Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322

5. The originating process was supported by an affidavit of Brian Arthur Cook sworn 16 June 2004. Mr Cook deposed that he was the sole director and secretary of the plaintiff. Mr Cook further deposed that in Lonsdale Street, Melbourne, on 26 May 2004 at about 11.50am, Mr Verginis, a solicitor employed by Holding Redlich (the solicitors for the defendant) said to him "You are Brian Arthur Cook a director of Emhill Pty Ltd" to which Mr Cook replied "Yes" and that Mr Verginis then said to him "I serve you with this statutory demand for and on behalf of Bonsoc Pty Ltd" and then handed Mr Cook some papers which Mr Cook examined.

8. Exhibited to Mr Cook's affidavit was a copy of the papers which had been handed to him on 26 May 2004. The exhibit comprised a copy of a letter from Holding Redlich to the secretary of Emhill Pty Ltd enclosing by way of service a statutory demand and the exhibit further comprised a copy of the statutory demand itself, dated 26 May 2004. The exhibited copy of the statutory demand was addressed to Emhill Pty Ltd of 20 Coonil Crescent, North Shore 3214, Victoria and stated that the plaintiff owed the defendant the sum of $56,695.47 being "the total amounts of the debt described in the Schedule." The demand contained what might be described as the usual verbiage and was signed on behalf of the defendant creditor by Holding Redlich. The Schedule showed that the debt arose from an order of the Melbourne Magistrates' Court dated 25 February 2000 in the sum of $40,711.83 together with further interest thereon, in accordance with an attached calculation, in the sum of $15,983.64. A copy certified extract from the register of the Melbourne Magistrates' Court was also annexed to the statutory demand. The extract showed that the "judgment sum" of $40,711.83 was comprised of specified amounts for claim, interest and costs.

11. Mr Cook further deposed that the registered office of the plaintiff was situated at 20 Coonil Crescent, North Shore 3214, Victoria and that the plaintiff had not been served with any document at that address. The affidavit referred to numerous other matters and there were two further affidavits by Mr Cook but nothing presently relevant appears therefrom.

14. Mr Verginis swore an answering affidavit on 13 August 2004 deposing to service by him of documents upon Mr Cook on 26 May 2004. In that affidavit Mr Verginis deposed that on 26 May 2004 he spoke to Mr Cook outside [Master's] Court 1 of the Supreme Court and asked Mr Cook whether he was willing to accept personal service of a statutory demand on behalf of Emhill Pty Ltd outside the Court and that, after obtaining advice from his solicitor Mr Peirce, Mr Cook "said that he would be happy to accept service on behalf of the Company outside the Court." Mr Verginis went on to depose that, shortly thereafter and outside the Court building, Mr Cook replied in the affirmative to each of three questions which Mr Verginis put to him, namely "Mr Brian Cook?", "Are you a director of Emhill Pty Ltd?", and "Do you accept service of this Statutory Demand on behalf of the Company?".

17. Mr Verginis deposed that he "then handed Mr Cook the original Creditor's Statutory Demand and covering letter." [Emphasis added].

20. The Senior Master's Order in "OTHER MATTERS" stated:

"It is common ground that on 26 May 2004 in Lonsdale Street, Melbourne, a solicitor representing the defendant handed the Statutory Demand to Brian Arthur Cook and that the latter took the document and retained it. The plaintiff is Mr Cook's alter ego, ie, he is its sole director, secretary and shareholder. The plaintiff's argument that this service was ineffective because the document not being a copy but the original, the service was not within section 109X(1)(b), is rejected because - (a) the service effected was better than that allowed by section 109X(1)(b) and in accordance with section 459E which provides for service of the original statutory demand; (b) the service was service on the plaintiff because the plaintiff is Mr Cook with limited liability; (c) whatever Mr Cook knows, the plaintiff knows and, therefore, the statutory demand came immediately to the notice of the plaintiff; see Howship Holdings Pty Ltd v Leslie [1996] NSWSC 314; (1996) 41 NSWLR 542. The order in paragraph 1 is made out of an abundance of caution pursuant to section 109X(6)."

"1. If necessary, the defendant is authorised nunc pro tunc to serve the statutory demand by giving it personally to Brian Arthur Cook. 2. The statutory demand dated 26 May 2004 and served by the defendant on the plaintiff is varied by reducing the sum demanded to $48,512.49. 3. It is declared that the statutory demand has had effect, as so varied, as from when the demand was served on the plaintiff. 4. The plaintiff pay the defendant's costs of the proceeding, including its costs reserved on 21 July 2004."

28. Section 109X of the Act, so far as material, provides:

"(1) For the purposes of any law, a document may be served on a company by: (a) leaving it at, or posting it to, the company's registered office; or (b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory..." ... (6) This section does not affect: (a) any other provision of this Act, or any provision of another law, that permits; or (b) the power of a court to authorise; a document to be served in a different way."

32. It was submitted on behalf of the plaintiff that the statutory demand had not been served pursuant to s.109X because there had been no service at the company's registered office and the service on the director (Mr Cook) was of the original statutory demand and not a "copy" as required by s.109X(1)(b). It was further submitted that s.109X was exclusive or mandatory[1] and that the mode of service upon Mr Cook was not valid service on the plaintiff and that, further, the Court had no power to validate such service as the Senior Master had purported to do in paragraph 1 of the Order.

35. It was submitted on behalf of the defendant in answer that the statutory demand given to Mr Cook fell within the meaning of a "copy" and that service on the plaintiff had been duly effected pursuant to s.109X(1)(b). Alternatively, it was submitted that s.109X was facultative and not mandatory and that the mode of service was valid and effective.[2] Further or in the alternative it was submitted that the Court had power pursuant to s.109X(6)(b) to validate the mode of service, as had been done by paragraph 1 of the Senior Master's Order.

38. Although not adverted to in the course of argument, it appears to me that the plaintiff's application faces an initial difficulty. Section 459E(1) of the Act provides that a person may "serve" on a company a demand relating to a debt or debts. Section 459G(1) of the Act provides that a company may apply to the Court for an order setting aside such a statutory demand "served" on the company. I consider that the plaintiff cannot seek an order pursuant to s.459G(1) of the Act setting aside a statutory demand where it wishes to say that it has not been served with the demand. The appropriate mode of dealing with that situation would have been either to apply for a declaration that the purported service was ineffective or to rely upon the point in opposition to any winding up application based upon the statutory demand. Generally the declaratory procedure would be more convenient and sensible. It would follow that this application as presently framed might be dismissed but, no doubt, the originating process can be amended to seek a declaration and, in deference to the arguments presented, I will, if necessary, treat the application as one for a declaration.

41. In my opinion, s.109X(1) makes a clear distinction between service of a "document", referred to as "it" in each of sub-paragraphs (a), (c) and (d), and service of a "copy of the document", a phrase used only in sub-paragraph (b). It was suggested that the reason for the distinction might be that it was intended to enable a person desiring to serve a document on a company to attempt to serve the original on the company and at the same time to attempt to deliver a copy thereof to a director. Whatever the reason may be, in my opinion there is a clear distinction made, and a "copy" is different to an original i.e. different to the document itself.[3] In the Macquarie Dictionary (Third Edition) "copy" is defined as "a transcript, reproduction, or imitation of an original." In some cases there might be an argument about whether multiple identical documents constitute originals, or copies, or either as appropriate, but in the present case the evidence is unequivocal: the "original" statutory demand was given to Mr Cook and not a copy thereof. I conclude that the defendant has failed to serve the statutory demand pursuant to s.109X(1)(b).

44. I am further of the view that the Court has no power to validate such service. There is, I think, a real question whether s.109X(6)(b) gives a court any power to authorise a document to be served in a different way or merely preserves such a power if it may be found elsewhere in a provision of the Act or other law.[4] That question does not appear to have been argued. However, it has been decided (assuming that s.109X(6)(b), or a similar provision, does provide an independent head of power) that the power relates only to a document "to be served", i.e. it is a power to authorise service in the future and not a power to validate service in the past. It was so held by O'Bryan J in Racecourse Totalizators Pty Ltd v Hartley Cyber Engineering Pty Ltd[5] in relation to the relevant provisions of the then Companies (Victoria) Code, and that decision was referred to with approval in Rochester Communications Group Pty Ltd v Lader Pty Ltd ("Rochester Communications"),[6] a decision of the Full Federal Court.

47. My conclusion being that the statutory demand was not validly served pursuant to s.109X of the Act and that the purported service cannot be validated pursuant to that section, the remaining question is whether the delivery of the statutory demand to Mr Cook constituted good service on the company upon some other basis. Section 109X(6)(a) provides that the section does not affect any other provision of the Act or any provision of another law that permits a document to be served in a different way but the defendant did not point to any such "provision" (either of the Act or of any other "law").

50. However the defendant referred to Howship Holdings Pty Ltd v Leslie ("Howship Holdings")[7] as an authority supporting the submission that the purported service was good in any event. Howship Holdings was a case concerned with service upon individuals of an application to set aside a statutory demand. At that time s.109X of the Corporations Law was a different provision that dealt with service on natural persons and with service on bodies corporate other than companies. The application to set aside the statutory demand was made by summons and the summons was purportedly served through a document exchange.

53. Dealing with service on individuals, Young J said:[8]

"The ordinary meaning of `service' is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries [citations omitted] ... If this were not so, one would get the absurd situation referred to by McInerney J in Pino v Prosser [[1967] VR 835, 837], that the conclusion would be one which is;

`... remarkable to the point of seeming absurdity in that the defendant who, on his own affidavit admits that he received the writ should be held not to have been served.'"

58. It was submitted in Howship Holdings that the then s.109X was a code and that service through a document exchange was ineffective. Young J considered that the then s.109X was facultative and not mandatory and that the mere fact that the summons had not been served under the then s.109X did not disqualify it from service "if the document came into the possession of the addressee".[9] Young J said: "..one gets back to the ordinary principle, has there been personal service, that is has the document come to the notice of the respondent?" and he concluded that it had.[10]

61. On the other hand, in Griffith Producers Co-operative Company Ltd v Calabria[11] a different approach was taken. In that case a statutory demand was sent to the registered office of the body corporate by fax and later by post. McLelland CJ in Eq. held that the earlier service by fax was ineffective. His Honour said that "[s]ervice of such a document on a corporation, being an artificial entity with no physical existence, must in my view be effected formally in accordance with the applicable statutory procedure... ."[12]

64. In 1997, in Rochester Communications[13], the Full Federal Court decided an appeal on the question whether the irregular service of an application for an order setting aside a statutory demand under the provisions of the then Corporations Law might be validated. Copies of the application and supporting affidavit were delivered to "an employee" at a location that was thought to be the registered office of the creditor company but which was in fact the office of one of the directors of the creditor company. Section 220 of the then Corporations Law provided that a document "may be served" on a company by leaving it at or sending it by post to the registered office of the company.

67. In the context of considering whether the irregular service might be validated, Beaumont J considered a number of cases dealing with service of documents upon companies. He noted the common law position that "the service of a writ on a corporation aggregate, which from the nature of the body could not be personal, was by serving it on a proper officer, so as to secure that it came to the knowledge of the corporation".[14] He then referred to provisions in various jurisdictions which had provided for service on a company at its registered office. He referred to Vignes v Stephen Smith & Co Ltd[15] in which, notwithstanding the words "may be served" in the relevant section, the Court held that the only way in which a writ could be served on a company was by leaving it at or sending it by post to the registered office, and to Eagles v Eagles[16] in which Pape J held that service of a writ was irregular when it was served at a branch office and not the registered office of a company. Beaumont J also referred to Howship Holdings[17] but noted that that case dealt with service upon a person and not upon a company. Beaumont J concluded that the irregular service could not be validated. Whitlam J agreed with Beaumont J for reasons which are irrelevant for present purposes.

70. In the same case Moore J (who also agreed with the conclusions of his brethren) said:

"The clear purpose of ss 220 and 109X is to identify the manner of service on companies, individuals and other corporations for the purposes of the Corporations Law, and more generally, while preserving the operation of other provisions of the type identified in ss 220(7) and 109X(2) dealing with service. Subsections 220(7) and 109X(2) speak in terms of "not affecting" provisions of the type to which they refer. However the function of such provisions in relation to a requirement elsewhere in the Corporations Law, such as s 459G(3)(b), that a document be "served" has to be considered. Such a requirement would, in the absence of a clear indication to the contrary, be satisfied by service in a manner identified in other provisions of the Corporations Law, namely ss 220 and 109X. If provisions dealing with service are expressed to be "not affecting" other methods of service then, in my opinion, there is manifest a clear legislative intention that the "unaffected" methods of service would also constitute service for the purposes of the Corporations Law as would service in the manner expressly identified in the Corporations Law itself."[18]

74. Similar views to those expressed by Young J in Howship Holdings were expressed in 1999 in a judgment of Gillard J in this Court concerning the service of a statutory demand pursuant to the Corporations Law[19], in which Gillard J said:

"Service of the statutory demand 51. Section 459E(1) gives the right to a person to "serve on a company a demand relating to" a debt. 52. The section does not specify how service is to be effected. The object of service is to bring to the knowledge of the recipient the contents of the document served. It follows that as a general proposition, "service of a document" means personal service. A company being a non-natural entity must act through its servants or agents. Who constitutes the company for the purpose of serving documents on it? Whether a person has authority to accept service on behalf of a company and whether the company has notice of the document will depend on all the circumstances. 53. In order to facilitate service on a company, legislation concerning companies and rules of court make provision for service of documents. What constitutes service by post is in all Acts dealing with the interpretation of legislation and can be traced back to the 19th century - see s.25 of the Acts Interpretation Act 1958 (Vic) now s.49 of the Interpretation of Legislation Act 1984 (Vic). 54. Section 109X of the Law deals with, inter alia, service of documents by post and on a director of the company. However, it is noted that its provisions are merely facultative and are not mandatory. In other words, personal service is effective and further as long as it is proven that the document came to the attention of the intended recipient it is good service no matter what form of service is employed."

78. Again in Biotech International Ltd v Peptech Ltd[20] _(_a judgment of Owen J in the Supreme Court of Western Australia), it was said:

"37. It is to be noted that s 109X does not purport to be an exclusive code: see s 109X(6). However, there is no suggestion that there is a law or court order providing an alternative means of service. Nor does the offer provide for an alternative means of service. But the section is facultative rather than mandatory and does not exclude other means of service: Howship Holdings Pty Ltd v Leslie [1996] NSWSC 314; (1996) 41 NSWLR 542 at 544. In that case Young J pointed out, also at 544, that the ordinary meaning of service is personal service, which imports the notion that the document in question must come to the notice of the person for whom it is intended. 38. The next question is whether the document was served by a means other than those provided for in s 109X. The argument advanced by the defendant is that the notice was effectively served by the facsimile transmission of 20 April 2000. There is no dispute that a facsimile transmission can be good service. Young J held it to be so in Howship Holdings. Decisions to the same effect include Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) [1996] FCA 1789; (1996) 69 FCR 531 and NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26."

82. Further, in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd[21] copies of a statutory demand and supporting affidavit were sent by fax to a company's registered office in Toowoomba together with a covering letter stating that the originals were being sent to Toowoomba for service on the company's registered office. The date of service of the statutory demand was important. Helman J found it unnecessary to determine whether certain Queensland legislation was applicable because he was persuaded that the admitted receipt of the facsimile transmission of the statutory demand and accompanying affidavit proved that there had been effective service of those documents on the principles discussed by Young J in Howship Holdings. Helman J said:

"There is, I think, no reason to refrain from applying the principle explained by Young J in Howship Holdings... to service of a statutory demand under s.459E of the Corporations Act. To ignore the admissions of receipt, and, it should be noted, service, of the documents of the kind before me in this case would be artificial in the extreme."

86. Helman J went on to say that he was not persuaded that the decision of McLelland CJ in Eq. in Griffith Producers should be applied adding that the admissions in the case before him overcame any inadequacies in the manner of service.

89. In my opinion, s.109X of the Act is facultative and not exclusive or mandatory and the section should not be construed so as to exclude any means of service which is proved to have brought a document to the actual attention of a company.[22] Those propositions are supported by Howship Holdings[23], by the views expressed by Gillard J[24], by the decision in Biotech International Ltd v Peptech Ltd[25] and also by the decision in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd[26]. The decision in Griffith Producers Co-operative Company Ltd v Calabria[27] did not canvass these propositions nor do I think that Rochester Communications[28] is direct authority against them.

92. Of course, proof of service of a document upon one director will not necessarily constitute proof that the document has actually come to the attention of the company of which he or she is a director. But in the present case Mr Cook is the sole director and secretary (and indeed shareholder) of the plaintiff company, and thus he is that company's directing mind and will.[29] Not only did service of the document upon Mr Cook of necessity bring the document to the actual attention of the plaintiff company, but the evidence here is that Mr Cook expressly accepted service of the statutory demand on behalf of the plaintiff.

95. I am therefore of the view that the plaintiff has failed to show that the statutory demand was not duly served on it. The contrary is the case.

98. For those reasons, I will make the following orders:

2. Orders of Senior Master Mahoney made 13 August 2004 set aside and in lieu thereof order that:

(a) The proceeding be treated as an application for a declaration that the plaintiff was not duly served with the statutory demand dated 26 May 2004 on 26 May 2004 or at all;

(b) Proceeding dismissed on the ground that the plaintiff was duly served with the statutory demand on 26 May 2004;

(c) The plaintiff pay the defendant's costs of this proceeding, including reserved costs and the costs of the hearing before the Senior Master.

[1] Citing Griffith Producers Co-operative Company Ltd v Calabria (1997) 15 ACLC 19, and Rochester Communications Group Pty Ltd v Lader Pty Ltd (1997) 143 ALR 648.

[2] Citing Howship Holdings Pty Ltd v Leslie [1996] NSWSC 314; (1996) 41 NSWLR 542.

[3] Compare s.601CX(3) of the Act and also see the distinction between an affidavit and a copy thereof: Finis v Fitzwilliam Square Pty Ltd [1988] VicRp 25; [1988] VR 183; Fingalbay Pty Ltd v Rengay Nominees Pty Ltd (1997) 142 FLR 340; Victorian Workcover Authority v Kay's Pty Ltd [2001] VSC 358; (2001) 39 ACSR 281.

[4] See Re Pyramid Building Society (in liq) (1994) 13 ACSR 566, 569 per Hayne J.

[5] (1989) 15 ACLR 457, 459.

[6] (1997) 143 ALR 648, 668 per Beaumont J.

[7] [1996] NSWSC 314; (1996) 41 NSWLR 542.

[8] [1996] NSWSC 314; (1996) 41 NSWLR 542, 544.

[9] [1996] NSWSC 314; (1996) 41 NSWLR 542, 544.

[10] [1996] NSWSC 314; (1996) 41 NSWLR 542, 545-6.

[11] (1997) 15 ACLC 19.

[12] (1997) 15 ACLC 19, 20.

[13] (1997) 143 ALR 648.

[14] See Newby v Von Oppen (1872) LR 7 QB 293, 296 per Blackburn J (with the agreement of Cockburn CJ, Mellor and Quain JJ).

[16] [1960] VicRp 63; [1960] VR 400.

[17] [1996] NSWSC 314; (1996) 41 NSWLR 542.

[18] (1997) 143 ALR 648, 681.

[19] CGU Workers' Compensation (Vic) Ltd v Carousel Bar Pty Ltd [1999] VSC 227, at [51]-[54].

[20] [2000] WASC 120; (2000) 156 FLR 295, 305-6.

[21] [2003] QSC 98; [2004] 1 Qd R 140, 141-3. See too: Technitrade Pty Ltd v Compucon Computers (SA) Pty Ltd [2002] SASC 309, at [4].

[22] Compare the same approach taken in relation to earlier companies legislation: Peters v Oscar Mayer Pty Ltd [1963] VicRp 54; [1963] VR 390, 395 (Full Court).

[23] [1996] NSWSC 314; (1996) 41 NSWLR 542.

[24] CGU Workers' Compensation (Vic) Ltd v Carousel Bar Pty Ltd [1999] VSC 227, at [51]-[54].

[25] [2000] WASC 120; (2000) 156 FLR 295, 305-6.

[26] [2003] QSC 98; [2004] 1 Qd R 140, 141-3.

[27] (1997) 15 ACLC 19

[28] (1997) 143 ALR 648.

[29] See Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153, 171.