Ketrim Pty Ltd v AS&L Pty Ltd

Supreme Court of NSW|2004-11-11|Before: Barrett J, Chernov J

CITATION : Ketrim Pty Ltd v AS&L Pty Ltd [2004] NSWSC 1046 HEARING DATE(S) : 05/11/04 JUDGMENT DATE : 11 November 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Statutory demand set aside

CATCHWORDS : CORPORATIONS - winding up - statutory demand - whether proceedings to set aside commenced within time - whether "defect" in specification of address for service - whether "defect" productive of injustice if demand not set aside - whether "genuine dispute" as to existence of debt LEGISLATION CITED : Corporations Act 2001 (Cth), s.459G, 459J(1)(a) Daewoo Australia Pty Ltd v Suncorp Metway Ltd (2000) 48 NSWLR 692 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd [2004] SASC 70 Dominion Capital Pty Ltd v Pico Holdings Inc (2002) 4 VR 195 Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Greenway Hotel Pty Ltd v Parton [2004] ACTCA 13 Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 41 ACSR 15 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 CASES CITED : Montt Capital Pty Ltd v MBF Consulting Pty Ltd [2004] WASC 146 Re Morris Catering Pty Ltd (1993) 11 ACSR 601 Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 QdR 140 Perpetual Nominees Ltd v Masri Apartments Pty Ltd (2004) 49 ACSR 719 Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2002) 41 ACSR 491 Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWCA 329 Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2003) 48 ACSR 222 Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd (unreported, VSC, Chernov J, 24 April 1998) Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 Spencer Constructions Pty Ltd v G & A Aldridge Pty Ltd (1997) 76 FCR 452 Trecomax Pty Ltd v Prentice (2004) 50 ACSR 314 PARTIES : Ketrim Pty Limited - Plaintiff AS&L Pty Ltd - Defendant FILE NUMBER(S) : SC 3663/04 COUNSEL : Mr B S Wilson, Solicitor - Plaintiff Mr N Sullivan, Solicitor - Defendant SOLICITORS : PricewaterhouseCoopers Legal Lawyers - Plaintiff Champion Legal - Defendant

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

3663/04 - KETRIM PTY LIMITED v AS&L PTY LTD JUDGMENT 1 By an originating process filed on 28 June 2004, the plaintiff, Ketrim Pty Ltd, makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant, AS&L Pty Ltd. 2 The statutory demand is dated 3 June 2004. It refers to a debt described as follows: "The Debtor is indebted to the Creditor in the amount of $21,000.00 as referred to in Special Condition 53.1 of the Deed of Agreement for Lease entered into between the Debtor and the Creditor." 3 The plaintiff says that there exists a genuine dispute as to the existence of the debt so described and that an order setting aside the statutory demand must be made under s.459H. 4 The plaintiff mounts a second attack upon the statutory demand, saying that there is a "defect" in the demand within s.459J(1)(a), being a defect of such a kind that substantial injustice will be caused unless the demand is set aside. 5 The defendant, for its part, says that the plaintiff's application for an order setting aside the statutory demand was not made within the period allowed by s.459G(3), that that period cannot be extended (David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265) and that, because the application was accordingly not made in accordance with s.459G, the court cannot treat it as a basis for the making of the order the plaintiff seeks. It is appropriate to deal with this matter first. 6 Section 459G(3) requires that two things happen within 21 days after the statutory demand is served on the relevant company. The first is that the company's application for an order setting aside the demand be "filed with the Court". The second is that a copy of the application and a copy of the supporting affidavit be "served on the person who served the demand on the company". 7 The starting point in identifying the relevant period of 21 days is to ascertain the date of service of the statutory demand. In the present case, the demand was sent to the plaintiff by post. There is in evidence a "Customer Receipt" issued by Australia Post on 3 June 2004 in respect of an article dispatched by registered post to the plaintiff at an address in Ryde. In the material put into evidence by the plaintiff is a copy of the statutory demand and supporting affidavit together with a covering letter from the defendant which is dated 3 June 2004 and carries two rubber stamp impressions one "DELIVERED 8 JUN 2004" and the other "RECEIVED 8 JUN 2004". There is no evidence of how these stamps came to be on the letter. A letter from the plaintiff's Brisbane solicitors to the defendant dated 24 June 2004 refers to "your letter dated 3 June 2004 received by our client on 8 June 2004 serving a Statutory Demand …". 8 The plaintiff's originating process seeking an order setting aside the statutory demand was filed on 28 June 2004. A letter of 30 June 2004 from Gateway Lawyers, the defendant's Brisbane solicitors, to the plaintiff's solicitors in Sydney begins: "Thank you for your facsimile dated 28 June 2004 enclosing the Originating Process, Affidavit of M Georgiadis sworn 25 June 2004, and an Affidavit of J. Stuart-Robertson sworn 25 June 2004."

There is reference later in the letter to 28 June 2004 as the date of filing of the originating process. An affidavit of a process server sworn on 30 June 2004 testifies to delivery of the originating process and the two affidavits to a receptionist at Gateway Lawyers, Level 4, 379 Queen Street, Brisbane. 9 Before addressing the significance of this evidence I should refer to the applicable rules as to service of both a statutory demand and service of an application for an order setting aside a statutory demand. 10 In Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 41 ACSR 15, I dealt with the question of determining the date of service of a statutory demand sent by post. My conclusion was that s.109X of the Corporations Act allows service by post upon the relevant company and that the time of service is to be determined by reference to s.29 of the Acts Interpretation Act 1901 (Cth). The reasoning is set out at paragraphs [34] to [44] of the judgment and was adopted and applied in Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd [2004] SASC 70. The result is that, in the absence of proof to the contrary, service is deemed to have been effected at the time at which the letter would be delivered in the ordinary course of post. This is the effect of s.29 of the Acts Interpretation Act as in force on 1 November 2000, that being the version made applicable by s.5C of the Corporations Act. 11 The requirement of service in relation to an application under s.459G was addressed by me in Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2002) 41 ACSR 491. I quote paragraphs [9] to [11] of the judgment: "The requirement with respect to the copy of the company's s.459G application and supporting affidavit is a requirement that they be 'served'. The Act does not contain its own provisions concerning service, except in particular cases, being service on 'a company' (s.109X(1)) and, in certain instances, on a director or secretary (s.109X(2)). Since the person who resorts to the statutory demand procedure may be an individual, a body corporate which is not a 'company', a body politic or any other form of juristic person, there is no place, in the context of s.459G(3)(b), for the operation of any of the provisions of s.109X, the intention being that any mode of 'service' may be effected. The general meaning of 'service', in the Corporations Act 2001, is to be derived from s.28A(1) of the Acts Interpretation Act 1901. By operation of s.5C of the Corporations Act 2001, the Acts Interpretation Act 1901 as in force on 1 November 2000 applies to that Act. Section 28A(1) is as follows: 'For the purposes of any Act that requires or permits a document to be served on a person, whether the expression "serve", "give" or "send" or any other expression is used, then, unless the contrary intention appears, the document may be served: (a) on a natural person: (i) by delivering it to the person personally; or (ii) by leaving it at, or by sending it by pre-paid post to, the address of the place of residence or business of the person last known to the person serving the document; or (b) on a body corporate - by leaving it at, or sending it by pre-paid post to, the head office, a registered office or a principal office of the body corporate.' As it says, this provision applies in so far as a contrary intention does not appear. I do not think that the present context is one in which there appears any contrary intention to the effect that the address specified in the demand in obedience to the instruction in paragraph 6 of the form is the only permitted place of service: see Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1220. But even if such a contrary intention is manifested, it does not, to my mind, confine the mode of service, as distinct from the place of service." 12 This analysis was not questioned on either occasion on which the first instance decision was considered by the Court of Appeal: Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2002] NSWCA 329; Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2003) 48 ACSR 222. 13 The evidence concerning service of the statutory demand and accompanying affidavit is that they were posted by registered post on 3 June 2004 and that they were received by the plaintiff on 8 June 2004. I am prepared to make a finding of receipt the latter date based on the two stamps on the copy of the covering letter put into evidence by the plaintiff and the statement in the plaintiff's solicitors' letter of 24 June 2004. This case is accordingly one in which a date on which service by post was effected has been proved, so that there is no room for the operation of the rule in s.29 of the Acts Interpretation Act based on "the ordinary course of post". I hold that the statutory demand was served on 8 June 2004. 14 It is next necessary to identify the deadline for service of the originating process and the supporting affidavit. For service of those documents to be in accordance with s.459G(3), that service must have occurred "within 21 days after" the statutory demand was served. With service of the statutory demand having occurred, according to my finding, on 8 June 2004, the first day after the date of service was 9 June 2004 and the twenty-first day after service was 29 June 2004. Compliance with s.459G(3) therefore required service of the originating process and supporting affidavit on or before 29 June 2004. 15 Personal delivery of the originating process and supporting affidavit by the process server to Gateway Lawyers' office in Brisbane on 30 June 2004 occurred after this deadline and could not have satisfied s.459G(3). The deadline will therefore be found to have been met (and the section satisfied) only if steps taken by the plaintiff's Sydney solicitors to serve by facsimile are found to represent good service. 16 There is, of course, no statutory provision allowing service of such documents by facsimile or making service by facsimile good service. But it is important to note that the defendant, by its solicitors, acknowledged receipt of the facsimile of 28 June 2004 with which the documents were transmitted. The matter was argued before me on the basis that, by that means, the content of the documents reached the nominated address for service on 28 June 2004 and, having regard to the virtually instantaneous nature of facsimile transmission, I am prepared to make such a finding. 17 That circumstance is sufficient to resolve the question of service on 28 June 2004 in favour of the plaintiff. In Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542, Young J dealt with a situation where the originating process containing an application under s.459G and the supporting affidavit were forwarded through a document exchange. His Honour held that service in that manner was not good service but that proof of actual receipt, albeit through a document exchange box, was effective as service. That decision was followed, in a case such as the present, in Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd (unreported, VSC, Chernov J, 24 April 1998) where the s.459G originating process and supporting affidavit had been sent by facsimile to the address for service specified in the statutory demand. Chernov J said: "In my opinion, for the reasons given below, there has been proper service of the relevant documents on the respondent. Here, the statutory demand which is in the prescribed form was issued in accordance with s459E. It provides, as I have said earlier, that the address of the creditor for service was to be the address of the solicitors. I agree with Lander J in Players Pty Ltd v Interior Projects (1996) 20 ACSR 189, that the combination of s459E, the prescribed form of statutory demand under it, and s459G, shows that the legislation contemplates that the application under s459G(3) may be served on the creditor at the address shown on the statutory demand. A like conclusion was reached by Young J in Howship Holdings Pty Ltd v Leslie (1996) 21 ACSR 440 at 442. In my view, it is sufficient for the purposes of s459G(3) if copies of the application and affidavit are served at the relevant address, that being the address nominated by the giver of the statutory notice. Thus, service may be effected if copies of the relevant documents are left at the nominated address. In a sense, how they come to be left there is irrelevant (see Young J in Howship Holdinas Pty Ltd v Leslie, at p442). For instance, the copy documents may be left by someone attending at the address in question and leaving them there. If that had occurred in this case, then in my view, proper service would have been effected of the relevant documents. The same object is achieved if the copies arrive at that address as a result of being sent by way of a facsimile transmission. What is required by s459G(3) is that the respondent should receive copies of the relevant documents at the address nominated by it. Once that has occurred, the requirement of s459G(3) as to service of the relevant documents is satisfied."

His Honour added: "It is not the object of the legislation and the rules governing service to allow a respondent who has the relevant application in his or her hands within the prescribed time, to avoid meeting a case brought against him or her, by recourse to technical arguments as to service. As Lander J in Players Pty Ltd v Interior Projects observed at p193: The intention is to facilitate the service of an application under s459G, not to impede service or make service of such an application more difficult. Further, as Young J in Howship Holdings Pty Ltd v Leslie, has pointed out at p442: Were it otherwise, one would get to the absurd situation referred to by McInerney in Pino v Prosser & Hassan [1967] VR 835 at 837, that the defendant who, on his own affidavit admits that he received the writ ... should be held not to have been served." 18 A corresponding approach to the question whether a faxed statutory demand actually coming to the notice of the relevant company is sufficiently served was taken in both Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 QdR 140 and Emhill Pty Ltd v Bonsoc Pty Ltd (2004) 50 ACSR 305. 19 In the present case, I am satisfied that service of the originating process and supporting affidavit must be regarded as having been effected on 28 June 2004, being a day within the period of 21 days referred to in s.459G(3). 20 The conclusion that these proceedings were commenced by documents served within time makes it necessary to consider the plaintiff's substantive claims to have the statutory demand set aside. The first such claim is based on the proposition that inclusion of the address of Gateway Lawyers at Level 4, 379 Queen Street Brisbane, in clause 6 of the statutory demand is a "defect", as referred to in s.459J(1)(a), because the nominated address is in Queensland instead of New South Wales and that the "defect" is of such a nature that injustice will occur unless the statutory demand is set aside. 21 The form prescribed under s.459E(2)(e) by regulation 1.0.03 of the Corporations Regulations is Form 509H. Clause 6 of the form is in these terms: "6. The address of the creditor for service of copies of any application and affidavit is ( insert the address for service of the documents in the State or Territory in which the demand is served on the company, being, if solicitors are acting for the creditor, the address of the solicitors )." 22 The address included in clause 6 was the Brisbane address of the solicitors acting for the defendant. That did not satisfy the italicised instruction contained in the prescribed form because, although the creditor's solicitors' address was given, it was not in New South Wales where the demand was to be served. There was accordingly an irregularity amounting to a "defect" as defined by s.9: Daewoo Australia Pty Ltd v Suncorp Metway Ltd (2000) 48 NSWLR 692; Dominion Capital Pty Ltd v Pico Holdings Inc (2002) 4 VR 195; Cooline Pacific Pty Ltd v Quitstar Pty Ltd (above); Quitstar Pty Ltd v Cooline Pacific Pty Ltd (above); Perpetual Nominees Ltd v Masri Apartments Pty Ltd (2004) 49 ACSR 719; Montt Capital Pty Ltd v MBF Consulting Pty Ltd [2004] WASC 146. But because the plaintiff succeeded in serving the defendant in such a way as to bring its case and the basis for it to the defendant's notice within time, there can be no suggestion that the "defect" was productive of injustice of the kind that would warrant the making of an order by reference to s.459J. This approach is consistent with that taken in decided cases involving a defect in the specification of an address for service in clause 6. The plaintiff's challenge to the statutory demand based on s.459J therefore fails. 23 It remains to consider the plaintiff's case based on s.459H and the claim that there is a "genuine dispute" as to the existence of the debt. In order to be within s.459H, a dispute must satisfy tests laid down in a number of well known cases, including Re Morris Catering Pty Ltd (1993) 11 ACSR 601, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 and Spencer Constructions Pty Ltd v G & A Aldridge Pty Ltd (1997) 76 FCR 452. I would repeat here what I said about those tests in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411: "It is appropriate to dwell for a moment on the guidance provided by these cases. The tests of 'plausible contention requiring investigation', 'real and not spurious, hypothetical, illusory or misconceived' and 'perception of genuineness (or lack of it)', applied in the context of a summary procedure where 'it is not expected that the court will embark on any extended inquiry', mean that the task faced by a company challenging a statutory demand on the 'genuine dispute' ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger."

This formulation has been applied in Greenway Hotel Pty Ltd v Parton [2004] ACTCA 13 and in Trecomax Pty Ltd v Prentice (2004) 50 ACSR 314. 24 The debt referred to in the statutory demand is said to arise from clause 53.1 of a deed made between the plaintiff (called "Lessor") and the defendant (called "Lessee"). That clause is as follows: "The Lessor will pay to the Lessee the amount of $21,000 as compensation to the Lessee for costs incurred in breaking its existing lease. Such payments to be made when this Agreement for Lease, and the Lease is signed and all payments due pursuant to this Agreement for Lease have been made by the Lessee. The Lessee must produce evidence of the termination of the Lessee's existing premises and the Lessor will pay the amount to the Lessee 14 days after such evidence has been produced to the Lessor or the last of the payments due under this Agreement for Lease have been made, or the approval referred to in the following clause has been given in writing, whichever is the later." 25 The plaintiff's promise to pay the defendant $21,000 is conditional. A debt of $21,000 will be owing, due and payable by the plaintiff to the defendant, as referred to in s.459E(1), only if all conditions precedent to the plaintiff's obligation to pay have been satisfied. It is the plaintiff's contention that those conditions precedent include three events, being the events to which the 14 day deadline for payment is expressed to relate. The events are first, production by the defendant to the plaintiff of evidence of "the termination of the Lessee's [ie, defendant's] existing premises", second, "the last of the payments due under this Agreement for Lease have been made" and, third, "the approval referred to in the following clause has been given in writing". The words "whichever is the later" are said by the plaintiff to make these conditions cumulative. This is a cogent and plausible construction. 26 The first condition refers to "termination of the Lessee's existing premises". It is assumed that this refers to termination of the lease of the defendant's "existing premises". The plaintiff says that the defendant has not produced evidence of any such termination. All that has been produced, says the plaintiff, is two surrender of lease documents, one expressed to be between S L Pronk, J D Pronk and Deemrend Pty Ltd as lessor, Subway Realty Pty Ltd as lessee and R and G Stephens as guarantor and the other expressed to be between the same persons as lessor, ACN 009 696 379 Pty Ltd (formerly Graham Retailers Pty Ltd) as lessee and the same persons as guarantor. The copy of the second shows execution by only the lessee and guarantor parties. 27 Neither of these documents can be classified as a document effecting or leading to termination of any lease under which the present defendant (AS&L Pty Ltd) is lessee. On the face of things, therefore, the evidence does not show that evidence of the kind envisaged by the first condition in clause 53.1 has been produced by the defendant to the plaintiff. The defendant's position appears to be that the lessees referred to in the surrender documents are companies which, like the defendant, are owned by Mr Stephens and that the reference in claim 53.1 to "the lessee's existing premises" is sufficiently wide to encompass premises leased by the other companies owned by Mr Stephens. This may or may not be found to be so upon full argument. 28 The observations in paragraphs [25] to [27] are sufficient to sustain the plaintiff's claim that there is a genuine dispute as to the existence of the debt of $21,000 said to be sourced in clause 53.1 of the deed. There is a question as to the meaning of "the Lessee's existing premises" in clause 53.1. There is a question as to whether the premises to which the two surrender documents relate are within that description. And there is a question as to the effect of the partially executed surrender document. These questions raise arguable issues which are cogent and not fanciful, with the result that there is a "genuine dispute" for the purposes of s.459H. 29 The plaintiff advances a second ground of "genuine dispute", namely, that, by virtue of a contract for sale dated 20 March 2003 between the plaintiff as vendor and a company called Albert Chung Pty Ltd as purchaser and, one assumes, completion thereunder, the plaintiff's obligation under clause 53.1 became instead an obligation of the purchaser under that contract. 30 The expression "Leases" is defined in this contract for sale as all leases affecting the particular property at Clontarf, Queensland, which is apparently a shopping centre. Even if it assumed that clause 53.1 forms part of one of those "Leases", I do not think that, in the absence of evidence of some form of novation, the plaintiff can say that the contract for sale relieved it of any payment obligation it had, as against the defendant, by virtue of clause 53.1. While the contract for sale says that, with effect on completion, "each of the Leases is assigned to the Purchaser", that of itself cannot have caused that purchaser to become bound to perform in favour of lessees in place of and to the exclusion of the plaintiff as vendor. This is borne out by the contract for sale itself which goes on to say that the purchaser covenants to observe and perform the provisions of the leases binding on the plaintiff and to indemnify the plaintiff against claims that may be made against the plaintiff for breach of those provisions. The obligations remain obligations of the plaintiff, even though the purchaser has covenanted to protect the plaintiff in respect of them. I would therefore not find for the plaintiff on this part of its genuine dispute claim. 31 The result of this litigation is that the originating process and supporting affidavit are shown to have been filed and served within the statutory time limit and that the plaintiff has succeeded, on one of the bases asserted, in showing that there is a genuine dispute as to the existence of the debt specified in the statutory demand. The plaintiff is therefore entitled to the relief sought by way of order setting aside the statutory demand. 32 I will make order 1 in the originating process. I will also order that the defendant pay the plaintiff's costs of the proceedings. **********

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