By originating process filed on 9 March 2023, the plaintiff Rio Dorado Limited (Rio), applies to set aside a statutory demand issued and served by the defendant, Ms Heather Rutherford, on 9 March 2023.
The statutory demand relates to an alleged debt of $177,886.77 that is described in the schedule to the demand and in the affidavit accompanying the demand as comprising:
1. a debt of $30,000.00 in respect of three convertible notes issued by Rio to Ms Rutherford on 11 December 2019 at the issue price of $10,000.00 per note, which Ms Rutherford required Rio to redeem by notice in writing given on 26 August 2022;
2. a debt of $13,809.65 for interest that accrued in respect of that convertible note;
3. loans advanced by Ms Rutherford to Rio during the period from 9 November 2020 to 4 June 2021, and interest on those loans, in a total sum of $17,400.11; and
4. loans and advanced by Ms Rutherford to Rio during the period from 1 July 2021 to 1 November 2021, and interest on those loans, in a total sum of $116,677.01.
The statutory demand was issued on the same date as a statutory demand issued to Rio by Featherstone Enterprises Pty Limited (ACN 137 298 018) (Featherstone Enterprises) in respect of a claimed debt of $757,850.36 (the Featherstone Enterprises demand), as well as a further statutory demand issued to Rio by 70:20:10 Forum Pty Limited (ACN 158 131 938) (Forum) in respect of a claimed debt of $67,049.16 (the Forum demand). Ms Rutherford is the sole director of Featherstone Enterprises and a director of Forum. Ms Rutherford affirmed three separate affidavits on 16 February 2023, each one verifying the debt claimed in one of the three demands issued on that date.
According to the evidence adduced on behalf of Ms Rutherford which I will refer to in more detail below, employees of the firm of solicitors acting for her prepared two envelopes, each of which contained the three statutory demands. One of those envelopes was delivered by hand to Rio's registered office on 16 February 2023 and the other was sent by pre-paid registered post to Rio's registered office on 16 February 2023. The evidence includes an Australia Post tracking report recording that the envelope was delivered on 20 February 2023.
Rio acknowledges that an envelope containing the three statutory demands were delivered to its registered office by hand on 16 February 2023, but disputes that the demands were delivered by post on 20 February 2023.
Mr Gary Mares, a director of Rio, swore an affidavit on 8 March 2023 in support its application to set aside the statutory demand issued by Ms Rutherford. Mr Mares deposed that that statutory demand received at Rio's registered office was accompanied by an affidavit relating to a different statutory demand. Mr Mares annexed to his affidavit a copy of the statutory demand that was received, together with the affidavit that accompanied it. The affidavit is Ms Rutherford's affidavit verifying the debt claimed in the Featherstone Enterprises demand.
Accordingly, Rio seeks an order under s 459J(1)(b) of the Corporations Act 2001 (Cth) setting aside the statutory demand issued by Ms Rutherford on the basis that it was not accompanied by the affidavit required by s 459E(3) verifying the debt claimed in the demand when served on Rio at its registered office on 16 February 2023.
The solicitor appearing for Ms Rutherford at the hearing on 23 May 2023 accepted that the evidence adduced by Rio establishes that there was some mistake in the chain of custody of the documents before they were placed into the envelope that was delivered to Rio's registered office by hand on 16 February 2023, and conceded that the Court should not find that the statutory demand issued by Ms Rutherford was accompanied by an affidavit verifying the debt claimed in that demand at the time of that delivery. However, it was submitted that the statutory demand and the correct verifying affidavit were served on Rio at its registered office by post on 20 February 2023.
Rio contends that if any envelope containing the statutory demands was delivered by post (which it denies), the evidence does not support a finding that it contained the statutory demand issued by Ms Rutherford together with a verifying affidavit in respect of the $177,886.77 debt claimed in that demand.
Rio submitted, and Ms Rutherford accepted, that the demand should be set aside pursuant to s 459J(1)(b) if the Court finds that it was not accompanied by Ms Rutherford's affidavit verifying the claimed debt of $177,886.77. That approach accords with authority. [1] Thus, the issues to be determined are:
1. whether the envelope was delivered to Rio's registered office by post on 20 February 2023; and
2. if so, whether that envelope contained both the statutory demand issued by Ms Rutherford on 16 February 2023 and her affidavit verifying the debt of $177,886.77 claimed in the statutory demand.
The evidence that bears on those issues may be summarised as follows.
Ms Hayley Couch is an office administrator employed by Ms Rutherford's solicitors, W Advisers Pty Ltd. Ms Couch gave the following evidence in her affidavit affirmed on 10 March 2023:
"5 On 16 February 2023 I served the following documents (Documents), copies of which are annexed and marked "HC-1", on Rio Dorado Limited:
a. Creditor's Statutory Demand for Payment of Debt dated 16 February 2023 issued by 70:20:10 Forum Pty Ltd ACN 158 131 038 and Affidavit Accompanying Statutory Demand;
b. Creditor's Statutory Demand for Payment of Debt dated 16 February 2023 issued by Featherstone Enterprises Ltd ACN 137 298 018 and Affidavit Accompanying Statutory Demand;
c. Creditor's Statutory Demand for Payment of Debt dated 16 February 2023 issued by Heather Jane Rutherford and Affidavit Accompanying Statutory Demand.
6 I served the Documents in the following manner:
a. I placed a copy of the Documents into a registered prepaid post envelope addressed to "Level 1, 283 George Street Sydney NSW 2000" and handed that envelope to an employee of Australia Post at the Parliament House Post Office on Macquarie Street in Sydney at about 4:00 pm. The tracking number for the envelope was "TMP19 69100 40400 45338 93097". A copy of the proof of lodgement provided to me by Australia Post at the time of posting the envelope is annexed and marked "HC-2".
b. I also personally delivered an envelope containing the Documents, which was given to me by Thuy Pham, to a female person apparently employed at Level 1, 283 George Street Sydney NSW 2000 at about 4:09PM. At the time of service, I handed the envelope to a female staff member behind the reception desk, who stated her name to be "Liliane". I saw that she accepted the envelope.
7 On 10 March 2023, I visited the Australia Post website and retrieved the tracking information for the tracking number referred to in the previous paragraph. Annexed and marked "HC-3" is a copy of the tracking information I retrieved which shows that the envelope was delivered on 20 February 2023."
The "Documents" annexed to Ms Couch's affidavit comprise (in the following order):
1. the Forum demand;
2. Ms Rutherford's affidavit verifying the debt claimed in the Forum demand;
3. the Featherstone Enterprises demand;
4. Ms Rutherford's affidavit verifying the Featherstone Enterprises demand;
5. the statutory demand issued by Ms Rutherford that is the subject of the present proceeding; and
6. Ms Rutherford's affidavit verifying the debt claimed in that statutory demand.
Ms Thuy Pham is a solicitor employed by W Advisers Pty Ltd. In her affidavit affirmed on 27 April 2023, Ms Pham deposed that, after witnessing Ms Rutherford's three verifying affidavits on 16 February 2023, she asked Ms Couch to print one copy of the three statutory demands and affidavits. Ms Couch had earlier sent an email to Ms Pham attaching three pdf files, each of which contained one of the three demands and the relevant verifying affidavit of Ms Rutherford. I infer that Ms Couch had prepared those pdf files on Ms Pham's instruction. Ms Pham deposed that she then reviewed the documents printed by Ms Couch to check that there was one copy of each demand and affidavit, and placed them in an envelope on which she wrote the address of Rio's registered office. Ms Pham then handed the envelope to Ms Couch. Ms Pham deposed that she then instructed Ms Couch to "print another copy of the 3 pdf files and post them to the same address".
It follows from the concession referred to at [8] above that Ms Couch's evidence identifying the "Documents" is wrong insofar as it concerns the contents of the envelope that she personally delivered to Rio's registered office on 16 February 2023.
Given that Ms Couch describes and defines the material in the two envelopes as the same "Documents", and does not describe the process by which she prepared and collated the "Documents" that she personally placed in the registered pre-paid post envelope, it is probable that her evidence about the contents of that envelope is affected by the same error as her evidence about the contents of the hand-delivered envelope. I reject the submission made on behalf of Ms Rutherford that this is mere speculation. It is an inference that is reasonably available to be drawn from the limited evidence adduced in Ms Rutherford's defence, viewed in light of the concession referred to at [8] above, and in circumstances where Rio was in no position to adduce evidence about what documents were placed in the envelopes that were delivered and posted to its registered office. Ms Pham's evidence sheds no light on the matter because she had no involvement in the placement of documents in the pre-paid registered post envelope. Ms Couch is the only person who could have given more evidence about that matter, but she did not do so.
I accept that Ms Couch's evidence that she addressed the pre-paid registered post envelope to Rio's registered office, together with the Australia Post tracking report, establishes on the balance of probabilities that the envelope and its contents were delivered to that address on 20 February 2023. I accept the submission made on behalf of Ms Rutherford that the evidence of Ms Pangestu, who worked as a receptionist at those premises, does not support a finding to the contrary. In her affidavit sworn on 22 May 2023, Ms Pangestu deposed that she is "a receptionist" employed at MNSA Financial Services Pty Ltd (MNSA) at the premises where the registered office of Rio was located at the relevant time, that she collects and sorts mail sent to MNSA in her role as a receptionist, and that, to the best of her knowledge, "MNSA did not receive an envelope by post with statutory demands addressed to the Company on or about 20 February 2023." Ms Pangestu does not give evidence that she was the only receptionist employed by MNSA at the relevant time, that she was present at work on 20 February 2023, that she was the only person responsible for collecting and sorting mail at that time, or that her collection and sorting procedures involved checking the contents of envelopes received by mail. Nor does Ms Pangestu refer to any records kept of incoming mail. In my view, it is inherently improbable that she was able to recall when asked on or about 22 May 2023 whether or not a particular envelope was received on 20 February 2023. For all of those reasons, Ms Pangestu's evidence carries no weight.
However, for the reasons already explained at [16] above, I find that the statutory demand issued by Ms Rutherford that was contained in the pre-paid registered post envelope prepared by Ms Couch and delivered to Rio's registered office on 20 February 2023 was not accompanied by Ms Rutherford's affidavit affirmed on 16 February 2023 verifying the debt claimed in that demand.
It follows that the statutory demand must be set aside pursuant to s 459J(1)(b) of the Corporations Act.
There is no reason why costs should not follow the event. Those costs should be paid on the ordinary basis. The originating process sought an order that Ms Rutherford pay Rio's costs on an indemnity basis. However, counsel for Rio made no submissions in support of an indemnity costs order, and Ms Rutherford has not conducted her defence of this proceeding in a manner that might warrant an indemnity costs order against her.
For those reasons, the orders of the Court are as follows:
1. Order pursuant to s 459J(1)(b) of the Corporations Act 2001 (Cth) that the creditor's statutory demand dated 16 February 2023 issued by the defendant to the plaintiff be set aside.
2. Order that the plaintiff's costs of the proceedings be paid by the defendant on the ordinary basis, in such amount as may be agreed or assessed.
[2]
Endnote
See, for example, Re Cooperbrown Pty Ltd [2019] NSWSC 1341 at [17]-[23] (Black J) and the authorities there referred to.
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Decision last updated: 09 June 2023
Parties
Applicant/Plaintiff:
In the matter of Rio Dorado Limited ACN 148 175 991; Rio Dorado Limited (ACN 148 175 991)