard to the existing authorities, the plaintiff must have recognised that there was a significant risk that its application would fail. Having said that, and with some hesitation, I have concluded that this is not a proper case for an order for indemnity costs. The plaintiff's approach raised a question which had not, in terms, been determined in the earlier cases, whether subsequent service in accordance with SEPA could be combined with earlier service in respect of a company interstate so as to satisfy the requirements of s 459G of the Corporations Act. Had the plaintiff been successful in that argument, it would have avoided the odd result to which I have referred, and would have avoided, in some cases, the failure of applications to set aside statutory demands on what might be seen as technical grounds. It was ultimately unsuccessful in that argument, but I do not consider that it was unreasonable, as distinct from ambitious, to seek to develop it. 18For these reasons, I do not consider that I should order that the plaintiff pay the defendant's costs of the application on an indemnity basis.