JSBG Developments Pty Ltd v Kozlowski

DECISION : Separate questions answered as per paragraph 31.

CATCHWORDS : PROCEDURE - proceedings brought by company - originating process signed by company's sole director - no solicitor involved - whether proceedings validly constituted - defendant resident in another State but served in New South Wales - whether compliance with Service and Execution of Process Act required

Corporations Act 2001 (Cth), ss 127(1)(c), 459G, 467A, 1322(2) Judiciary Act 1903 (Cth), s 79 LEGISLATION CITED : Service and Execution of Process Act 1992 (Cth), ss 15(1), 16 Supreme Court (Corporations) Rules 1999, rules 1.3(1)(a), 1.3(2) Uniform Civil Procedure Rules 2005, rules 7.1, 7.2(1), 28.2

Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334 CASES CITED : Hubbard Association of Scientologists International v Anderson [1972] VR 340 Hubbard Association of Scientologists International v Anderson (No 2) [1972] VR 577

PARTIES : JSBG Developments Pty Ltd - Plaintiff Wlodzimierz Antoni Kozlowski - Defendant

COUNSEL : Mr G D McDonald - Plaintiff Mr T O Bland - Defendant

SOLICITORS : Director in Person Lou Baker and Associates

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

4503/09 JSBG DEVELOPMENTS PTY LTD v WLODZIMIERZ ANTONI KOZLOWSKI JUDGMENT 1 An originating process and a supporting affidavit were filed on 10 September 2009. The affidavit was sworn by Mr B F Golledge. He is described therein as "a director and shareholder of the plaintiff". 2 The plaintiff is named in the originating process as JSBG Developments Pty Ltd. Mr Golledge's signature is appended in a space at the foot of the originating process marked "Signature of Plaintiff". 3 The originating process claims the following principal order: "The Creditor's Statutory Demand for Payment of Debt issued by the Defendant be set aside in accordance with Sections 459H and 459J of the Corporations Act 2001." 4 Section 459G of the Corporations Act 2001 (Cth) is identified in the originating process as the provision under which the application is made. The case is therefore a civil proceeding under the Corporations Act, with the result that the laws of New South Wales, including laws relating to procedure, bind the court: see Judiciary Act 1903 (Cth), s 79 and Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334. 5 The Supreme Court (Corporations) Rules 1999 accordingly apply: see rule 1.3(1)(a). Those rules have the effect that the general rules of court apply to the extent that they are relevant and not inconsistent with the Supreme Court (Corporations) Rules: see rule 1.3(2). 6 When the matter came before me on 19 October 2009, I ordered by consent and pursuant to rule 28.2 of the Uniform Civil Procedure Rules 2005 that the following questions be determined separately and before any other question:

Question 1: Whether, in the absence of the filing of an affidavit as referred to in rule 7.2(1) of the Uniform Civil Procedure Rules 2005 with the originating process, these proceedings are validly constituted.

Question 2: Whether any defect of the kind referred to in question 1 is rectified by the filing of the affidavit of Mr Golledge sworn and filed on 19 October 2009 so as to cause the proceedings to be validly constituted.

Question 3: Whether it was necessary for the Service and Execution of Process Act 1992 (Cth) to be complied with by the plaintiff in relation to the originating process. 7 I then heard argument on the separate questions. 8 Several matters of fact are agreed or uncontroversial: first, that the originating process and Mr Golledge's affidavit of 10 September 2009 were served on the defendant in New South Wales; second, that no notice under the Service and Execution of Process Act was attached to the originating process; third, that no affidavit of the kind referred to in rule 7.2(1) of the Uniform Civil Procedure Rules was filed with the originating process; fourth, that on 10 September 2009, Mr Golledge was the only director of the plaintiff (a second director having ceased to hold office on 30 March 2009 upon his becoming bankrupt); and, fifth, that on 19 October 2009, an affidavit of Mr Golledge addressing the matters made relevant by rule 7.2(1) was filed. 9 Question 3 may be dealt with shortly. Section 16 of the Service and Execution of Process Act 1992 (Cth) is in these terms: "Service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served." 10 The reference here to "service" takes its meaning, for present purposes, from s 15(1): "An initiating process issued in a State may be served in another State." 11 In this case, the "initiating process", being the originating process filed on 10 September 2009, was, in s 15(1) terms, "issued" in New South Wales. It was also served in New South Wales on the defendant, a natural person. The case is accordingly not, in terms of s 15(1), one of service "in another State". There was therefore simply no occasion for consideration of or compliance with s 16 or any other provision of the Service and Execution of Process Act; and this is so even if (as it appears may be the case) the defendant is ordinarily resident in some other part of Australia. 12 Question 3 must be answered "No". 13 In approaching Questions 1 and 2, it is necessary to have regard to the provisions of the Uniform Civil Procedure Rules as follows: "7.1(1) A natural person may commence and carry on proceedings in any court, either by a solicitor acting on his or her behalf or in person.

(2) A company within the meaning of the Corporations Act 2001 of the Commonwealth: (a) may commence and carry on proceedings in any court by a solicitor or by a director of the company, …

(3) In the case of proceedings in the Supreme Court, subrule (2) (a) authorises a company to commence proceedings by a director only if the director is also a plaintiff in the proceedings. … 7.2(1) A person who commences or carries on proceedings in the Supreme Court or District Court: (a) as the director of a company within the meaning of the Corporations Act 2001 of the Commonwealth, or … must file with the originating process, notice of appearance or defence, as the case may be, an affidavit as to his or her authority to act in that capacity, together with a copy of the instrument evidencing that authority.

(2) The affidavit made by the director of a company within the meaning of the Corporations Act 2001 of the Commonwealth must contain: (a) a statement to the effect that: (i) the director is a director of the company, and (ii) the director has been authorised by a resolution of the directors duly passed at a meeting of directors held on a specified date (which must not be earlier than 21 days before the date of the affidavit) to commence and carry on the proceedings, as the case requires, and (iii) the authority has not been revoked, and (iv) the director is aware that he or she may be liable to pay some or all of the costs of the proceedings, or (b) a statement to the effect that: (i) the director is the managing or governing director of the company and has authority to exercise the powers of the directors, and (ii) the director is aware that he or she may be liable to pay some or all of the costs of the proceedings. …" 14 The argument advanced on behalf of the plaintiff is that it commenced the proceedings by a corporate act, being the signing and filing of the originating process by its sole director. Perhaps because there is no evidence that Mr Golledge was also the sole secretary of the plaintiff, there was no submission that s 127(1)(c) of the Corporations Act warrants a finding of execution of that document "by" the plaintiff. But there can be no doubt that the acts of its sole director bind the company. 15 A finding that signing and filing of the originating process by means of Mr Golledge's actions was signing and filing by the plaintiff might perhaps support an argument that the plaintiff company commenced the proceedings "in person". But that, as rule 7.1 shows, is, as regards commencement of proceedings, a course open only to a "natural person". Where, as here, proceedings are to be commenced by a "company" within the meaning of the Corporations Act, the permitted and available courses are only those specified in rule 7.1(2). 16 A company cannot commence proceedings "in person" for the same reason as it cannot appear before a court in person. I quote, in that connection, from the joint judgment of Smith J, Little J and Gowans J in Hubbard Association of Scientologists International v Anderson [1972] VR 340 at 341: "A company cannot appear before the court in person or be treated as appearing before the court in person. We refer to the cases of Re London County Council and London Tramways Co (1897) 13 TLR 254; Scriven v Jescott (Leeds) Lt d (1908) 53 Sol Jo 101; Frinton and Walton U.D.C. v Walton and District Sand and Mineral Co Ltd , [1938] 1 All ER 649; Tritonia Ltd v Equity and Law Life Assurance Society , [1943] AC 584;[1943] 2 All ER 401, and Re Education Pty Ltd and the Companies Act , [1963] NSWR 1340. These cases show that a company, since it cannot be regarded as a litigant in person , must appear before the court by or through an agent. The cases also show that the class of agents by and through which a company may appear before the court may be limited by statute or by the practice of the court." [emphasis added] 17 Rule 7.1(2) is a limiting provision of the kind here mentioned. It must be read so that the word "may" is regarded as meaning "may only". This follows from the circumstance that a company "cannot be regarded as a litigant in person". 18 Importantly, however, the right or ability of a company within the meaning of the Corporations Act to commence proceedings "by a director" is, in this court, qualified and constrained by rule 7.1(3). That rule makes eligible, for the purposes of rule 7.1(2)(a) only a director who is, in his or her own right, a plaintiff in the proceedings. The combined effect of rules 7.1(2)(a) and 7.3 is that, if the company and a director of the company are both plaintiffs, the company may commence and carry on the proceedings by that director. Otherwise, the company may not commence or carry on the proceedings by a director. 19 Mr Golledge, the sole director of the plaintiff, is not an additional plaintiff in these proceedings. Nor could he be. The only competent applicant for an order setting aside a statutory demand served on a company is that company itself. This is made plain by s 459G(1) of the Corporations Act. 20 Because Mr Golledge is not and cannot be a plaintiff, the effect of rule 7.1(3) is that this case is not one in which rule 7.1(2)(a) was, on 10 September 2009 or at any other time, the source of authority for the proceedings to be commenced by the plaintiff by Mr Golledge; and this is so whether or not there has been compliance with the rule 7.2(1) with respect to the filing of an affidavit. 21 Having regard to Question 1, therefore, it is necessary to consider the status of proceedings which, although procured to be brought by a company by a person having authority to act for the company in that respect, are not commenced in a way that conforms with rules 7.1(2) and 7.1(3). Are such proceedings, in the words of Question 1, "validly constituted"? 22 The starting point in approaching that question is another decision of the Full Court of the Supreme Court of Victoria. In Hubbard Association of Scientologists International v Anderson (No 2) [1972] VR 577, Adam J, Little J and Gowans J addressed, in a joint judgment, the status of a writ of summons signed and issued on behalf of the plaintiff by an agent whose authority was apparently unquestioned. It was held that the writ was not a nullity and that, despite non-observance of a rule of court that a corporation might sue only by a solicitor, the defendant was not entitled as of right to have the writ set aside. The situation was characterised as one of mere irregularity for the purposes of a rule to the effect that non-compliance with the rules did not render proceedings void unless the court so directed, but the proceedings might be set aside as irregular. 23 The rationale for the finding of mere irregularity was stated as follows in the joint judgment (at 580): "The requirement of the Rules that a plaintiff if not suing in person must act through a solicitor and not through some other agent would appear, primarily at least, to be for the benefit of a defendant. That requirement ensures, so far as practicable, that where a litigant is not suing in person (a risk to which any defendant is, of necessity, subject to in the interests of justice) his agent should be a duly-qualified solicitor who accepts a professional responsibility for the initiation and conduct of the litigation on the plaintiff's behalf and is subject to the disciplinary powers of the Court over solicitors. As to this, reference may be made to the Rules which require that a solicitor who acts for a plaintiff in the institution of legal proceedings by writ must continue to act for him in the subsequent conduct thereof, subject only to special provisions for change of solicitors, or for a plaintiff subsequently acting in person without a solicitor: see O.7.

Not only do the Rules not permit of an agent for a plaintiff not being a solicitor, instituting proceedings on his behalf, they nowhere permit of such an agent at any later stage of the litigation assuming the conduct thereof on behalf of the plaintiff." 24 The court also said (at 580-581): "What has already been done irregularly in this case can, of course, not be undone. The writ in its defective form has been sealed by the Prothonotary and issued accordingly, so it is impossible that in relation to the writ itself and its issue the Rules can be now literally complied with.

We do not consider that because the irregular proceedings are not in this limited sense now curable, that the Court, when acting under O.70, r1 is powerless to do other than set aside the irregular proceedings. Such a narrow operation would deprive a beneficial rule of much of its value and ignore the fact that it expressly permits of other action than setting aside non-complying proceedings or amending them.

Although the irregularities which have occurred cannot now be prevented, if by an order short of the extreme step of setting aside all prior proceedings the irregularities can be cured in the sense that the interests of the defendants can be sufficiently protected, the demands of justice indicate that such an order would be an appropriate exercise of the Court's discretion." 25 In this case too, the originating process in defective form has been sealed and issued. 26 The rule of court on which the second Hubbard Association case turned is very similar to s 1322(2) of the Corporations Act: "A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid." 27 Section 1322(2) applies to this case. An application to a court under s 459G is unquestionably a "proceeding under this Act". The effect of s 1322(2) is that, in the absence of, first, a finding of the court of "substantial injustice" that the court cannot remedy and, second, the making by the court of a declaration of invalidity, proceedings commenced otherwise than as allowed by rule 7.1(2) are "not invalidated" because of that irregularity. 28 It is also significant that s 459G is within Part 5.4 of the Corporations Act. That brings into play s 467A: "An application under Part 5.4 or 5.4A must not be dismissed merely because of one or more of the following: (a) in any case--a defect or irregularity in connection with the application; (b) in the case of an application for a company to be wound up in insolvency--a defect in a statutory demand; unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied (for example, by an adjournment or an order for costs)." 29 Both s 1322(2) and s 467A focus upon "substantial injustice". The matter of "substantial injustice" and other matters that might cause the court to make a declaration of invalidity under s 1322(2) or negate the saving effect of s 467A do not arise in the present context. The court is required (and able) to address only the separate questions. The court has not received evidence or submissions in relation to "substantial injustice". 30 In any event, Question 1, according to its terms, goes only to the significance of the fact that an affidavit in terms of rule 7.2(1) was not filed with the originating process. That, for reasons stated, is clearly an irregularity within s 1322(2) and s 467A. It cannot, of itself, mean that the proceedings are not "validly constituted". 31 The questions stated at paragraph [6] above are answered as follows:

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