Deputy Commissioner of Taxation v Revolve Limited

REASONS FOR JUDGMENT 1 This is an interlocutory application filed on 17 April 2012 under which Ms Kay Hewitt a former director of the defendant company (Revolve Limited) seeks leave pursuant to s 471A(1A)(d) of the Corporations Act 2001 (Cth) to cause the defendant to commence and proceed with the review of a winding up order made by Registrar Hedge on 16 March 2012. 2 The application also seeks the setting aside of the winding up order and dismissal of the plaintiff's application for the winding up. The plaintiff (the Deputy Commissioner of Taxation) opposes leave to extend time for the making of the application. 3 The first issue which arises therefore is whether I ought to exercise my discretion to extend time to permit the present application to be made. The application was required, under reg 16.1(3) of the Federal Court (Corporations) Rules 2000 and s 35A(5) of the Federal Court of Australia Act 1976 (Cth), to be filed by 10 April 2012. However, the application as I said was not filed until 17 April, some seven days out of time. Although the delay is not great the explanation which has been given is not in my opinion sufficient to justify the extension of time which is sought. 4 The evidence which has been put before me may be summarised in the following way. 5 Ms Hewitt relies upon a misunderstanding which took place in the office of her solicitors when they sought to file the application in time on 5 April 2012. As a result of the misunderstanding the filing fee was not paid until 16 April and the application was therefore not able to be filed until 17 April. It seems to me that this explanation is insufficient because it was the responsibility of the solicitors to make the necessary arrangements for payment of the filing fee within time. There was more than sufficient time to make the payment when the solicitors learnt on 5 April that there were difficulties with the acceptance of the credit card payment which had been attempted on that date. 6 Moreover no application was made for a stay of the winding up order and the liquidator took office. It seems to me that it was incumbent upon the solicitors to make an application for a stay at that time. 7 In any event, for reasons to which I will refer later, it is my opinion that the substantive application would be doomed to fail or at the very least it does not have sufficient prospects of success to justify the extension of time which is sought. 8 It is well established that the strength of the case to be argued on review is a significant aspect of an application of this kind: see Deputy Commissioner of Taxation v Soiland Pty Ltd (in liq) [2010] FCA 168 at [16] and [26]. 9 Moreover a further factor which the court is required to take into account before granting approval of an application for review is the issue of solvency that appears from the summation of the authorities given by Barker J in Soiland at [17]ff and in particular in his Honour's statement of the relevant principles at [26] of his judgment. Reference may also be made in that regard to the decision of Besanko J in Lightburn Pty Ltd v Kama Power Products Pty Ltd [2003] SASC 43 at [31] to [34]; see also Web Wealth Pty Ltd v Helimount Pty Ltd [2006] FCA 1376 at [39] to [40]. 10 I turn next to the substantive issue on which Mr Smith who appears for Ms Hewitt relies, that is to say, the issue of a prima facie case. The effect of Mr Smith's submission is that the statutory demand upon which the Deputy Commissioner of Taxation relies was not properly served because it was not delivered to the registered address of the defendant. The evidence establishes that the statutory demand was served on the defendant's then registered office by prepaid post. The demand was posted on 23 June 2011. The effect of s 29 of the Acts Interpretation Act 1901 (Cth) and s 160(1) of the Evidence Act 2005 (Cth) is that the demand was presumed to have been received no later than Wednesday, 29 June 2011. 11 However the defendant submits that delivery could not possibly have been made because when the demand was posted the site to which the demand was addressed was a vacant site with no mail receptacle, no door and no one occupying it. The defendant relied, inter alia, on an affidavit of Mr Muir, a postal worker who gave evidence that the usual practice of postal workers is not to deliver mail where there is no one who is capable receiving the mail. Importantly Mr Muir says in his affidavit that if mail could not be delivered by a mail receptacle or under a door or to a person in apparent occupation of the addressed premises, contractors are directed to return the mail to the post office. He says that the standard procedure for undelivered mail was for it to lie at the post office for two weeks after which it was despatched to an identified sender. 12 In my opinion, the relevant authorities are directly against the acceptance of Mr Smith's submission. The principles were stated in some detail by Barrett J in partners of Piper Alderman v Sharjade Pty Ltd [2011] NSWSC 6. His Honour observed at [13] that there is authority for the proposition that a person who complies in a literal sense with the requirement for service should not be allowed to proceed on the basis of the benefit of that service if the person knows that the document in fact did not come to the notice of the party to be served. 13 However, his Honour went on to say that in Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354 at [76], Basten JA commented that s 29 of the Acts Interpretation Act imposes on an intended recipient responsibility for ensuring that the document does not go astray after delivery to the postal address. 14 Barrett J also said at [18] that: A company's registered office must be at some defined and readily accessible place consisting of, or being within, a building… [it] 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. 15 He said that: Implicit in the statutory scheme…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. 16 The observations of Ashley JA in Von Risefer v Mainfreight International Pty Ltd (2009) 25 VR 366 at 373 to 374 are to the same effect. 17 Reference should also be made to Barrett J's decision in Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 167 FLR 175 at [46] to [47]. His Honour there observed that evidence in a case such as this must concentrate on the evidence relevant to non-delivery as distinct from evidence of non-receipt. He observed at [46] to [47] that: "common experience suggests that Australia Post does not simply retain mail indefinitely." 18 It seems to me to follow from the authorities to which I have referred that the substantive issue upon which Mr Smith relies is doomed to failure for two reasons. 19 First, the evidence in the present case is even stronger than that which was before Barrett J in Polo Club. This is because I have evidence from Ms Jarrett that the envelope which was posted to the defendant was not returned by Australia Post. In those circumstances, any suggestion of non-delivery is negatived. Moreover, that conclusion follows from what Mr Muir says in his affidavit, namely, that the policy was to return undelivered mail to the sender within two weeks. As I have said, here the evidence is that the mail was not returned. It therefore follows that I ought to infer that the envelope was delivered to the defendant. 20 Second, the proposition for which Mr Smith contends is one that I cannot accept, because it is contrary to the basic principles which underlie the provisions of the Corporations Act providing for a corporation to file with ASIC the details of its registered address. Mr Smith's submission is that the evidence shows that the site which was the registered office was one which was not capable of receiving service or delivery of the mail, because it was a vacant site which was in the process of being bulldozed. However, the effect of what Barrett J said in Piper Alderman and what Ashley JA said in Von Risefer is that it is incumbent upon a company to establish a registered office which is capable of being accessed. As Barrett J said in Piper Alderman at [18], this is what is expected under the statutory scheme which includes the provisions of s 109X(1)(a) of the Corporations Act. 21 Moreover, it was incumbent on the defendant to notify ASIC of its change of registered address. It is not open to it to rely upon the fact that the change of registered address was filed with ASIC nearly a month later on 21 July 2011. There is a further reason why I propose to refuse the present application. It is that there is a general principle that insolvent companies ought not to be permitted to trade. Here there is no evidence to satisfy me that the defendant is solvent. 22 What I have is evidence of an undisputed debt, which the defendant has failed to pay. The debt is in the sum of $101,000 due to the Deputy Commissioner and there is no evidence that that debt is disputed, nor, as I have said, is there any evidence that the company is solvent. In those circumstances, it is well established that an application of the present type ought to be refused. 23 One further issue was raised in the written submissions. That issue was the effect of s 459R of the Corporations Act. The issue was raised because the present application is brought after the six-month period specified in s 459R(1) of the Corporations Act. That section provides that an application for a company to be wound up in insolvency is to be determined within six months after it is made. 24 However, I do not consider that any such issue arises because the winding up order made by the registrar on 16 March 2012 was made within time. The exercise of the power by the registrar was a delegated power which is subject to review under s 35A(6) of the Federal Court Act. In my opinion, that provision produces the consequence that if a court, when determining a review, comes to the conclusion that the application ought to be dismissed, the court does not make a fresh winding up order. All that the court does is to dismiss the application. That is the effect of what has been done in a number of cases. See, for example, Web Wealth Pty Ltd v Helimount (2006) FCA 1376 and Deputy Commissioner of Taxation v Soiland Pty Ltd (in liq) (No 2) [2010] FCA 1453 at [183]. In my opinion, in the present case, no further or additional order for winding up is required and no question arises as to any possible non-compliance with s 459I(1). 25 It follows from what I have said above that I propose to make the following orders: (1) The interlocutory application filed by the defendant on 17 April 2012 be dismissed. (2) Ms K. Marie Hewitt and the defendant are to pay the plaintiff's costs of the interlocutory application filed on 17 April 2012 as agreed, or as assessed. (3) The liability to pay the plaintiff's costs in accordance with order 2 shall be joint and several. (4) The plaintiff's costs as provided in order 2 are to be costs to be reimbursed out of the property of the defendant in accordance with section 466(2) of the Corporations Act 2001. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.