Supreme Court of NSW|1996-08-01|Before: Howship Holdings P, McInerney J, Young J

Howship Holdings P/L v Leslie and Anor [1996] NSWSC 314 (1 August 1996)

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HIS HONOUR: The defendants seek a declaration pursuant to Pt 11(8)(c) of the Supreme Court Rules that the summons filed in these proceedings has not been duly served on the defendants. The summons in these proceedings is for an order pursuant to s 459G of the Corporations Law setting aside a statutory demand which was posted on 4 June this year, and would have been deemed to have been served a day or so later. The summons was issued out of this Court on 21 June 1996.

The defendants filed an application for winding up the plaintiff consequent upon the alleged non-compliance with the statutory demand. However, they did this in the Federal Court of Australia by an application that apparently was filed on 1 July 1996.

The substantial dispute in this case is whether service of a summons at a document exchange box is good service. However, this really misstates the vital question that I have to answer. The evidence suggests that the plaintiff despatched the summons with a covering letter and the supporting affidavit to the defendants, who are solicitors, by putting the letter, which bore date 26 June 1996, into the document exchange addressed to the defendants at DX1205 Sydney. There is no dispute that DX1205 Sydney is a document exchange box which is used by the defendants.

Section 459G(3) of the Corporations Law provides that an application to set aside a statutory demand may only be made if the copy of the application and copy of the supporting affidavit are served on the person making the demand within 21 days. The decision of the High Court of Australia in David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265 makes it clear that the legislature intended that if no such application is filed and served within the 21 days it is not competent for a court to deal with the application.

Section 459G itself does not deal with what is service. 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, including Hope v Hope [1854] EngR 805; (1852) 4 De GM & G 328; 43 ER 534, 539-540; Reg v Heron (1884) 10 VLR 314, 315; Pino v Prosser [1967] VicRp 107; [1967] VR 835, 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them.

If this were not so, one would get the absurd situation referred to by McInerney J in Pino's case at p 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."

The Corporations Law does not indicate where the summons is to be served. Section 459E of the Law prescribes various matters that must be contained in the statutory demand, but nowhere do these include an address for service. The prescribed form 509H, however, does contain in para 6 a direction to insert the address of the creditor. There is no suggestion that doing so was beyond the power of the regulation making authority. Indeed, it assists in the ordinary working out of the Act.

Where a statute or regulation prescribes the giving of an address for service, that address for service is an address at which a summons dealing with the statutory notice can be served. This is clear from form 509H itself, but the general law would be to the same effect; see re Drinkwater (1929) 46 WN(NSW) 202 decided in connection with an address for service on a Real Property Act caveat.

Mr Archer, who appeared for the defendants, put that s 109X of the Corporations Law which deals with service is a code and that as there had been no service within the meaning of s 109X (or in accordance with the personal service provisions of the Supreme Court Rules) there had been no service at all. However, s 109X is facultative, it is not mandatory. It will be noted that the words used in subs 1 are "may be served". Indeed the Drinkwater rule shows that s 109X could not constitute a code for service. The document could have been served under s 109X, but the mere fact that it has not been does not disqualify it from service if the document came into the possession of the addressee.

Whilst generally I follow what Lander J said in Players Pty Ltd v Interior Projects (1996) 14 ACLC 918, insofar as his Honour was tempted to say that s 109X provided a code, I would not, with respect, follow him.

If the Supreme Court Rules applied (and I think for the reasons given by Lander J in the Players' case they do not) then personal service would be required of originating process. Mr Debuse, for the plaintiff, in his ingenious argument put that Cohen J in Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1220, 1223, used the term "ordinary service" in respect of a demand. His Honour did use those words, but I am sure from the context of his judgment he did not use those words in any technical sense.

Mr Debuse also put that s 109X(2) operated in his client's favour. I cannot see on its proper construction how s 109X(2) is able to affect the result of this case at all.

Accordingly, one gets back to the ordinary principle, has there been personal service, that is has the document come to the notice of the respondent? Really the question in the instant case is has it come to the attention of the addressee within time, but I have not been asked to deal with the time aspect of the case in the argument that was put to me.

There may also be an argument as to how far "irregular service" is service within the meaning of s 459G. As is pointed out by Gallop J in Davies v Alliance Acceptance Co Ltd (1993) 110 FLR 153, 157, ordinarily irregular service is merely voidable and will be effective unless someone asks the Court to set it aside. Accordingly, I would have thought that had there been an irregular service within the 21 days then without something more there would be sufficient service for the Court to be seized of the matter, notwithstanding the stringencies that flow from the Corporations Law as interpreted in the David Grant case.

There seems to be, however, some exceptions to the ordinary rule as to service that are implicit from the David Grant case. If, for instance, the plaintiff's solicitor's process server meets a representative of the defendants' solicitor in a hotel, and the defendants' solicitor's representative says that he will take the document to his office but does not go back to his office on the 21st day and goes on the 22nd day probably there would be no service because what is required is actual service within the 21 days and that any unfulfilled undertaking to accept service, or private arrangement, falls outside what is permitted under the David Grant rule. However, if there is some sort of informal service, but the document is in fact in the hands of the addressee within 21 days, then I can see no reason why that is not good personal service within the meaning of s 459G.

The question I am asked is whether service through the document exchange is good service. The short answer to that question is no. There have been a series of cases dealing with service of notices in conveyancing transactions by the document exchange before the standard forms of contract were amended. The line of cases, such as Chapman v Larrescy [1978] 1 NSWLR 592; Freeman v Jacobs [1980] 1 BPR 9273; Pratt v Hawkins (No 2) (1991) NSW ConvR 55-592 and N M Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26 at 35 and following suggests that without special contractual provisions service through a document exchange is not personal service. However, that is not the ultimate question. The ultimate question is whether the document was received by the addressee within the 21 days. If it is, then in my view no matter how it got to the addressee the addressee has been served within 21 days.

I appreciate Mr Archer's point that the scheme of the Corporations Law is that there should be certainty as to when the document is received. However, the question in any disputed case can always be resolved by discovery and interrogatories so that it does not seem to me that this is something that matters overmuch.

Obviously a solicitor, at least after these reasons for judgment have been published, who serves by the document exchange will be taking a risk because unless he or she can show that the document was received by the addressee within time the client may be out of court. However, if receipt can be demonstrated then, to my mind, there is good service.

In the present case the solicitors and the defendants are the same so that there is no problem as to who was the addressee of the notice, the solicitor or the client. There may be such a problem in another case, unless the solicitor's document exchange is mentioned in the statutory demand. I note that it was not mentioned in the statutory demand in the instant case.

The evidence is that the document did come to the notice of Mr Smits, one of the defendants. There is no evidence as to when it came into his hands. The case is one where no assumptions can be made as to when Mr Smits got the document. It would be unfair, in light of the fact that I was only asked to decide one particular point, to make any Jones v Dunkel assumption. All I should say then is that on the material before me I would not be inclined to make the declaration. I stand the matter over to a suitable time for the parties to tell me what the next step is.

**I should note that I did not appreciate the proceedings for winding up in this matter being commenced in the Federal Court. While it is a matter for parties to elect which Court of coordinate jurisdiction they will proceed in for winding up, where there is process already issued in this Court, even if the person who receives that process thinks that no order can be made, it only unnecessarily boosts the costs that are going to be paid to have actions proceeding in the same subject matter in two separate Courts concurrently.**

I formally stand the matter over to Friday 26 July 1996 at 9.50am. Counsel may contact my Associate if some other time is more convenient.

[On 26 July 1996, by consent the matter was adjourned to 1 August 1996]

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HIS HONOUR: I gave reasons for judgment in this matter on 23 July 1996. I think I should withdraw the penultimate paragraph which I have marked with asterisks which made a comment on the undesirability of matters commencing in the Federal Court because I think that is one of the circumstances I need to take into account on this aspect of the case and it has a deeper significance than what I thought on 23 July.

In my previous judgment I held that service of a summons and affidavit to set aside a statutory demand should not be served by the document exchange, but if they were dealt with in that way and were in fact received by the person giving the statutory demand no later than the twenty-one day period specified in s 459G(3) of the Corporations Law they were served in time.

Mr Archer, who appeared for the defendants today, put further argument to me as to why that was wrong. I will mark his submissions as MIO4. They may be useful in the Court of Appeal, but I adhere to the view that I then took.

That really leaves two matters of fact to decide which will either result in the whole of these proceedings being dismissed or, alternatively, in the making of a declaration on the defendants' notice of motion. The two factual matters are when the statutory demand was served and when a summons and affidavit to set aside the statutory demand were received by Messrs Smits Leslie.

The factual task has been complicated by the rather bizarre failure on both sides to give me the vital evidence. On the first question there are two inconsistent statutory provisions as to when postal articles are properly served. There is some material as to when the notice was in fact received, but Mr Baird, the only person who could give evidence as to when the statutory demand was in fact received, although in court, did not give any evidence on the topic at all. I could only assume under the rule in Jones v Dunkel that nothing Mr Baird could say would have assisted the plaintiff's case that the notice was received on 7 June 1996.

Mrs Mee, a clerk of the defendants' firm, says that she posted the notice duly addressed to the plaintiff in the afternoon or 4 June 1996. It is a matter about which I can take judicial notice that post boxes within the City of Sydney are prominently marked that the post is cleared at 6pm. Accordingly, even though Mrs Mee posted the document at 5pm on 4 June I would have expected that it would have been taken to the mail sorting people that night. An officer of Australia Post told Mrs Mee that in the ordinary course of post that letter would have been delivered to Nelson Bay on Thursday 6 June 1996.

Mr Aldridge, for the plaintiff, is quite correct to point out that there is no evidence as to the status of the officer who gave that information. We are all familiar with junior officials in court registries or post offices giving information which has as much chance of being correct as anyone else's guess. However, there is some slight material that the letter would have been received in Nelson Bay, where the plaintiff's registered office is, on Thursday the 6th.

Mr Archer relies on s 109Y of the Corporations Law, which in para (b) provides that unless the contrary is proved service is taken to have been effected at the time when the letter would have been delivered in the ordinary course of post. As to the ordinary course of post in this context see Bowman v Durham Holdings Pty Ltd [1973] HCA 55; (1973) 131 CLR 8, 15 and the decision of Roden J in Thomas v Johnson (1979) ANZ Conv R 160.

However, s 160 of the Evidence Act provides that it is presumed, unless evidence sufficient to raise doubt about the presumption is adduced, that a postal article sent by prepaid post is to be considered to have been received on the fourth working day after being posted. According to the rules set out in that formula the document would have been served on 10 June 1996.

Section 160 of the Evidence Act has never been the subject of judicial comment, as far as I am aware. It is inconsistent with s 109Y of the Corporations Law. Strangely enough, s 160(2) of the Evidence Act provides that the section is not to apply if the proceedings relate to a contract and the section is inconsistent with the contract. The section makes no mention at all to being inconsistent with other legislation.

There is a general rule that a later Act pro tanto repeals an earlier Act, so there is a respectful argument that s 160 of the Evidence Act pro tanto repeals s 109Y of the Corporations Law. That is only a prima facie rule. One has to actually work out what the intention of the legislature was.

As was demonstrated by the Court of Appeal when the government by mistake passed the Education Acts in the wrong order, it is not just because one Act is later than another that the later Act will prevail; see Black v Director General of Education [1982] 2 NSWLR 714.

There is also a rule of statutory construction that general legislation which is inconsistent with particular legislation is considered not to repeal the particular legislation. In my view, the Evidence Act, s 160, does not pro tanto repeal s 109Y of the Corporations Law and the Corporations Law s 109Y is still the governing legislation for when services of statutory demand are effected.

It should be noted that the two sections place a different onus on the parties. Section 160 makes a presumption, unless sufficient evidence to raise doubt is adduced. Once a doubt is adduced then the presumption does not apply. However, s 109Y says that unless the contrary is proved, so that there is the obligation on a person alleging the contrary to prove on the balance of probabilities when service did take place.

We do know in this case that service took place no later than 7 June 1996 because there is evidence of Mr Fidler that on that day he observed Mr Baird, his co-director, opening mail and that one of the items of mail he opened was the statutory demand. However, in the absence of Mr Baird's evidence there is nothing to show that that mail was received either on the morning of 7 June or the afternoon of 6 June. Accordingly, there is insufficient to prove the contrary under s 109Y and therefore, relying on the only evidence that I have as to the ordinary course of post, the evidence of Mrs Mee and her conversation with the Australia Post official, I must take the statutory demand as having been served on 6 June.

I then turn to the question as to when the summons and supporting affidavit were received by Smits Leslie. There is no doubt they were received. There is no doubt that they were received no later than 1 July. The evidence is that Mr Leslie prepared the application for winding up in the Federal Court and that he attended the Federal Court at approximately 11.45am on 1 July and lodged it. He must have either prepared the application and the affidavit in support on the early morning of 1 July or the week before in anticipation that the statutory demand would not be complied with, or set aside.

Mr Leslie has chosen not to give evidence. There is no reason why he did not give evidence. Again, I must assume that nothing Mr Leslie could say could assist his case.

There was no particular reason for commencing the winding up proceedings in the Federal Court. Most people who choose that court do so because they wish to have input into who will be the liquidator, but the evidence shows in the instant case that no liquidator was nominated. It is rather difficult to imagine that a firm of solicitors, who are acting for themselves and, accordingly, would be very conscious of the costs, would want to commence proceedings in two courts at once over the one small matter. Accordingly, it seems to me that the mere fact that the proceedings were commenced in the Federal Court is some material from which I can infer that at the time when the initiating process was prepared the summons and affidavit to set aside the statutory demand had not been received. However it may well be that the initiating process in the Federal Court was prepared on 27 or 28 June 1996.

The summons and affidavit were despatched with a covering letter of 26 June. Experience is that documents are not always despatched on the date they bear. Often a secretary prepares documents shortly before he or she goes home and the solicitor concerned signs them the next day. However, the fact that the document is dated 26 June is some material to suggest that it was despatched on the 26th or 27th. Both the solicitors for the plaintiff, Barrett Edmunds & Co, Nelson Bay and the defendants are members of the Document Exchange. I know from other cases that there are rules of the Document Exchange dealing with when documents are deemed to be received, which contractually binds the parties, but as no one, despite hint, chose to tender those rules I will just put them out of my mind.

Mr Edmunds says that the procedure of the Nelson Bay Document Exchange, which he is involved in organising, is that at the close of the business day items from the Document Exchange are put into two locked bags, one containing Newcastle documents, which goes to Newcastle Document Exchange, and the other addressed to all other members of the Document Exchange, which goes to Sydney. The deponent says that he is informed by his secretary and believes that the letter of 26 June was despatched through the facility of the Document Exchange on 26 June.

Although the secretary did not give evidence, there is some evidence that the letter was despatched on that day. The letter must have arrived, as I have said, on the morning of 1 July at the latest. 1 July was a Monday. It seems to me, looking at the whole of the evidence, taking into account the fact that Mr Leslie did not give evidence, that it is more likely than not that the document was received by Smits Leslie on 28 June.

I should note that there were some administrative problems in the office of Smits Leslie in the relevant week; that the receptionist, whose duty it was to date stamp documents, was not at work or had resigned and, accordingly, that week there was no one who was date stamping documents that were received in the office, as would normally be the case.

If, as I have held, on the balance of probabilities the statutory demand was received on the 6th, there were twenty-one days to file and serve the summons and affidavit seeking to set aside the statutory demand. That expired at midnight on 27 June. Accordingly, 28 June was one day too late.

Accordingly, there is no jurisdiction after the High Court's decision in the David Grant case, to which I referred in my earlier judgment, to deal with this application by the plaintiff to set aside the statutory demand. As the winding up proceedings are in the Federal Court, I do not think it is for this court to make any remarks at all on s 459S of the Corporations Law.

I very much regret having to come to this decision because presumably what will now happen is that both sides will appeal against my decision, if they can, to the Court of Appeal in New South Wales. There will also be proceedings in the Federal Court over a demand for some $25,000. However, the policy of the Corporations Law is not to have these matters decided according to any principles of commercial common sense, but strictly in accordance with law and I have done my duty.

Accordingly, it seems to me that the proceedings should be dismissed with costs. The exhibits should remain.

Howship Holdings P/L v Leslie and Anor [1996] NSWSC 314

At a glance

Court

Decision date

Before

Source

Judgment (53 paragraphs)

Howship Holdings P/L v Leslie and Anor [1996] NSWSC 314 (1 August 1996)

Parties

Cases Cited (4)