Pacific Mobile Phones Pty Ltd, Re [2008] QSC 210 (20 August 2008)

CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - PROCEDURAL REQUIREMENTS - SERVICE OF APPLICATION - the applicant's solicitors attempted to serve a statutory demand to the ASIC registered office of the respondent - the respondent was no longer at that address and had attempted to change the ASIC record - the envelope in which the demand was sent was returned to the applicant marked "Left Address/Unknown" - there was no public access to the building in which the registered office was situated - whether the statutory demand was delivered to the Respondent

CORPORATIONS - WINDING UP - APPLICATIONS FOR WINDING UP BY COURT - PROCEDURE - DISMISSAL, STAY OR RESTRAINT OF PROCEEDINGS - ABUSE OF PROCESS - a winding up application was brought by the applicant despite knowledge that the statutory demand had not come to the actual notice of the respondent - the applicant persisted with the application even though the default judgment on which it was based had been set aside - whether there had been an abuse of process

CORPORATIONS - WINDING UP - APPLICATIONS FOR WINDING UP BY COURT - PROCEDURE - LEAVE TO OPPOSE WINDING-UP APPLICATION - whether there is a genuine dispute about the debt - whether the respondent is solvent

Acts Interpretation Act 1901 (Cth) s 29

Corporations Act 2001 (Cth), s 109X, s 459P, s 459S

Braams Group Pty Ltd v Miric [2002] NSWCA 417, cited

CGU Workers' Compensation (Victoria) Ltd v Carousel Bar Pty Ltd [1999] VSC 227, cited

Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075, cited

David Grant & Co. Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265, cited

Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354, cited

Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd [2005] SASC 48, cited

Expile Pty Ltd v Jabb's Excavations Pty Limited [2003] NSWSC 96, cited

Fancourt v Mercantile Credits Limited (1983) HCA 25; (1983) 154 CLR 87, cited

F P Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136, cited.

Perpetual Nominees v Masri Apartments Pty Ltd [2004] NSWSC 551, followed

R v County of London Quarter Sessions Appeals Committee; ex parte Rossi [1956] 1 QB 682, cited

Re: Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559, cited

Williams v Spautz [1992] HCA 34; (1991-1992) 174 CLR 509, cited

[1] The applicant, Commonwealth Broadcasting Corporation Pty Ltd, by application dated 23 June 2008 seeks an order winding up the respondent, Pacific Mobile Phones Pty Ltd, in deemed insolvency pursuant to s 459P of the Corporations Act 2001 (Cth) for failure to respond to a statutory demand based on a judgment entered in default of appearance in the Local Court in New South Wales. The respondent has appeared to oppose the application.[1] The grounds of opposition are:

• The statutory demand dated 26 May 2008 was not served upon the registered office of the respondent because it was returned by Australia Post to the sender on 27 May 2008.

• Bringing the winding-up proceedings without actual notice to the company in that circumstance is an abuse of process.

• If the service is deemed effective, the respondent contends that there is a genuine dispute about the debt, the subject of the demand.

The circumstances giving rise to the statutory demand

[2] The respondent, through its sole director, Barry Boulos, has operated a mobile phone shop in Sydney since 1997. Its main business is the sale of mobile phones and accessories and Vodaphone mobile service contracts as agent for Vodaphone. It has been an authorised dealer for Vodaphone since 1997.

[3] The respondent's previous premises were located at Suite 311, 3 Smail Street, Ultimo, New South Wales 2007 - the Ultimo premises - and were on the third level of that building. In March 2007 the respondent moved into its new business premises at 225 Broadway Road, Broadway, New South Wales 2007 - the Broadway premises - because the Ultimo premises were undergoing major building renovations. All the businesses at that address in Smail Street relocated because of those renovations and no public access was possible to any offices in that building.

[4] In June 2007 Mr Boulos enquired by telephone about radio advertising on Mix 106.5 or to 2WS 101.7 with Australian Radio Network, the name under which the applicant trades. Shortly afterwards a conference was held at the Broadway premises with two representatives from the applicant. Subsequently a second conference was held at the Broadway premises. On 20 July 2007 Mr Boulos returned some documents by facsimile transmission to the applicant's representative, adding his landline telephone number, fax number and his mobile telephone number to those documents. Subsequently, at the end of July 2007, Mr Boulos met a script writer at the office of the applicant in North Ryde at the representative's invitation. Mr Boulos deposes that he did not commit to any advertising.

[5] On 15 August 2007 a "team member" from Mix 106.5 attended at the Broadway premises to purchase a mobile phone for a staff member. He was given an invoice for the phone showing the Broadway address, the telephone land line number, mobile phone number and fax number and an email address. Mr Boulos was offered a free 15 second "plug" on Mix 106.5 by the purchaser and accepted. Mr Boulos recalls receiving an invoice from the applicant for advertising for August 2007 which he has misplaced. He has deposed that no advertising other than the free "plug" was provided by the applicant. The documents which Mr Boulos signed and returned on 27 July 2007 on behalf of the respondent were contractual in nature but he deposes that he was assured by the applicant's representative that his signature would merely secure the special promotional deal should he engage their advertising services The applicant has sworn no affidavit in contradiction.

[6] The applicant issued a statement of claim out of the Local Court in New South Wales dated 5 March 2008 addressed to the respondent at its registered address at Smail Street, Ultimo, for the amount of $16,720 being the amount of two invoices for advertising services performed in August and September 2007. Judgment in default of appearance was entered on 13 May 2008.

[7] On 27 May 2008 Mr Boulos became aware through a business associate that default judgment had been entered against the respondent in the Downing Centre Local Court in Sydney on 13 May 2008. On 28 May 2008 the respondent filed a notice of motion to set aside the default judgment returnable on 10 July 2008. On 10 July the default judgment was set aside - an application resisted by the applicant. Mr Boulos's affidavit in support of the respondent's application deposed to no notice of the claim and disputed the debt.

[8] On or about 30 November 2007 Mr Boulos sent a Form 484 "Change of Address" with a cheque in the necessary amount to ASIC seeking to change the registered address of the company to 225 Broadway Road, Broadway, New South Wales 2007. He had given a redirection notice to Australia Post to December 2007. On or about 4 December 2007 Mr Boulos received a letter addressed to the company at 225 Broadway Road, Broadway, 2007 (not 2217 as appears in para 8 of his affidavit, which is clearly a typing error) from ASIC advising him that some incorrect information was in the form. The writer of the letter said that the form had to be completed with the correct information and returned by 25 December 2007. Mr Boulos deposes that on or about 24 December 2007 he contacted ASIC by telephone to ask if he could send the amended Form 484 by facsimile transmission and was advised that he could. He faxed the Form 484 to ASIC with the correct information. That fax was successfully transmitted.

[9] On 2 July 2008 the respondent's solicitor noted, when searching the ASIC register, that the information in the Form 484 had not been processed by ASIC and the old address at Smail Street, Ultimo was shown. Mr Boulos contacted ASIC on 7 July 2008 and was informed that a letter had been sent to him shortly after receiving the form by facsimile advising that ASIC required an original signature on the amended form. That letter was sent to Suite 311, 3 Smail Street, Ultimo, New South Wales 2007. The company had not received the letter.

[10] Katherine Wright, a receptionist in the employ of the applicant's solicitors, deposes that on 26 May 2008 she served the respondent with a creditor's statutory demand for payment of a judgment debt by forwarding it to the registered office of the company at Suite 311, 3 Smail Street, Ultimo, New South Wales 2007 under cover of a letter from Hall Lawyers dated 26 May 2008. Those documents were enclosed in an express post envelope. The address was the address on the ASIC register for the respondent.

[11] Bich Ngoc Thi Nguyen, a solicitor employed at Hall Lawyers, deposes that on 27 May 2008 he received an express post envelope addressed to the respondent at Suite 311, 3 Smail Street, Ultimo, New South Wales 2007 marked "Return to Sender" with the box against "Left Address/Unknown" ticked. The options available to the post office authorities on the pro forma "Return to Sender" sticker are "Insufficient Address", "Refused" and "Unclaimed" in addition to the one which was ticked.

[12] On 23 June 2008, although aware of the application to set aside the default judgment, the applicant filed its application to wind up the respondent in this court based upon the failure to respond to the statutory demand which, in turn, was based on the default judgment. That application was adjourned from 9 July to 25 July and then 31 July 2008.

Was the company served with the statutory demand?

[13] Mr Coulsen, who appeared on behalf of the applicant, maintained that the applicant complied with the provisions of the Corporations Act about service on the company. Section 109X 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 ..."

[14] Mr Coulsen submitted that a company is obliged by law to keep its address current and there is no obligation on a creditor to seek out the company if it does not do so. Accordingly, he contended, the respondent must seek the leave of the court pursuant to s 459S of the Corporations Act to oppose the winding-up application if the respondent seeks to rely on the debt being disputed since that is a ground which might have been relied on on an application to set aside the statutory demand. Mr Coulsen further submitted that the evidence about the solvency of the company is insufficient to meet the standard required by the authorities.

[15] Mr Coulsen has referred to the recent authority of Deputy Commissioner of Taxation v Meredith[2] applying Fancourt v Mercantile Credits Limited[3] in which a distinction is drawn between non-delivery and non-receipt where service may be effected by post.[4] Mr Coulsen contended that it is non-receipt rather than non-delivery which has occurred here and service is deemed effected by post by delivery to the registered address of a company.

Mr Wilson for the respondent does not seek to attack the "deeming" provisions about service of a document on a corporation by post nor engage in the

non-delivery/non-receipt dichotomy. He submitted that on the uncontested facts the statutory demand was not served on the respondent because it was not delivered to the registered address of the respondent. That was because there was no public access to the building where the respondent had its registered address. The South Australian Full Court in Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Lt[5]5 upheld the finding of a Master that delivery of a statutory demand to a post office box number of the accountants whose office was the company's registered office was not service on the registered office of the company - that occurred when the employee collected the mail and took it back to the office.

Section 29 of the Acts Interpretation Act 1901 (Cth), which applies to the Corporations Act 2001,[6] provides that:

"(1) Where an Act authorizes or requires any document to be served by post, whether the expression "serve" or the expression "give" or "send" or any other expression is used, then unless the contrary intention appears the service shall be deemed to be effected by properly addressing prepaying and posting the document as a letter, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post."

Section 109Y which was in substantially similar terms in the Corporations Act has now been removed. Cases which discuss that provision and the analogous State acts concerning posting are of assistance because the provisions are not materially different. In Fancourt v Mercantile Credits Limited the court emphasised,[7] after setting out s 39(1) of the Acts Interpretation Acts 1954 to 1962 (Qld), analogous to s 29,

"In the present case, the notices were not returned undelivered and there was no other circumstances which suggested that they did not reach their destination."

[18] The High Court, in a much quoted passage, referred,[8] obiter, to a line of cases commencing with R v County of London Quarter Sessions Appeals Committee; ex parte Rossi[9] which dealt with proof of non-delivery where service by post was authorised and used and said:

"The effect of the cases appears to be that proof of non-delivery means that service cannot be deemed to have taken place under the second limb of the section [of the Queensland provision analogous to s. 29 of the Acts Interpretation Act 1901 (Cth)] at the time of delivery in the ordinary course of post and cannot be established as having taken place at any other time. The consequence is that where it is necessary to establish service at a particular time, proof of non-delivery is as effective as proof of non-service, notwithstanding that service by post is in the circumstances permitted and the requirements of the Interpretation Act are observed: see Beer v. Davies [1958] 2 Q.B. 187; Hewitt v. Leicester Corporation [1969] 1 W.L.R 855; [1969] 2 All E.R. 802; Saga Ltd v. Avalon Promotions [1972] 2 Q.B. 325n; A./S. Cathrine-holm v. Norequipment [1972] 2 Q.B. 314; c.f. Lombard Australia Ltd. v. Mohrwinkel (1973) 21 F.L.R. 277; 1 A.C.T.R.57. It may be thought that there is an anomaly in such a result because it means that, notwithstanding the adoption of a permitted means of service, the service is nevertheless ineffective if there is proof of non-delivery. It is, however, unnecessary to pursue these decisions here save to remark that they are all cases in which delivery was disproved. Despite remarks in the judgments about non-receipt, it was non-delivery which was significant because the second limb of of the refers to proof of the contrary of delivery. As the present case shows, delivery may be different from receipt by the intended recipient and, provided that delivery is not disproved, the fact of non-receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of the post."

[19] Gillard J in CGU Workers' Compensation (Victoria) Ltd v Carousel Bar Pty Ltd[10] concluded that Fancourt v Mercantile Credits Limited established that if a document was not served at any time, the contrary was proven. That is, if non-delivery is proved then service will not be deemed to have been effected. Basten JA, with whom Ipp JA agreed, in Meredith noted[11] that:

"Section 29 in effect imposes on the intended recipient responsibility for ensuring that the document does not go astray after delivery to the postal address." (italics added)

[20] Mr Wilson submitted that the actual knowledge of the applicant that the statutory demand had not come to the attention of the respondent deprived the applicant of the benefit of the "service by posting" provision in the Corporations Act should service be found to have occurred, particularly where the applicant, through its representatives, knew that the company conducted its business at a different address and had the means of contacting its principal.

[21] In CGU Workers' Compensation the creditor's solicitors knew within the 21 day period after serving a statutory demand addressed to the registered office that the respondent did not know of the statutory demand because it was returned marked "Return to Sender" and "Left Address". Information noting a change of address was available in the debtor company's annual report. Gillard J referred to the reasoning of Santow J in F P Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd[12] and McLelland CJ in Eq in Re: Future Life Enterprises Pty Ltd[13] as identifying a qualification on the effect of s 109X and s 109Y if documents were returned to the sender. His Honour said[14]:

"The qualification is that unless it is established that the creditor has taken all reasonable steps to bring the demand to the attention of the company after the demand has been returned, it would be an abuse of process to bring a winding up application knowing that the demand never came to the notice of the company. But if all steps were diligently pursued by the creditor to bring the statutory demand to the notice of the company then service would be effective and the proceeding would not be an abuse of process."

The abuse of process is that mentioned by Gummow J in David Grant & Co. Pty Ltd v Westpac Banking Corporation[15] referring to passages in Williams v Spautz[16] and discussed in Braams Group Pty Ltd v Miric[17], that is, obtaining a collateral advantage by the process rather than that for which the proceedings are properly designed and exist. Expressed in that way, the concept does not sit readily with the "fair notice" cases under the deemed or presumed service provisions, but clearly Gummow J had something similar in mind when he said:[18]

"It may also transpire that a winding up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical service of that term...injunctive relief may then be available".

But it may also be appropriate to refuse the application to wind-up if the company is solvent.

[22] The applicant obtained default judgment in the Local Court in Sydney. When Mr Boulos learnt of the judgment the respondent immediately filed a notice of motion on 28 May 2008 to set aside the default judgment. It was returnable on 10 July 2008. On 23 June 2008 the applicant, although aware that there was an application to set aside the judgment, filed its winding-up application returnable on 9 July 2008. The winding-up application was adjourned until 31 July 2008 and has been persisted in by the applicant notwithstanding that the default judgment was set aside and the proceedings in the NSW Court disputing the debt continue. If the order to wind-up the respondent is successful that will stifle those proceedings.

[23] The respondent had done all that the corporations' legislation required it to do to register a change of address. Whilst the highest authority[19] recognises that Part 5.4 of the Corporations Act may operate harshly, that is as a consequence of the scheme devised by the legislature to deal promptly with debts incurred by corporations. The presumption of service will operate even if there is no receipt of the documents for it is for the corporation to maintain a satisfactory address but proof of non-delivery to that address will rebut the presumption. I have concluded that there was no delivery of the statutory demand to the respondent at its registered address in Ultimo because of the physical impossibility of doing so.

[24] If there was service of the statutory demand in accordance with s 109X of the Corporations Act and s 29 of the Acts Interpretation Act, subject to the question of solvency, the evidence suggests that the application to wind up ought to be refused for the reasons discussed above.

[25] I should say something about the disputed debt. The respondent requires leave to oppose the winding-up application pursuant to s 459S(1) if there was proper service and the conduct of the applicant does not support a finding of abuse of process. Because the statutory demand did not come to the respondent's attention and the applicant knew the respondent could not seek to set it aside, the respondent is not prevented from raising the issue of the genuineness of the dispute at the hearing of the winding-up application. This was a conclusion reached by Austin J in Perpetual Nominees v Masri Apartments Pty Ltd[20] on facts not relevantly different from the present with which I respectfully agree.

Mr Boulos has deposed to his relationship with the applicant about the placement of advertising which has not been contradicted. The allegations in the applicant's New South Wales statement of claim have not been supported by any affidavit. There is a prima facie basis for concluding that no contract for the supply of advertising was entered into or, if it were, it should be set aside for misrepresentation, or that the advertising, the subject of the invoices never occurred. Accordingly, if necessary, leave is given to raise the dispute.

[27] On the hearing of a winding-up application based on insolvency the overall question of solvency of the company is critical.[21]

Mr Boulos deposes to the solvency of the respondent. It is a small company. It employs three permanent part-time staff and other staff on an "as needs" basis. Mr Boulos exhibits the respondent's bank statements, profit and loss statement and balance sheet. The company uses the accounting software MYOB and employs a bookkeeper on a quarterly basis. The respondent has no creditors and is involved in no litigation apart from the dispute with the applicant. It made a net profit after wages last financial year of $38,527.08. The balance sheet shows that it has net assets of approximately $288,000. It has approximately $87,000 in its bank account. There is nothing to suggest it cannot pay all its debts as and when they become due and payable.[22]

Mr Coulsen submitted that on the authority of Expile Pty Ltd v Jabb's Excavations Pty Limited[23], a decision of Barrett J, the respondent ought to have produced the "fullest and best evidence"[24] and that unaudited accounts are not normally probative of solvency. Expile concerned a company with significant indebtedness, deficiencies in its accounts and lack of evidence of realistic borrowing capacity to refund repayments of short term liabilities. It would be oppressive if a small, viable company, with no creditors, in the circumstances in which this application has been brought, were required to expend significant sums to employ an external accountant to analyse its books and records to rebut the presumption of insolvency.

(1) I am persuaded that there was non-delivery of the statutory demand to the respondent and there is therefore no presumed insolvency.

(2) If there was service of the statutory demand the applicant knew that the respondent had no notice of it within a day of posting the statutory demand; had adequate information about the respondent to bring the statutory demand to the respondent's actual notice; brought the winding-up application when an application to set aside the judgment in default of appearance had been listed for hearing; and persisted in that application after the judgment had been set aside so as to characterise the pursuit of the winding up of the company as an abuse of process.

(3) Alternatively, there is a genuine dispute about the debt the subject of the statutory demand and leave is given to raise it.

[32] The order is the application to wind up the respondent in deemed insolvency is dismissed. I will hear submissions about the costs of the application.

1. [1] In its interlocutory application the respondent has sought to have the proceedings transferred to New South Wales but did not press that relief at the hearing. It is convenient to refer to the parties in their winding-up application nomenclature rather than as in the interlocutory application.
2. [2] [2007] NSWCA 354.
3. [3] (1983) HCA 25; (1983) 154 CLR 87.
4. [4] Meredith concerned a provision in the Income Tax Assessment Act 1936 (Cth) analogous to s 109X of the Corporations Act.
5. [5] [2005] SASC 48.
6. [6] Section 5C(1), Corporations Act .
7. [7] At 95.
8. [8] At pp 96-7.
9. [9]