Plaintiff v Defendant

1 This matter before the court arises in the following circumstances. The defendant served a statutory demand on the plaintiff on 2 December 2004. There was an error in the statutory demand. It did not comply with Form 509H contained in schedule 2 of the Corporations Regulations in that the address of the creditor for service of copies of any application and affidavit were stated to be the office of the solicitors for the defendant in Western Australia whereas the form requires that an address for service of the documents in the State in which the demand is served on the company should be inserted and that is to be, if solicitors are acting for the creditor, the address of the solicitors in that State.

2 The defendant should have inserted, but did not, an address for the service of any application and affidavit in Victoria. The consequence of that failure was that the plaintiff did not have any address within the State at which to serve an application to set aside the statutory demand and it is common ground that the plaintiff was therefore obliged under the Service and Execution of Process Act (Cth) 1992 to serve any application to set aside the statutory demand at the registered office of the defendant in Western Australia.

3 The plaintiff launched an application to set aside the statutory demand, an application in this Court, on 23 December 2004 which was very late - in the sense that the plaintiff only had 21 days to serve such an application. Again it is common ground and well established that an application outside that time is totally ineffective and that a court has no jurisdiction to determine such an application.

4 In fact, the application was served by fax on 23 December and by post on 28 December to the address stipulated in the statutory demand.

5 When the application came on before the Senior Master on 23 February 2005, it was, as I understand it, common ground that the court had no jurisdiction to hear the application because the requirement of service on the defendant within 21 after service of the statutory demand was not satisfied and that is the first matter mentioned in the Senior Master's order under "OTHER MATTERS".

6 The Senior Master went on to state that the service of the application was late, or out of time, "Because the defendant's solicitor did not comply with directions as to paragraph 6 in the Form 509H" and the Senior Master went on to note that as a result, the defendant had imposed on the plaintiff an obligation not only to comply with the requirements of Section 459G of the Corporations Act, but also those of the Service and Execution of Process Act.

7 The Senior Master then notes that the plaintiff's solicitors adverted to the requirement under the Service and Execution of Process Act and attempted service with the form required by the Service and Execution of Process Act at the address in the statutory demand: "This however was not the address of the defendant's registered office and therefore was not effective under the Service and Execution of Process Act".

8 The Senior Master goes on to state in "OTHER MATTERS" that the only way the plaintiff could effect valid service involved its ignoring the address for service in the statutory demand and the Senior Master concludes in "OTHER MATTERS" that the defect in the statutory demand caused a substantial injustice because it had deprived the plaintiff, despite its solicitor's efforts, of the opportunity to make the application of which the statutory demand is obliged to give notice it may make.

9 The proceeding was dismissed and the defendant was ordered to pay the plaintiff's costs of the proceeding on an indemnity basis.

10 The defendant gave a Notice of Appeal from the Senior Master's order as to costs. That notice is dated 10 March 2005 and is some 8 days out of time.

11 The notice seeks an extension of time and, the appeal being against the costs order, seeks leave to appeal as well as a hearing of the appeal itself.

12 I have heard argument on behalf of the parties on all of these questions, namely the question of the extension of time to appeal, leave to appeal against the costs order and the appeal itself and, for convenience, I have heard all those arguments together, but they raise separate questions.

13 Another matter raised by the notice of appeal is an application for special leave to rely upon an affidavit not given before the Senior Master, namely the affidavit of Kim Alan Suckling sworn 9 March 2005. That is an affidavit which deposes to the fact that after the hearing before the Senior Master on 23 February 2005, he instructed his - he is a director of the defendant - he instructed his Western Australian solicitor to write with a settlement proposal and the affidavit exhibits his solicitor's letter dated 28 February, which was within the time for appeal, in which he contends that the order by the Senior Master awarding indemnity costs against the defendant was wrong and raising a number of matters in relation to that and offering to settle on the basis that each party pay its own costs and saying that if the matter can't be settled on that basis his instructions were to lodge an appeal and seek costs on an indemnity basis.

14 I do not think special leave is required to rely on that affidavit because it is an affidavit in support of the application to extend time for appeal and not an affidavit relating to the matters in issue before the Senior Master on the question of costs or anything else.

15 There is really no good explanation before the court as to why leave to appeal was not sought immediately or a notice of appeal lodged, at least, within time, save that one can see from the letter that was written within time that there was an attempt to resolve the matter without incurring further costs, an attempt which I think was a sensible one in the circumstances. That does not excuse the failure by the defendant, who is the appellant here, to comply with the rules.

16 Neither counsel was able to refer to any authority setting out the criteria that the court should consider on a question of extending time to appeal or granting leave to appeal on a question of costs. In the present case I think that those two matters need to be considered together. The extension of time question needs to be determined in the light of the requirements of the rules that an appeal should be launched speedily so that such matters can be quickly resolved. The requirement as to leave to appeal against the costs order is aimed at preventing the rehearing de novo of discretionary questions, unless there is perhaps some matter of clear principle involved or some other reason of importance why an order as to costs, a matter of discretion, should be re-agitated.

17 The matter which weighs with me, both on the question of extension of time and on the question of leave to appeal in this proceeding, is the fact that the Master made an order for indemnity costs, that being the most stringent order as to costs that he could have made. It was more than a party/party order, it was not even a solicitor/client order, it is a case where the onus is reversed. It is an indemnity order and the onus is on the party the subject of the order to show that any of the costs sought are unreasonable, as the rules so provide.

18 That order for indemnity costs was made in a situation where the application which had been launched by the plaintiff was dismissed for want of jurisdiction. So it is on the face of it an extraordinary order to make and in my opinion plainly wrong, for reasons that I will refer to in a moment. An extension of time for the hearing of this appeal and leave to appeal should be granted, pre-eminently for that reason, that it seems to me that an order for indemnity costs in those circumstances was plainly wrong.

19 The defendant should not be deprived of an opportunity to set aside an order which appears to the court to be plainly wrong, simply because of a few days' delay in making the application, especially where the matter was raised by correspondence in an attempt to save the costs of an appeal. I think that there is a question of principle involved, it is a case where the discretion of the Senior Master has plainly miscarried, for reasons which I will endeavour to state. So the time will be extended and leave is granted. The appeal then becomes a hearing de novo on the question of costs; so the question of costs has to be determined afresh but in the course of doing that I will indicate why I think that the Senior Master was plainly wrong, and the reasons are really the same in both instances.

20 It is clear and it is conceded that the defendant contributed to the situation which has arisen, by making a clear error in the statutory demand. But it seems to me that the error in the form of statutory demand is not a justification for the plaintiff's legal representatives to fail to do their work as lawyers for the plaintiff. The obligation lay upon them, in instituting a proceeding in this court, to satisfy themselves as to the time limits for making the application and to satisfy themselves as to the legal requirements of service of such an application.

21 No doubt it can be offered in exculpation of the error that they were misled by the form, although there is no actual evidence to that effect before the court. But although it might be offered in exculpation, it is not a complete answer. The obligation of the plaintiff through its advisors was to comply with the law; and the lawyers were obliged to satisfy themselves as to what the legal requirements as to service were. So it is one thing to say that there is some responsibility on both sides for what has happened, but it is another to say that the defendant should be punished, particularly punished by indemnity costs, for an error which is not wholly that of the defendant.

22 The plaintiff is also at fault. No doubt it is not a case where the plaintiff should be ordered to pay the defendant's costs, and counsel for the defendant has not so contended. The submission is that each party should bear their own costs and in my opinion that is the appropriate order. I can see an argument that might be run, that the defendant should pay the plaintiff's costs on a party/party basis but in the end I do not think that that argument is a good one, notwithstanding that the error of the defendant no doubt contributed to the plaintiff's failure to make this application in accordance with the legal requirements.

23 I think that the Senior Master misstated the position, with respect, in "OTHER MATTERS" when he said that the failure of the plaintiff to serve the application within 21 days was "because" the defendant's solicitor did not comply with the directions contained in Form 509H. The evidence does not support that finding, and of course on a rehearing I am not concerned with it, but it is relevant to my earlier determination that the Senior Master was plainly wrong in the order he made.

24 The evidence shows that the plaintiff's solicitor was aware on 23 September what the registered office of the defendant was and was also aware that the Service and Execution of Process Act had to be complied with. In those circumstances there seems to be a clear error by the plaintiff's solicitor. One element in the failure to comply with the requirements of the relevant legislation may have been the error in the form, but it is only one element.

25 I further think, again with respect, that it is a misstatement by the Senior Master to say that the defect in the statutory demand deprived the plaintiff of the opportunity to make the application of which the statutory demand is obliged to give notice it may make. That, it seems to me on the evidence, is putting it far too highly.

26 The statutory demand was served on 2 December and there should have been time to serve at the registered office of the defendant, had the plaintiff been familiar with the legal requirements. The fact is that these matters are now mentioned in numerous Corporations Law commentaries and there are decided cases about the matter and it is incumbent upon those making such an application to set aside a statutory demand to be familiar with the legal requirements. That is their job.

27 So for those reasons I think the Senior Master was plainly wrong and I further think that the appropriate order is that each party bear its own costs. It is so ordered. I will allow the appeal. I will set aside the Senior Master's order as to costs and order instead that each party bear its own costs of the hearing before the Senior Master. I will order the defendant's costs of the appeal be paid by the plaintiff and I will grant the plaintiff an indemnity certificate under the Appeal Costs Act.