Deputy Commissioner of Taxation v Melking Holdings Pty Ltd

Registry: Western Australia

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 68

Counsel for the Plaintiff: Mr WCJ Zappia

Solicitor for the Plaintiff: Australian Government Solicitor

Counsel for the Interested Person: Ms J Moore

Solicitor for the Interested Person: HopgoodGanim Lawyers

Counsel for the Joint and Several Liquidators of Melking Holdings Pty Ltd (ACN 056 528 780): Mr D Goh

Solicitor for the Joint and Several Liquidators of Melking Holdings Pty Ltd (ACN 056 528 780): Herbert Smith Freehills

BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff

AND: MELKING HOLDINGS PTY LTD (ACN 056 528 780) Defendant

Joint and Several Liquidators of Melking Holdings Pty Ltd (ACN 056 528 780)

JUDGE: COLVIN J DATE OF ORDER: 21 JUNE 2019

1. There be leave to Michael Joseph Fuery to cause Melking Holdings Pty Ltd (in liq) to apply for a review of the orders made by Registrar Trott on 28 May 2019 to wind up Melking Holdings Pty Ltd.
2. There be leave to the plaintiff to amend the originating process in terms of the proposed amended originating process dated 17 June 2019 excluding proposed paragraph 6.
3. The decision of Registrar Trott be affirmed.
4. The review application is otherwise dismissed.
5. The plaintiff's costs of the review application be paid by the defendant to be reimbursed out of the property of the defendant in accordance with s 466(2) of the Corporations Act 2001 (Cth).
6. The approved reasonable costs of the liquidators of the defendant incurred in appearing on the review application do form part of the costs of the winding up of the defendant to be paid to the liquidators. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 On 28 May 2019 a Registrar of this Court made an order winding up Melking Holdings Pty Ltd (Melking) on the application of the Deputy Commissioner of Taxation. The order was made on the basis of deemed insolvency by reason of a failure to comply with a statutory demand said to have been served on the registered office of Melking on 8 February 2018. Mr Michael Fuery, a director of Melking appeared before the Registrar. He sought an adjournment on behalf of Melking. The adjournment application was refused and winding up orders were made by the Registrar. 2 On 11 June 2019, Mr Fuery brought an application for leave to apply on behalf of Melking for a review of the orders made by the Registrar and a stay of the winding up orders pending the determination of the review. Two matters were raised as to why there should be leave. First, it was said that there was a failure to afford procedural fairness by refusing the adjournment application in circumstances where the adjournment was sought to enable Melking to be legally represented. Second, it was said that the statutory demand had not been properly served and therefore the Registrar had erred in applying a statutory presumption of insolvency. 3 The matter came before me on 13 June 2019. At that point, the application for leave to bring the review application was opposed on the basis that the claim that there had not been proper service lacked merit. The Commissioner maintained that Melking had been served with the statutory demand. In addition, the Commissioner foreshadowed an application to amend the originating process if leave was given and there was a hearing of the application for review. The Commissioner said the proposed amendment to the application would seek to support the claim to validity of service of the statutory demand by claims made in the alterative as to modes of services other than those stated in the winding up application. The Commissioner indicated that leave may be sought to raise other matters. 4 The Commissioner also informed the Court of the terms of an email communication from the liquidators of Melking to the effect that until the application for review was determined, the liquidators would limit their activities to securing the assets of Melking and complying with their statutory reporting obligations. The liquidators sought to preserve their position in relation to reasonable remuneration and expenses. 5 In the above circumstances, I made orders allowing for the Commissioner to file and serve any proposed amended originating process and for Mr Fuery's application and the application for review (if leave was granted) to be heard together on 20 June 2019. In the result, the Commissioner has sought leave to amend to claim that the statutory demand was served by other means and has also sought to claim that Melking is actually insolvent. 6 Having now heard the application, I am of the view that there should be leave to bring the application for review and there should be an order affirming the Registrar's decision. The application by the Commissioner to amend should be allowed, but only to the extent that it seeks to claim there were other modes of service of the statutory demand and a presumption of insolvency arises. Otherwise, the application to amend should be refused in the exercise of the Court's discretion. The review application having been unsuccessful and Mr Fuery having acted appropriately in all the circumstances, there should be an order that the Commissioner's costs of the review application be paid by Melking to be reimbursed out of the property of Melking in accordance with s 466(2) of the Corporations Act 2001 (Cth).

Application for leave 7 While a company is under external administration (which includes where a winding up order has been made) an officer of the company (which includes a director) must not perform or exercise a function or power of that office: s 198G(1). For a director to take steps to cause the company to commence court proceedings is to exercise a function or power of the office of director. There are a number of exceptions to the prohibition stated in s 198G(1). One exception is where the officer is acting with the written approval of the Court. 8 A provision in similar terms to the parts of s 198G that are relevant for present purposes was expressed previously in s 471A. Section 471A was repealed with effect from 1 March 2017 which was when s 198G took effect. Given the similarity in language and the fact that the changes were part of a package of reforms that reorganised as well as modified the provisions of the Corporations Act relating to insolvency practice introduced by the Insolvency Law Reform Act 2016 (Cth), the previous law as to the approach to be adopted by the Court when considering whether to allow a director to bring a review application in respect of a decision made by a Registrar in the exercise of delegated authority to make orders winding up a company is applicable. It is applicable because the nature of the legislative change made to introduce s 198G did not indicate any intention to change the operation of the statutory provision. 9 The approach to be followed in considering whether to grant leave was considered by Barker J in Deputy Commissioner of Taxation v Soiland Pty Ltd (In Liq) [2010] FCA 168 and the approach to be adopted summarised at [26]. 10 In the result, the Commissioner did not oppose the grant of leave to Mr Fuery to bring the application for review. Therefore, it is not necessary to review the principles to be applied and I grant the leave sought by Mr Fuery.

The nature of the review 11 Section 35A(1) of the Federal Court of Australia Act 1976 (Cth) provides for certain powers of the Court to be exercised by a Registrar if a judge so directs. There is express provision whereby a party to proceedings in which the Registrar has exercised any of the powers of the Court under a direction made by a judge of the Court may apply for a review of the exercise of the power by the Registrar: s 35A(5). The review of a Registrar's decision is a rehearing de novo in which the Court may receive fresh evidence and depart from factual findings by the Registrar: Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2013] FCA 623 at [36] and Mazukov v University of Tasmania [2004] FCAFC 159 at [21]-[24]. It is 'a complete rehearing' in which '[t]he moving party before the Registrar has the responsibility of satisfying the Court that the orders should have been made': Callegher v Australian Securities and Investments Commission [2007] FCA 482; (2007) 218 FCR 81 at [46]. The availability of the review fulfils a constitutional imperative that the delegation of the exercise of judicial power to a Registrar is subject to real and effective control and supervision by the Court: Harris v Caladine [1991] HCA 9; (1991) 172 CLR 84 at 124-126 and HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd [2002] FCA 1638 at [38]-[40] (French J). 12 In Harris v Caladine, Mason CJ and Deane J expressed the following view concerning the nature of the hearing de novo provided for by the Family Law Act 1975 (Cth) where the subject matter was the making of an order altering property interests in a manner considered appropriate: The direction that the review is to be by way of hearing de novo plainly indicates that the jurisdiction of the Court on review is not relevantly confined and extends not only to any issue which might have arisen before the Deputy Registrar but also to any issue which might properly arise in the meantime. 13 However, that view was expressed in a context where the order as to property interests had been made by a Deputy Registrar by consent and on review the making of the order was opposed. It was argued that the issue on review was confined to whether the order should have been made given that there had been consent at that time. In other words, on review the consent still pertained even though it had been withdrawn by the client. It was in that context that the Court was considering the extent of the review and held that the merits of whether to make the property order were to be considered. The Court was not concerned with a claim that on review the issues might be expanded beyond those that fell for determination by the Deputy Registrar whether by consent or otherwise. 14 A rehearing of the kind provided for by s 35A(5) remains a review. The question is whether or not to affirm the decision made in the exercise of the delegated power. However, it is a fresh exercise of the power to be based upon the facts and law as at the time the review is undertaken. The decision to be made on review is a decision by the Court as to how it would exercise the power, not whether there has been error demonstrated in the approach by the Registrar. A rehearing would not extend to issues that were not before the Registrar such that it was in effect a hearing in respect of an exercise of power that was not undertaken by the Registrar. The issues to be determined on the review are those that were before the Registrar and the subject of the exercise of the delegated power. It is not for the moving party on review to seek to expand the issues that were before the Registrar by seeking to raise an amendment. To allow an 'amendment' would be to allow the moving party to raise for the first time the adjudication by the Court of the wider issues introduced by the amendment. The proceeding would become more than a review of the particular exercise of power by the Registrar. 15 However, s 35A(6) provides that the Court, on an application for review of an exercise of power by a Registrar, may make 'such order as it thinks fit with respect to the matter with respect to which the power was exercised'. The constitutional imperative behind the terms of s 35A(5) and (6) indicates a constitutional usage of the term 'matter'. In the context of the jurisdiction of federal courts, a matter is the subject matter for determination in a legal proceeding: Palmer v Ayres [2017] HCA 5; (2017) 259 CLR 478 at [26] (Kiefel, Keane, Nettle and Gordon JJ). It extends 'to at least so much of the circumstances as give rise to so much of the controversy as is committed by the Parliament to the judicial determination of a court exercising federal jurisdiction': at [102] (Gageler J). Therefore, although the ambit of the review is confined by the exercise of the power, the Court also has a statutory jurisdiction on review (exercisable at its judicial discretion) to make orders with respect to the wider subject matter before the Court on the application for a winding up order. 16 In the context of the present case, as the Commissioner wishes to move on the review application for a winding up order on a basis that was not advanced before the Registrar, then the Court would have power to entertain that application to the extent that it was within the subject matter of the original winding up application. The question whether there should be leave given to Mr Fuery to cause Melking to advance the review application is to be evaluated in that context. Of particular significance in a case like the present is the fact that the moving party has obtained an order for winding up and the application for review proceeds on an urgent basis with liquidators having been appointed and the company being in hiatus while the review application proceeds. There is a wider public interest and the interest of other creditors to be considered. If it is the case that the winding up order should not have been made there is the prejudice that arises for Melking in having its business activities suspended while the review is undertaken. As a result, the Court does not have the option of allowing the amendment on the basis that there will be an adjournment and provision for costs. Indeed, no party sought an adjournment. Further, the Court hears the review application to supervise the outcome of proceedings before the Registrar in which the moving party had carriage of the issues raised. The Commissioner obtained the winding up orders on a particular basis. These are important matters bearing upon whether leave should be granted to amend the application at the time of the review.

Sections 459C and 459Q 17 I will shortly deal with the Commissioner's application to amend, but before doing so it is necessary to consider authorities that deal with the presumption of insolvency that arises when there is a failure to satisfy a statutory demand. 18 Section 459C(2) requires the Court to presume that the company is insolvent if 'during or after the 3 months ending on the day when the application was made' the company failed to comply with a statutory demand' (emphasis added). There are other circumstances in addition to a failure to comply with a statutory demand where s 459C(2) specifies that the presumption also arises. Section 459C(2) has effect for the purposes of 'an application under section 234, 459P, 462 or 464': s 459C(1)(a). Section 459P specifies the persons who may apply to the Court for a company to be wound up in insolvency. Section 234 identifies who can bring an application for orders (including a winding up order) if there is oppression in the conduct of the affairs of a company. Section 462 identifies those who have standing to bring a winding up application on other grounds. Section 464 concerns the bringing of a winding up application by the Australian Securities and Investments Commission (ASIC). So, s 459C identifies the applications in which the presumed insolvency arising from a failure to comply with a statutory demand applies and does so by reference to the provisions in the Corporations Act that identify who may bring particular types of applications. It is a generic provision that applies to various different types of winding up applications that may be brought under the provisions in the Corporations Act. It contemplates a circumstance in which there may be a failure to comply with a statutory demand after the application was made. 19 Section 459Q of the Corporations Act provides that if an application to wind up a company in insolvency relies upon a failure to comply with a statutory demand, the application, amongst other things: (a) must set out particulars of service of the demand on the company and of the failure to comply with the demand; and (b) must have attached to it … a copy of the demand … It is a provision that is concerned with the content of a particular type of application, namely an application to wind up in insolvency in which reliance is placed upon the failure to comply with a statutory demand. 20 Finally, it is to be noted that s 465C prohibits a person, without the leave of the Court, from opposing an application under s 459P, s 462 or s 464 unless a notice of the grounds of opposition and an affidavit verifying the matters stated in the notice has been filed within the period prescribed. In that context, the requirement in s 459Q may be seen as facilitating clear notice of any reliance upon presumed insolvency so that grounds of opposition can be prepared on that basis. 21 In the above context, three issues arise, namely: (1) where an application is brought to wind up in insolvency that relies solely upon a failure to comply with a statutory demand, is the presumption of insolvency required by s 459C(2) confined to a failure to comply that is particularised in accordance with the requirement in s 459Q; (2) if so, can there be an amendment to the particulars in the application after it has been commenced to add a further failure to comply; and (3) in either case, is the answer different where the additional failure to comply with a statutory demand is alleged to have occurred after the commencement of the application. 22 The authorities are not consistent on these issues. They were carefully reviewed by Brereton J in Re Plutus Payroll Pty Ltd [2017] NSWSC 1360. In that case the winding up applications were brought on just and equitable grounds (not in reliance on a failure to comply with a statutory demand). His Honour concluded at [13] that 'where proceedings are commenced invoking grounds other than a presumption of insolvency arising from failure to comply with a statutory demand, but there is subsequent such failure to comply before the hearing, the presumption becomes available'. 23 Although the conclusion is qualified as applying to those instances where a winding up application is commenced by invoking grounds other than presumed insolvency from a failure to comply with a statutory demand, the reasoning of Brereton J does not require that qualification. It relied, in part, upon the terms of s 459C. Importantly, s 459C(2) lists six separate circumstances in which the Court must presume that the company the subject of a winding up application is insolvent. All six circumstances are the subject of the introductory words 'if during or after the 3 months ending on the day when the [winding up] application was made' (emphasis added). The failure by a company to comply with a statutory demand is the first in the list. The words 'must presume' are expressed to apply in all instances without qualification by reference to s 459Q or otherwise. 24 On the other hand, s 459Q is dealing with the form of application where reliance is placed upon a failure to comply with a statutory demand. The obligation is to provide particulars of such reliance in the application. The provision is otherwise silent as to the manner in which the application may be dealt with once commenced. That is a matter which is left to the usual practice and procedure of the Court. 25 In those circumstances, it is possible to give s 459Q an operation that does not require the opening words of s 459C to be read as applying in one way to the first item in the list (not applicable where the event occurs after the application has been commenced) and in accordance with the language of the provision in the case of the remaining five items. It would operate in the following way. Section 459Q may be construed as dealing with requirements that must be met at the time that the application is commenced. If those requirements cannot be met then the application cannot be validly commenced in reliance upon a failure to comply with a statutory demand as the basis for the allegation that the company is insolvent. In that instance, there must be some other basis for the winding up application. Even if the requirements of s 459Q can be met, but they are not properly attended to, then there is no valid application. The provision is expressed in mandatory terms and controls the circumstances in which an application to wind up a company can be commenced if the application relies on a failure to comply with a statutory demand. It is a protection to be afforded to companies who may be sought to be wound up on the basis of deemed insolvency. In such a case, the applicant does not rely upon the existence of an evidentiary basis to make a claim of actual insolvency but instead relies only upon the presumption. It is important in those circumstances that the step of commencing winding up proceedings based upon a failure to comply with a statutory demand is only taken where there is a proper foundation for the presumption upon which commencement of the application is based. The form of application ensures that there is precision as to the particular failure to comply. The relevant matters must be stated in the application itself which must include a copy of the statutory demand (noting that a statutory demand must itself be in respect of a debt the existence of which is verified by affidavit). It is significant that s 459Q specifically regulates the form of application that might be used to commence an application. The provision would carry little if any force if a failure to meet the requirement could be cured by later amendment. Applying the principles stated in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [93], the evident purpose of the provision is that an application which is brought in a manner that does not conform to s 459Q is invalid. 26 However, s 459Q does not say anything about how the application is to be determined once properly commenced. That is a matter left to the practice and procedure of the Court. Also, the provision does not deal with how the Court is to treat the failure to comply with the statutory demand for the purposes of determining whether there should be a finding of insolvency. That is the subject matter of s 459C. It requires the Court to presume insolvency in that event. 27 Nevertheless in Woodgate v Garard Pty Ltd [2010] NSWSC 508; (2010) 239 FLR 339, Palmer J held, contrary to earlier authority, that the presumption arising from a failure to comply with a statutory demand did not arise where it occurred after the making of the winding up application. The decision in Woodgate was not followed by McMurdo J in Equititrust Ltd v Willaire Pty Ltd [2012] QSC 206 at [83]ff. In the above context, Brereton J reasoned in Re Plutus Payroll at [12] as follows: What Palmer J said in this respect in Woodgate v Garard was obiter dicta. Those cases which have followed it have done so with qualification or reservation, or in circumstances where it was unnecessary to the decision. It has not been followed by two courts of co-ordinate jurisdiction. It does not accord with the plain words of the introductory part of s 459C(2). It results in an inconsistency between the application of the presumption when it arises from s 459C(2)(a), and when it arises from any of s 459C(2)(b) through (f). The requirement of s 459Q, even if mandatory, can be satisfied in the context of a failure to comply with a demand occurring after institution of proceedings, by amendment of the originating process after the presumption arises. Conscious of the undesirability of different interpretations by courts of co-ordinate jurisdiction of a national statute, in my view this court should now embrace the view of McMurdo J, and no longer follow Woodgate v Garard. (footnotes omitted) 28 The reasoning of Brereton J is the most recent analysis. I propose to follow that reasoning in the present context recognising that it requires an application of the reasoning in a context that did not arise in Re Plutus Payroll. Further, there is support in the decision of Gilmour J in Simpson v CT Partner Australia Pty Ltd [2015] FCA 1191 for the position that the presumption in s 459C(2) must be applied if any of the matters listed in that provision are shown to pertain. On that basis, I would summarise the position to be applied in the present case in the following way. 29 By reason of the terms of s 459Q, a valid application to wind up in insolvency that relies on an alleged failure to comply with a statutory demand must give particulars of the alleged failure that is said to have occurred prior to the commencement of the application. If the Court ultimately finds that there was not a failure to comply as particularised that does not mean that the application was invalid. The requirement is to give particulars of the failure to comply that is relied upon by the applicant. Of course, there must be a bona fide basis for the particulars. It must be a basis which exists prior to the commencement of the application. If not, the application will be an abuse of process. But it is not an abuse just because ultimately the claim of a failure to comply is not upheld by the Court. 30 Provided the claim is properly commenced then the application is otherwise to be dealt with in accordance with the practice and procedures of the Court adjudicating the application. Those procedures will invariably allow amendment of an application in certain circumstances. An amendment made in accordance with those procedures may introduce new particulars of an alleged failure to comply with a statutory demand that is relied upon by the applicant for the winding up order. Amendment procedures allow for claims to be made based upon events that occurred after the commencement of the proceedings. I see no part of the language used in s 459Q that would prevent the Court from allowing an amendment that added reliance upon a failure by the applicant to comply with a statutory demand where that failure occurred after the commencement of the winding up application. It would be treated in the same way as an amendment to rely upon matters other than a failure to comply with a statutory demand as a basis for establishing insolvency. Such an amendment might be sought in circumstances where the application was commenced in bona fide reliance upon a particularised failure to comply with a statutory demand that, in light of matters subsequently discovered or further evidence, is considered to be a failure that might not be able to be established. 31 However, no amendment is required in order for a party to avail themselves of the presumption which the Court must make by reason of the terms of s 459C. It is a presumption that applies to all winding up applications. There is no qualification. There is no exclusion of an application to which s 459Q applies. Rather, s 459C identifies certain types of behaviour that give rise to a presumption of insolvency in any winding up proceeding that is otherwise validly commenced. Indeed, there is a statutory direction by the terms of s 459C that requires the Court to apply the presumption irrespective of the terms in which the application may be expressed. It reflects a public interest in ensuring that insolvent companies do not continue to trade and incur further liabilities. 32 Therefore, provided an application has been commenced in accordance with the requirements stated in s 459Q (where reliance is placed upon a failure to comply with a statutory demand as the basis for the application), the applicant could, without amendment, lead evidence to establish that the presumption applies in which case solvency must be proved if the presumption is not to result in a determination that the company is insolvent: s 459C(3). It may be that the Court is persuaded to grant an adjournment to enable the defendant to prepare and lead evidence of solvency in order to discharge the burden of the statutory presumption in circumstances where there is inadequate notice by the plaintiff of an intention to rely upon the presumption. It may be that the Court requires an amendment to provide particulars of the kind described in s 459Q if an applicant for a winding up order seeks to rely upon the presumption. These are matters that the Court would consider in ensuring that the winding up proceedings are conducted fairly in the interests of justice. However, the presumption must otherwise be made irrespective of whether the basis for the application of the presumption is specifically stated in the application. A prudent plaintiff will give adequate notice of circumstances said to give rise to the presumption in order to avoid the possibility of an adjournment.

Chronology of events relating to service of statutory demand 33 A statutory demand dated 8 February 2019 was sent by an employee of the Australian Taxation Office to Melking at a street address in Serpentine by pre-paid ordinary post. Also on 8 February 2019, the same employee sent copies of the statutory demand to each of the three directors of Melking, including Mr Fuery. The other directors are Mr Fuery's son Justin and his nephew Damien. In each case, the addresses were those notified to the Commissioner as their preferred addresses for communications with the Commissioner. The address for Mr Fuery was the same as the address notified to ASIC as his address as a director of Melking. 34 The envelope enclosing the statutory demand sent to Melking was returned to the Commissioner on 14 March 2019. A sticker marked 'return to sender' had been placed on the envelope. Next to the word 'date' on the sticker had been written '12/3'. The sticker had four alternatives each with a box next to it. The box next to the option 'Unclaimed' had been checked. The other boxes which had not been selected were 'Insufficient Address', 'Left Address/Unknown' and 'Refused'. The envelope also bore a postage mark for Serpentine dated 20 February 2019. 35 On 19 March 2019, the same employee who had sent the demands on 8 February 2019, placed in the internal mail service at the Australian Taxation Office envelopes enclosing the statutory demands that were addressed to post office box addresses for the registered tax agent for Melking and the business portal address for Melking. 36 On 25 March 2019, the Commissioner brought an application under s 459P. The application was dated 21 March 2019. It relied solely upon an alleged failure to comply with a statutory demand. Attached to the application was the statutory demand. There was also an express statement in the application that the statutory demand had been served by posting the demand and an accompanying affidavit by ordinary prepaid post to the address in Serpentine which was said to be the registered office of Melking. 37 On 22 March 2019, Mr Fuery received a copy of the statutory demand. He was cross-examined about receipt of the copy at that time. He said that he could not remember how it turned up at the office of Melking. There was a suggestion that it may have come from Melking's accountant. The evidence does not permit a finding as to how the statutory demand received by Mr Fuery on 22 March 2019 came into his possession. However, the evidence does show that the statutory demand was actually received by Melking on 22 March 2019, one day after the winding up proceedings were commenced. Counsel for Melking properly conceded that to be the case. 38 On the evidence, there is no mail service to individual properties in Serpentine. It is common knowledge in Serpentine that mail is not delivered in Serpentine. Rather, mail sent to addresses in Serpentine is received at an unofficial post office in Serpentine. The mail is held for 14 days. If it is not collected then it is returned to the sender. No notification is given to property owners when mail is received. 39 The address in Serpentine has been the business premises of Melking for many years. It has been the registered office for many years. Mr Fuery's evidence, which I accept, was to the effect that the statutory demand was not received at the property in Serpentine prior to the commencement of the proceedings. Further, there has been no difficulty experienced with any receipt of important notices by Melking until the issues with the statutory demand. There was no suggestion that mail could not have been physically delivered to the Serpentine address of Melking. Melking maintains a post office box where its business mail is received.

Commissioner's application to amend 40 The winding up application that was before the Registrar and is the subject of the review relied solely upon a failure by Melking to comply with the statutory demand. The particulars of service given in the application refer only to service by ordinary prepaid post at the registered office of Melking being the address in Serpentine. 41 The Commissioner sought leave to amend the application to add the following clams: (1) a claim that the documents were served by posting them on 8 February 2019 to each of the directors of Melking; (2) a claim that the documents were served by mailing them to the tax agent and the post office box address of Melking on 19 March 2019 with Mr Fuery acknowledging he had received the documents on 22 March 2019; and (3) Melking is actually insolvent based upon its past failures to make payments to the Commissioner and certain statements made by Mr Fuery in dealings with the Australian Taxation Office in the period from March to May 2019. 42 In the course of argument I indicated that I would refuse leave to amend to rely upon the claim of actual insolvency and would reserve my decision concerning the alternative claims as to the mode of service of the statutory demand. I am of the view that there should be leave to amend to raise the alternative claims as to the mode of service. The following are my reasons on the application to amend.

Actual insolvency 43 The application was brought on at short notice in circumstances where liquidators had been appointed and had taken control of the property of the company and its affairs. I have already referred to the significance of these aspects for an amendment sought at the review stage. Notice of the proposed amendment was given on 17 June 2019. There is some material before me to indicate that the financial circumstances of Melking have changed recently. In particular, it appears that Melking has secured new contracts and has an expectation of receiving considerable and regular payments into the future. Counsel for the liquidators informed the court that Melking has cash of about $100,000. By reason that winding up orders have been made, the company does not have access to its own resources and records for the purposes of answering, within a short time frame, the claim of actual insolvency. In those circumstances, it would be unfair to allow the Commissioner at this stage to introduce a claim of actual insolvency at very short notice. 44 The Commissioner says that the application relies upon admissions made by Mr Fuery in transcribed recordings of his telephone conversations with employees of the Australian Taxation Office and it is plain that there is insolvency. However, those matters relate to the past financial position of the company and if the amendment were allowed it would require a consideration of the current financial position of Melking, including the effect of the recent contracts upon its solvency. 45 For those reasons, I refused to allow the amendment to introduce the claim of insolvency.

Alternative modes of service of statutory demand 46 As to the alternative mode of service, for reasons I have given the Commissioner is entitled to present evidence to establish the basis for the presumption that the Court must make in the circumstances described in s 459C(2). An amendment is not required by the provisions of the Corporations Act in order for that evidence to be presented and the terms of s 459Q do not prevent that evidence being received. However, in order to provide proper notice of the nature of the claim to be made it is appropriate that the Commissioner be required to articulate by way of amendment the nature of the claims made as to the alternative modes of service. The Commissioner has made that application. It was an application that was foreshadowed at the first return of the application by Mr Fuery for leave to bring the review application. At that time counsel for the Commissioner outlined in general terms the nature of the claim that would be made. The issues that arise in relation to the mode of service are of relatively short compass. There is no suggestion that there was evidence that might be obtained from someone other than Mr Fuery in order to meet the claims. Indeed, the factual position on the key issues is not really in dispute. 47 It is submitted for Melking that the affidavit evidence before the Registrar showed that there was an issue with service because it referred to the fact that the statutory demand had been marked unclaimed and was returned to the Commissioner. Yet the Commissioner proceeded before the Registrar on the basis of a claim that there had been service by prepaid mail sent to the registered office. However, the present application is rehearing de novo. The Commissioner is entitled to lead further evidence. For reasons I have given, that evidence could include evidence that seeks to establish that the presumption under s 459C applied by reason of a failure to comply with a statutory demand even a failure that occurred after the proceedings were commenced. 48 In the above circumstances, no prejudice has been demonstrated that would arise if the amendment to refer to alternative modes of service was to be allowed. However, it was submitted for Melking that the amendment should not be allowed because the proceedings had been commenced in circumstances that were an abuse of process because they were commenced in reliance upon an alleged failure to comply with a statutory demand when the service of the statutory demand that was relied upon and described in the particulars to the application (provided in accordance with s 459Q) could not have been established. For reasons I have given, the validity of the application did not depend upon whether the Court ultimately found that the alleged failure to comply with the statutory demand as particularised in the application was established. Rather, there must be an alleged failure upon which the Commissioner could reasonably rely in commencing the application. 49 In this case, the Commissioner sought to justify the commencement of the proceedings by reference to the evidence as to the financial position of the company and actual receipt of the statutory demand. However, the proceedings were not commenced on the basis of a claim of actual insolvency or service by other means. The statutory requirements of s 459Q must be met and the commencement of the proceedings cannot be justified by reference to other particulars or grounds that might have been raised. Therefore, the Commissioner must be able to demonstrate that there was a proper basis for the commencement of the proceedings having regard to the requirement to specify what the Commissioner relied upon if the application was for a company to be wound up in insolvency based upon an alleged failure to comply with a statutory demand (a circumstance that would not arise unless there had been proper service of the statutory demand). 50 For reasons set out below, I am not satisfied that it was an abuse of process to commence the proceedings in reliance upon service at the registered office. I reach that conclusion even though, for reasons set out below, I am satisfied that Melking has shown that there was doubt about the presumption of delivery by post and that the statutory demand was not delivered to the registered office, being the address in Serpentine, but rather only made its way to the informal post office. However, as the question whether the presumption of service by post applies depends upon the facts in each case, I am satisfied that there was a proper basis for the Commissioner to have relied upon the claim that the statutory demand had been served by sending it by prepaid mail to the registered office of Melking on 8 February 2019.

Proof of service by mail 51 The principles to be applied where reliance is placed upon statutory provisions to prove service of a statutory demand by post were recently reviewed by McKerracher J in Deputy Commissioner of Taxation v Josway Hospitality Pty Ltd [2018] FCA 466. I gratefully adopt his Honour's summary at [2] which was as follows: (a) proof of non-receipt by the recipient does not prove non-delivery: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 (at 96-97); Re Rustic Homes Pty Ltd (1988) 49 SASR 41 (at 44); Dwyer v Canon Australia Pty Ltd [2007] SASC 100 per Debelle J (at [8]-[9]); and Deputy Commissioner of Taxation v Contract Synergies Administration Pty Ltd [2011] FCA 743 per Jacobson J (at [5]-[18]); (b) the permissive or facilitative service provisions under s 109X(1)(a) of the Corporations Act will suffice to establish proper service in ordinary circumstances, but this provision is also to be read, in an appropriate case, against the provisions in s 29 of the Acts Interpretation Act 1901 (Cth) and s 160 of the Evidence Act 1995 (Cth), which do, in essence, recognise the possibility that delivery may not have been effected by ordinary prepaid post. Section 29 of the Acts Interpretation Act and s 160 of the Evidence Act respectively and relevantly provide: 29 Meaning of service by post (1) Where an Act 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 the service shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. (2) This section does not affect the operation of section 160 of the Evidence Act 1995. … 160 Postal articles (1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted. … (emphasis added) see also Deputy Commissioner of Taxation v Starpicket Pty Ltd (2012) 212 FCR 578 per Greenwood J (at [62]-[74]); (c) proof of non-receipt at a place, as distinct from non-receipt by a person, is likely to prove non-delivery at that place: Scope Data Systems Pty Ltd v Goman (2007) 70 NSWLR 176 per White J (at [49]); and (d) while mere denial of non-receipt by the addressee would scarcely, if ever, suffice to prove 'non-delivery', evidence of non-receipt at a place by an appropriate occupant, depending on the cogency of the evidence, may be sufficient to create a doubt for the purposes of s 160 of the Evidence Act. While such evidence needs to be sufficient to create a 'doubt', it does not need to be proof to the civil standard of fact finding at trial as to actual non-delivery. A 'doubt' ought not to be assimilated with proof or demonstration: Deputy Commissioner of Taxation v Manta's on the Beach Pty Ltd (2012) 88 ATR 193 per Logan J (at [12]).

Service by mail on the registered office 52 The registered office of a company must be a location that accommodates the possibility of service by post. The point was considered by Barrett J in Partners of Piper Alderman v Sharjade Pty Ltd [2011] NSWSC 6 at [18]-[22] where his Honour said: … A company's registered office must be at some defined and readily accessible place consisting of, or being within, a building. The specification of the address of the registered office must be such as to accommodate the possibility recognised in s 109X(1)(a) of the Corporations Act that documents will be served by posting them to the registered office. Implicit in the statutory scheme, therefore, is an expectation that there will be in place at the registered office a system for the safe and secure reception of documents delivered by post. In the present case, the defendant company saw fit to locate its registered office at premises served by a mail box located outside the confines of the registered office itself and outside the confines of the relevant building. The mail box formed part of a collection of boxes apparently accessible to anyone passing by … The present defendant chose as its registered office premises with mail delivery facilities prompting the like observation - that anything might happen to documents put into a letter box situated on the public walkway in front of the residential unit building and providing access to that building from the street. On the facts of this case there was, as I have said, good and effective service of the statutory demand by the plaintiffs. It has not been shown that a letter addressed to the Cremorne address would for any reason that the plaintiffs knew or ought to have known not to be delivered to the defendant; nor does the evidence show any basis for a conclusion that there was no delivery to the mail box for Unit [X], [Y] Milson Road, being the box to which the defendant's specification of registered office would have caused the envelope containing the statutory demand it to be taken by the postal service. Non-receipt of itself represents no sound basis for declining to award the relief they seek. Such a basis would exist if only the plaintiffs has initiated the winding up application in circumstances where they had knowledge making it unfair for them to proceed on the basis that the statutory demand had been duly served. No such basis exists here. 53 It is important to note how his Honour uses the observation that there is a responsibility to maintain an address that accommodates posting. It was part of the circumstances to be considered in reaching a conclusion whether there would be doubt about whether the statutory demand was received as is to be otherwise presumed. A company is not to be denied the opportunity to demonstrate that there has been no delivery to the company's registered office simply on the basis of the circumstances that apply where documents are sent by mail. Importantly, this was not a case where documents could not be delivered by mail to the registered office or where the nature of the arrangements for receipt of mail at that address meant that documents might be lost or not come to the attention of the company. 54 In this case, there was evidence raising that doubt in the form of the markings on the envelope when returned to the Australian Taxation Office. It may be that by reason of the postal arrangements that were known to Mr Fuery as a long standing director of Melking that a claim that the statutory demand was not received would not, of itself, be sufficient to raise doubt about the presumption. But here, the evidence went further and the markings on the envelope showed that the letter had not been claimed and was being returned for that reason. These were matters known to the Commissioner. That evidence when taken together with the evidence concerning the post office arrangements showed that there had not been actual receipt at the registered office. As a result, there was proof of non-delivery. 55 In Re Rustic Homes Pty Ltd (1988) 49 SASR 41, von Doussa J held that there had not been proper service under the provisions then applying where a summons was returned by Australia Post as 'unclaimed'. His Honour also made clear that there is a duty on the plaintiff and the plaintiff's solicitors to disclose the real situation and in a case where there is reason to suspect that the company has probably not received notice of documents, to utilise other means of arranging service. As to disclosure, no issue arises because the Commissioner caused evidence of the return envelope to be placed before the Court on the winding up application. 56 Despite the conclusion by von Doussa J, it is a question of fact in each case whether the circumstances indicate that there has been non-delivery at the relevant place (as distinct from an unwillingness to receive the documents at the place where they were delivered or a failure for the documents to be brought to the attention of a particular person despite being delivered to that place). In this instance, the particular markings included a postmark at Serpentine. They did not indicate that the envelope had been wrongly addressed and the address was that specified by the appellant as the registered office, an aspect that was not part of the circumstances considered by von Doussa J.

Proof of service by posting to directors 57 Section 109X(1) provides for the manner of service of a document on a company. It allows for delivery of a document personally to a director of the company who resides in Australia. There is no provision for service on a company by delivery by post to the directors. 58 Section 109X(2) provides for the manner of service on a director or company secretary. It provides for service by post. However, it states expressly that it applies to service on the company director or secretary in that capacity or for the purposes of proceedings in respect of conduct that they engaged in as a director or company secretary. 59 Service as permitted by s 109X on a director has not been established.

Proof of service by receipt by the company on 22 March 2019 60 The evidence is to the effect that the statutory demand was received by the company on 22 March 2019. In cross-examination Mr Fuery referred to the document having been received by the company but said that the precise circumstances as to how that occurred were not known. It seems likely that the copy that was sent to Melking's tax agent or to its post office box on 19 March 2019 found its way to Melking. After that Mr Fuery spoke to employees at the Australian Taxation Office about the statutory demand. 61 For reasons I have given, provided the application was properly commenced in accordance with s 459Q, the presumption of insolvency that arises when there is a failure to comply with a statutory demand can arise after the application was commenced. In this case, there was no claim that the statutory demand should be set aside. There was no attempt by Melking to seek to demonstrate solvency if the presumption applied. It claimed only that the presumption did not apply. By reason of the time that has passed since 22 March 2019 there has been a demonstrated failure by Melking to comply with a statutory demand. 62 Therefore, the presumption of insolvency under s 459C arises and must be given effect by the Court.

Service under the Taxation Administration Regulations 63 Section 14 of the Taxation Administration Regulations 2017 (Cth) provides that the Commissioner may serve a document on a person 'for the purposes of the taxation laws' by, amongst other things, posting a copy of the document to a preferred address for service that has been given to the Commissioner. As I have noted, copies of the statutory demand were sent to each of the directors of Melking at their preferred addresses for communications with the Commissioner. 64 Service in this case was not 'for the purposes of the taxation laws'. Rather, it was for the purposes of winding up proceedings. No doubt the Commissioner acts for the purposes of the taxation laws in seeking to recover debts by invoking the procedures conferred by those laws. However, an application to wind up a company is not undertaken for the purpose of recovery of a debt. Where winding up is sought on the basis of insolvency, wider public purposes concerned with ensuring that insolvent companies do not continue to trade pertain. Therefore, s 14 did not apply. 65 In any event, the relevant addresses were for the directors of Melking not for Melking itself. It was not until 19 March 2019 that a document was posted to the post office box address of Melking described as 'the business portal address' of Melking. 66 However, the Regulations provide that the preferred address for service must be one where the designation of the address or other circumstances indicate that the person (in this case Melking) wishes the address to be used by the Commissioner in preference to other addresses. There is no evidence before me which would establish compliance with that requirement and no submissions were made for the Commissioner in that regard.

Conclusion and orders 67 It follows that it has been demonstrated that Melking is presumed to be insolvent by reason of its failure to comply with the statutory demand dated 8 February 2019. There being no evidence to establish the solvency of Melking, the Commissioner is entitled to orders winding up Melking. For those reasons, the decision of Registrar Trott should be affirmed. 68 Counsel appeared for the liquidators of Melking on the review application. It was reasonable for counsel to appear because of issues in relation to appropriate orders as to costs of the liquidation depending upon the outcome of the review application and also to inform the Court as to the position in relation to the affairs of Melking. I will make provision for the approved reasonable costs of the liquidators to form part of the costs of the winding up to be paid to the liquidators. Otherwise, the review application should be dismissed. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.