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[2017] VSC 168
Supreme Court of Victoria
2017-04-04
RANDALL AsJ
Original judgment source is linked above.
CORPORATIONS - Corporations Act 2001 (Cth), s 459G, s 459G(2) - 21 days after the demand is served to make application - Jurisdiction - Difference between 'delivery' and 'receipt' - Corporations Act 2001 (Cth), s 459G(3) service of s 459G application and affidavit in support within 21 days - Jurisdiction - Service interstate - Failure to include SEPA Notice - Statutory Demand failed to follow paragraph 6 of Form 509H which required the specification of an address for service in the State or Territory in which the demand is served on the company - Failure to do so - Defect or 'null and void'.
1 The plaintiff originally made application pursuant to s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 21 December 2016. For the reasons set out hereafter, on the first return date, the plaintiff conceded that the application must fail as there had been non-compliance with s 9 of the Service and Execution of Process Act 1992 (Cth) ('SEPA'). The plaintiff sought to and was permitted to amend the originating process to seek relief under s 36 of the Supreme Court Act 1986 (Vic) and the Court's inherent jurisdiction for a declaration that the creditor's statutory demand for payment of debt dated 21 December 2016 is null and void.
2 Beside the SEPA notice, the date of the service of the originating process in the first instance was also an issue.
3 I made formal orders on the day of the hearing because of time constraints. I said I would publish my reasons in due course.
4 The registered office of the plaintiff is Suite 34, Level 1, 1 Ricketts Road, Mount Waverley VIC 3149. The registered office of the defendant is 34 Beech Drive Cashmere QLD 4500.
5 The creditor's statutory demand dated 21 December 2016 set out the defendant's address at paragraph 1. Paragraph 6, the address for service, was as follows:
The address of the creditor for service of copies of any application and affidavit is McBride Legal, Level 13, 15 Adelaide Street, Brisbane QLD 4000.
6 Paragraph 6 of the statutory demand is in the following terms:
The address of the creditor for service of copies of any application 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).
7 By serving the statutory demand in Victoria and specifying an address for service of any application to set aside in the State of Queensland, the defendant failed to comply with the provisions of Form 509H.
8 The statutory demand and the accompanying affidavit were posted on 21 December 2016. In addition, copies of the documents were transmitted to various email addresses pertaining to the plaintiff. The defendant submitted that I ought to find service had been effected by email. I declined to do so given my findings with respect to service.
9 The plaintiff's originating process seeking relief pursuant to s 459G together with the affidavit in support were filed on 6 February 2017 and sent by facsimile transmission to the defendant's solicitors on the same day. No SEPA notice was included.
10 The affidavit in support, sworn by Anthony Chimonis, set out that he had been in contact with Peter Delis, the accountant for the plaintiff. The office of Peter Delis was the registered office of the plaintiff. Mr Chimonis set out that as a result of contact with Mr Delis he believed that the statutory demand and accompanying affidavit both dated 21 December 2016, were received by the plaintiff on 16 January 2017.
11 Subsequently Mr Delis swore an affidavit. Mr Delis deposed, inter alia:
12 Section 109X of the Act sets out methods by which a document may be served on a company. Section 109X(1)(a) authorises the service by post.
13 Section 29 of the Acts Interpretation Act 1901 (Cth) sets out:
29 Meaning of service by post
(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 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.
(2) This section does not affect the operation of section 160 of the Evidence Act 1995.
14 Section 160 of the Evidence Act 1995 (Cth) refers to a second presumption for situations in which service is effected by post:
160 Postal articles
(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.
...
(3) In this section:
working day means a day that is not:
(a) a Saturday or a Sunday; or
(b) a public holiday or a bank holiday in the place to which the postal article was addressed.
15 The posting on 21 December meant that three public holidays were straddled before service would be effected - that is, 25, 26 December and 2 January. The practice of posting a statutory demand just before the Christmas period, although permitted, ought to be discouraged. Businesses and legal practitioners are often on holiday at that time of year.
16 In Renegade Rigging Pty Ltd v Hanlon Nominees Pty Ltd,[1] Ferguson J (as her Honour then was) set out that:
(a) bore the correct name and address;
(b) contained the relevant document to be served;
(c) bore the correct cost of postage; and
(d) was placed in the post.
17 Posting on 21 December 2016 was not in issue but, in any event, the elements referred to by Ferguson J (as her Honour then was) were satisfied by the affidavit of Charleigh van Wyk affirmed 20 February 2017.
18 Accordingly, in the absence of 'evidence sufficient to raise doubt', pursuant to s 160 the fourth working day after posting was 30 December 2016.
19 The defendant also adduced evidence of the annual report for 2016 for Australia Post.[2] That report demonstrates that:
(a) for delivery from metro to metro, the delivery standard was five business days;
(b) for delivery from metro to country, the delivery standard was six business days; and
(c) the rate of success in achieving those delivery standards was 96.2%.
20 Such a report, although it does not include December 2016, was also utilised in Healy v DCT.[3] The rates of success or delivery within the standard imposed were roughly the same in each year and in each State.
21 By referring to the Australia Post report, the defendant calculated (probably more generously than I would have) by applying a delivery standard of six business days, the statutory demand and accompanying affidavit would have been delivered no later than 3 January 2017.
22 I am satisfied that the statutory demand and accompanying affidavit were served no later than 3 January 2017. I do not accept that Mr Delis' evidence constitutes 'evidence sufficient to raise doubt about the presumption' referred to in s 160 of the Evidence Act 1995 (Cth).
23 In any event, there is a distinction between 'delivery' (as that word is used in s 29 of the Acts Interpretations Act 1901 (Cth)) and 'receipt'.
24 It can be readily distilled from Mr Delis' affidavit that the statutory demand and accompanying affidavit were 'delivered' to the registered offices mail box on a day earlier than 16 January 2017. The statutory demand and accompanying affidavit may have been 'received' on 16 January 2017 but that is merely because the registered office was not opened until 16 January 2017 and the mail was also not opened until that day.
25 In Woodgate v Garard Pty Ltd[4] Palmer J, in reviewing authorities with respect to 'effective and formal service' for statutory demands, set out:
26 In Fancourt v Mercantile Credits Ltd,[6] the High Court examined s 42(1) of the Hire-Purchase Act 1959 (Qld) (modes of serving or giving documents) and s 39(1) of the Acts Interpretations Act 1901 (Cth) (... delivered in the ordinary course of post). The High Court said:
...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.[7]
27 In Partners of Piper Alderman v Sharjade Pty Ltd,[8] Barrett J (as his Honour then was) was satisfied that service would be effected at the time when the letter would be delivered in the ordinary course of post. His Honour referred to Basten JA at [76] in Deputy Commissioner of Taxation v Meredith:[9]
Section 29 [of the Acts Interpretations Act 1901] in effect imposes on the intended recipient responsibility for ensuring that the document does not go astray after delivery to the postal address.
[and]
places the risk of loss within the postal system on the intended recipient.[10]
Non-receipt of itself represents no sound basis for declining to award the relief [sought]. Such a basis would exist if only the plaintiff has initiated the winding up application in circumstances where they had knowledge making it unfair for them to proceed on the basis that the statutory demand had been duly served. No such basis exists here.[11]
29 The defendant also sought to rely upon DCT v Trio Site Services Pty Ltd.[12] In that case, Lindgren J referred to Fancourt and determined the matter before him consistent with Fancourt.
30 As I have determined that the statutory demand and supporting affidavit were delivered by no later than 3 January 2017, the plaintiff's originating process was not filed or served within 21 days of service of the statutory demand and accompanying affidavit so as to confer jurisdiction in this Court pursuant to s 459G.
31 Given the finding in the preceding paragraph, I decline to determine whether there has been effective informal service by email.
32 Notwithstanding the failure to file and serve the s 459G application within the time prescribed, there is a further impediment in that the service of the application by facsimile transmission (assuming that it was appropriate in these circumstances) failed to attach a SEPA notice.
33 I will not set out all the relevant provisions of s 9 of the SEPA given that the plaintiff readily conceded non-compliance. Section 16 of SEPA provides that service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served. The notice referred to in s 16 is a Form 1 Notice (SEPA Regulations (4)(1)(a)).
34 In Energy Conservation Systems Pty Ltd v Downer EDI Engineering Electrical Pty Ltd,[13] Barrett J (as his Honour then was) said:
My own view is that if there is no compliance with s 16 (which presupposes also compliance with s 15), the conclusion must be that there is no service; and that this is so whether or not the document has actually come into the possession of the defendant. The opening words of s 16 are, "Service is effective only if". It must follow that if the condition then stated is not satisfied, there is no effective service and that this is so whatever the position may be about agreement of the parties, actual receipt and actual notice. The terms of the section are strict rather than facultative.[14]
35 Barrett J's (as his Honour then was) decision is consistent with a plethora of other decisions to the same effect. Given the concession I will not list them.
36 Accordingly, I determine that, in any event, service of the originating process was defective.
37 On the first return of the originating process I had expected to summarily dismiss the application. However, Mr Brown for the plaintiff drew my attention to Re International Materials & Technologies[15] and sought leave to amend the originating process to seek a declaration that the statutory demand was 'null and void'. Leave was granted.
38 In Re International Materials the plaintiff debtor applied pursuant to s 459G to have a statutory demand set aside. The application was filed on the last day of the relevant time limit and emailed to the solicitors of the defendant the same day. The statutory demand had been served on the plaintiff in New South Wales, but the address of the creditor for service nominated in the demand was address of the defendant's solicitors in Victoria. The registered office of the defendant, as revealed by an ASIC search, was also in Victoria. The interstate address provided on the statutory demand was not compliant with Form 509H as prescribed in the Act.
This statutory demand is null and void because, in not providing an address for service within a State in which the demand was served, it fails in a material and fundamental way to comply with the requirements of the prescribed form referred to in s 459E(2)(e) of the Corporations Act 2001 (Cth).
40 The defendant, although conceding that the application came to its attention within the relevant time period, submitted that the application was not validly served as the plaintiff had not complied with the requirements of the SEPA. As such, the court had no jurisdiction to entertain the s459G application.
41 Brereton J accepted that there had not been effective service and consequently the statutory demand could not be set aside. His Honour, however, went on to determine that the deficiencies in the statutory demand as served by the defendants had resulted in the demand being 'null and void'. In effect, by nominating an interstate address for service on the statutory demand which could only result in effective service if the additional requirements of the SEPA were met, the defendant had entrapped the plaintiff into failing to comply with the requirements for valid service. The deficiency in the demand was viewed as misleading, and so serious and fundamental, that the demand was deprived of the quality of a demand under s459E of the Act. Although without jurisdiction to set the demand aside, Brereton J declared that the defendant's demand was 'null and void'.
Did Brereton J's analysis go further than the authorities upon which his Honour relied?
42 In declaring the demand 'null and void', Brereton J's analysis appeared to proceed upon two bases. First, a line of authority in which courts had recognised the misleading nature of, and injustice that may be caused by, a statutory demand that nominates an interstate addresses for service. In Ultimate Manufacturing Pty Ltd v Lyell Morris ('Ultimate Manufacturing')[16] the plaintiff brought an application under s 459G in circumstances where the defendant had served a statutory demand which nominated an interstate address for service. Although the plaintiff's solicitor acted with 'upmost expedition', service was invalid due to non-compliance with the SEPA. Senior Master Mahoney, recognising that the court did not have jurisdiction to set the application aside, instead made orders declaring that the demand was defective, and in order to prevent substantial injustice, that the defendant company needed to attach the declaration to any future winding-up application. Senior Master Mahoney followed this approach in Highfield Woods Pty Ltd v Bayview Crane Hire,[17] where a demand nominating a Queensland address for service, which was not the registered office of the respondent, was served in Victoria.
43 In Re Marlan Financial Services,[18] an appeal from a decision of a Senior Master dismissing a s 459G application, Byrne J recognised that a statutory demand served in Victoria yet nominating an address for service in New South Wales (which was not also the registered office of the respondent) was 'positively misleading'.[19] Byrne J was not persuaded that making orders similar to those made in Ultimate Manufacturing would have been of utility. His Honour did recognise that the applicant could seek an injunction restraining the respondent from relying on the demand in relation to any winding up application.[20] This avenue appeared to be based on comments of Gummow J in David Grant v Westpac[21] as to the existence of injunctive relief at equity.
44 Although the decisions of Byrne J and Senior Master Mahoney identified a degree of injustice caused by a demand identifying an interstate address for service, they still appeared to view such an error as either an 'irregularity'[22] or 'defect'.[23] At no stage were the demands in question considered to be invalid. As such, Brereton J's reliance on this line of authority appears to have been combined with a second base of reasoning, the proposition that in circumstances where there are fundamental deficiencies in the demand depriving it of the character of a statutory demand, the demand will fail to be a statutory demand for the purposes of s 459E of the Act. That proposition relied upon obiter comments[24] and two instances in which courts had found demands to be fundamentally deficient.
45 The obiter comments were made in contexts where, although there were deficiencies in demands, the demands were still viewed as falling within the broad scope of 'statutory demand' as defined in the Act. Further, Dodds-Streeton J in Crema Pty Ltd v Land Mark Property Developments Pty Ltd ('Creama')[25] interpreted some of the obiter comments as implying that a demand had to have deficiencies of a 'gross and exceptional' charter before it would be considered to fall beyond the scope of the Act. In her Honour's view, such arguments were to be made in a s 459G application, or failing such an application, with leave pursuant to s 459S.[26] Of additional note, Brereton J cited Vicbar v Development Constructions as recognising the possibility that in certain instances a demand would be considered a nullity. On the facts of that case, however, Cohen J stated:
Pt 5.4 of the Corporations Law contains its own terms as to defects in a demand. The insertion of the wrong address would be a defect which may in circumstances where the company was misled or where it tried unsuccessfully to pay the debt, cause an injustice. In my opinion it would be inconsistent with the terms of s 459J to find that an error of that nature would nullify the demand.[27]
46 The two cases upon which Brereton J relied where a demand was held to have been fundamentally deficient were Sheslow v Diamond Rose NL,[28] in which the demand was purportedly made under an incorrect act and there was no attempt to follow Form 509H at all, and Re Beralt,[29] in which the demand omitted the phrase 'an application must be made within 21 days after', as written in the prescribed Form 509H. While the former case appears to fall within the circumstances contemplated by the obiter comments mentioned, the analysis of Ambrose J in the latter cases appears internally inconsistent. Although his Honour found that the statutory demand fell within the definition of 'statutory demand' in the Act as it purported to be statutory demand, it was still declared to be ineffective for the purposes of s 459E.[30]
47 His Honour distinguished the case of Everkind v Hazenforn[31] on the basis that in that case, the registered office of the respondent was in the same jurisdiction in which the demand had been served. This distinction has been maintained by Brereton J in a subsequent case, as discussed in paragraph 50 below.
48 Ultimately, while cases appear open to the prospect that in some instances a demand or document will not even fall within the concept of a 'purported demand' for the purposes of the Act, I am unsure if Brereton J's analysis really explained how the facts at hand differed from Ultimate Manufacturing Pty Ltd v Lyell Morris and Re Marlan Financial Services (and Vicbar when considering earlier legislation), where the same deficiency was described as a defect or irregularity.
How has Re International Materials been considered in subsequent cases and commentary?
49 Brereton J followed the approach of Re International Materials in Re Ege Foods Australia [2014] NSWSC 983, a winding up application. In that case, the deficiency which made the statutory demand invalid was that the affidavit in support did not verify that the debt was due and payable, as required by s 459E(3). His Honour also explained Re International Materials further:
Cases in which a purported creditor's statutory demand are held to be invalid are few and far between.[32]
...
At the heart of Beralt and of International Materials & Technologies is that a failure to comply with a mandatory requirement of s 459E that adversely affects the ability of the company to make a valid application to set aside the demand is not a mere defect which may render the demand liable to be set aside only if it is productive of substantial injustice, but a non-compliance with a mandatory requirement that deprives the demand of the character of a compliant demand and renders it ineffective.[33]
50 His Honour dismissed the winding up application. Brereton J has also referred to Re International Materials in a subsequent case. In Re Cummins Equipment Hire Pty Ltd,[34] his Honour granted leave to amend a s 459G application to claim a declaration that a statutory demand, which identified an interstate address for service, was null and void. In Re Glenevan Pty Ltd[35] his Honour distinguished it on the basis that other possibilities for service were available without having to resort to compliance with the SEPA (following Everkind v Hazenforn[36]).
51 Other judges have approached Re International Materials perhaps with more caution, albeit not rejecting the approach. In Primespace Property Investment v Vienne Pty Ltd,[37] a case in the Federal Court, the plaintiff (a responsible entity for a registered managed investment scheme) filed an application under s 459G of the Act. The demand had provided an address for service in the Australian Capital Territory rather than New South Wales, where the demand had been served, and the plaintiff submitted that this was 'a fundamental defect rendering each demand null and void', relying on Re International Materials. The applicants had filed the s 459G application within time, and were relying on 459J(1)(b) of the Act. Griffiths J, in rejecting the submission, followed the decision of the Full Court of the Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 ('Spencer Constructions'):
[24] In Spencer Constructions, the Full Court held that, in the case of a defect in, or in relation to, a demand, strict compliance with the relevant statutory provisions is not a precondition to the validity of the demand, which means that such a defect does not result in invalidity. The Full Court found that the provision of an address for service of any application and affidavits in a jurisdiction other than the jurisdiction in which the demand was served was clearly a defect in the demand but that because no injustice was caused by the defect in the particular case, the demand could not be set aside merely because of that deficiency (referring to both s 459J(1)(a) and (2) of the Act). Furthermore, the Full Court held that the court's power to set aside a demand for 'some other reason' under s 459J(1)(b) had no application because that provision was only available in relation to a reason other than a defect in the demand. The Full Court stated that this view was supported by the definition of 'statutory demand' in s 9 of the Act, which defines a statutory demand as a document that is, or purports to be, a demand served under s 459E. Accordingly, as long as a document is or purports to be a statutory demand served under that provision, even significant defects in the document fall to be determined under s 459J(1)(a) and not s 459J(1)(b).
[25] The Full Court did not reject the possibility that there may be cases where deficiencies in the form of a demand are so fundamental that the demand is incapable of meeting the definition in s 9 of the Act (see Lockhart J's comments in Topfelt Pty Ltd v State Bank of New South Wales [1993] FCA 589; (1993) 47 FCR 226 at 238). It is plain, however, that the Full Court in Spencer Constructions did not regard the incorrect provision of an interstate address for service of any application or affidavit as constituting such a fundamental deficiency, at least in the circumstances of that case.[38]
52 Griffiths J, determined that in circumstances where his Honour was bound by Spencer Constructions, it was unnecessary to 'consider and determine the correctness of the series of recent decisions in the Supreme Court of New South Wales which were relied upon by the plaintiff which, on their face, seem difficult to reconcile with Spencer Constructions'.[39]
53 In Re Leasing Holdings,[40] a case in the Supreme Court of New South Wales, Black J considered a winding up application. The grounds of the application included that a statutory demand had been served and not complied with. The statutory demand was served in New South Wales immediately prior to the Christmas break. It noted the address of the creditor as being in New South Wales, and an address for service of any application in Victoria. The debtor submitted that such non-compliance with Form 509H made the demand invalid, or alternatively, that it amounted to a substantial defect for the purposes of s 467A. Black J, accepted that:
the fact that a creditor's statutory demand specifies the address of a creditor, being its registered office, in the same State as that in which the relevant demand was served may be relevant to whether the specification of an address for service outside that State is misleading, to the extent necessary to either invalidate the Demand or give rise to substantial injustice. That will depend upon the circumstances in the particular case...[41]
54 His Honour identified, however, that the circumstances at hand differed from the authorities cited. Of importance, in Re International Materials there was no option for service other than service compliant with the SEPA.[42] Further, his Honour distinguished Primespace on the basis that the plaintiff in that case conceded that there had been no substantial injustice as a result of the interstate address.[43] Black J went on to find that in the circumstances:
the specification of the address for service in paragraph 6 of the Demand was fundamentally misleading. It was at least likely to induce the recipient of the Demand, if it had proceeded to bring an application to set aside the Demand, to consider that that application could, or indeed should, be served in Victoria at an address that was not the Company's registered office.... However, it seems to me that the misleading character of paragraph 6 of the Demand was not so fundamental as to render it a nullity, within the principle in Topfelt.[44]
Further, his Honour required evidence of whether the debtor was misled, 'by being confused as to how it should go about serving an application to set aside the [d]emand, or by seeking to effect service of such an application in the manner contemplated by paragraph 6 of the [d]emand',[45] before following the approach of Ultimate Manufacturing, Re International Materials and Ege Foods.
55 In the case of Re Urban Solutions Group Pty Ltd,[46] an application to set aside a statutory demand, Black J again considered the issue of interstate service. The demand identified an interstate address for service, which also happened to be the creditor's registered address. The application was conceded to be out of time, and by an amendment with the consent of the creditor, the debtor sought a declaration that the demand was null and void. The nomination of an interstate address was one of three purported deficiencies in the demand. Again, the circumstances were noted to differ from those in Re International Materials, where service at the specified address could not have complied with the SEPA.[47] In referring to the case Black J stated:
[3] ... Brereton J took that course where there was an issue as to the validity of an address for service specified in a creditor's statutory demand. However, it seems to me that position is the exception rather than the rule, and cannot be permitted to become the rule, lest the time limit within which an application to set aside a creditor's statutory demand under s 459G of the Act must be brought is subverted and the legislative purpose which it is intended to achieve is defeated. For reasons that will emerge below, it does not seem to me that this case engages that exceptional jurisdiction.
[4] Mr Sneddon, who appears for [the debtor], also draws attention to the observations of Mandie J in Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322 ; (2004) 50 ACSR 375, approved by Barrett J in Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139; (2005) 56 ACSR 223 at [13], that an application to set aside a creditor's statutory demand which proceeds on the basis that it has been properly served is a time alternative to an application for a declaration that service was not effected. It seems to me that there is significant force in that view. If that view were taken, then that would be a further reason why the declaration now sought in the Amended Originating Process could not be permitted.[48]
[5] In the circumstances, there was some evidence that efforts to serve the application were commenced late and were not completed because of difficulties that arose, in part due to the need to serve outside the jurisdiction. Those issues, however, were held to be 'a matter properly raised in a opposition to a winding up application'.[49] The case was not brought into the 'exceptional circumstances' addressed by Brereton J in Re International Materials, in which 'the specification of an address outside the jurisdiction had the likely or necessary consequence... that the application could not adequately have been served'.[50]
56 Although Primespace stated that 'recent decisions of the New South Wales Supreme Court' may on their face be difficult to reconcile with Spencer Constructions, this was in the context of a s 459G application which had been effectively served. As a Federal Court application, issues with the SEPA did not arise. In New South Wales, while Black J appears to accept Brereton J's approach in Re International, emphasis is placed upon 'the circumstances of each case' and it only being applicable in 'exceptional circumstances'. His Honour also seems more concerned with the practical effect of the deficiency in the demand. Further, Black J perhaps views a winding up application to be the proper forum to discuss evidence of any injustice caused. Ultimately, however, his Honour was able to distinguish Re International on the facts at hand.
57 A number of additional cases perhaps assist in determining whether the reasoning in Re International should be followed. In Sustainable Organics (Wooshaway) Pty Ltd v Ranger Loaders Pty Ltd ('Sustainable Organics'),[51] a case in the Supreme Court of Queensland heard prior to Re International, a debtor brought a s 459G application. It also sought declaratory relief stating that the document was not a demand for the purposes of the Act, and injunctive relief, preventing the creditor from relying upon the demand. The demand was served in Queensland, and provided an address for service in Western Australia. The Western Australian address that the s 459G application was served upon was not the creditor's registered office, and as such there was non-compliance with the SEPA. The debtor submitted that the demand was a nullity, relying on the obiter of Topfelt and Re Beralt. The creditor argued that the deficiency in the address was a defect.
58 Phillipides J in Sustainable Organics viewed the starting point for consideration the definition of 'statutory demand' in the Act. Her Honour then continued to consider Topfelt and Re Beralt before noting that in both Spencer Constructions and Re Ad-A-Cab Holdings[52] statutory demands that contained interstate addresses were considered defects. Her Honour found that the error in the address for service rendered the demand defective, rather than making the demand being incapable of 'satisfying the description of a statutory demand for the purposes of s 459E'.[53] The deficiency was not seen in the same category of that in Re Beralt.[54] As the evidence before her Honour did not depose to substantial injustice or an abuse of process or collateral purpose, there were no grounds for the equitable declaration sought.
Was Re International Materials out of step with Intermediate Appellant Authority?
59 As mentioned, in Spencer Constructions the Full Court of the Federal Court considered an appeal from the decision of a judge at first instance which held that nominating an interstate address for service (the creditor's solicitors' address) on a statutory demand was not a ground for setting aside the demand pursuant to s 459J(I)(b). In dismissing the appeal the court stated:
The failures to specify the correct registered office of the appellant and an address of the respondent in New South Wales for the service of any application and affidavits are clearly "defects" in the demand in that the required form and the directions and instructions contained in it have not been complied with.[55]
60 In Elan Copra Trading Pty Ltd v JK International Pty Ltd ('Elan Copra'),[56] the full court of the Supreme Court of South Australia determined an appeal from a decision of a Master. A statutory demand had been served upon the appellant in South Australia, and it nominated an address for service in New South Wales. The registered office of the respondent was in Queensland. The s 459G application was not served in compliance with the SEPA and the Master had determined that the court's jurisdiction to set aside the demand was therefore not invoked. Grounds of appeal relied upon by the appellant related to agreement, waiver and election. Although the Master declined to make orders as considered in Re Marlan and Dominion Capital, this finding was not appealed.
61 In dismissing the appeal, White J (with whom Doyle CJ and Perry J agreed) stated:
It cannot be concluded that this departure from the terms of the prescribed form made the demand served ineffective as a statutory demand for the purposes of the Corporations Act. Such a conclusion is precluded by the definition of "statutory demand" in s 9 of the Corporations Act:
...
The document served on the appellant was, at the least, a document purporting to be a demand served under s 459E. Section 459J is also relevant in this context because it provides relevantly that a statutory demand is not to be set aside merely because of a defect.[However, if the defect causes substantial injustice, the statutory demand may be set aside on that ground.[57]
... I would dismiss the appeal. I do not regard this decision as producing a result which is satisfactory. This is a case in which despite the deficiencies in the method of service adopted, the application and supporting affidavit were received by the respondent's solicitors within the prescribed 21 day period and furthermore, were brought to the attention of the respondent itself within that same period. There is no suggestion that the absence of the notice prescribed by s 16 of SEPA prejudiced the respondent in any way. Furthermore, the respondent was itself non-compliant with the obligation to nominate an address for service in this State.[58]
63 Sustainable Organics appears to directly conflict with Re International, and Brereton J did not considered the case. Elan Copra is also at odds with Re International. Although technically the issue of whether the demand was a demand for the purposes of the Act was not before the Court of Appeal, Derham AsJ has interpreted the comments of White J as finding that the use of an interstate address in the demand did not make the demand 'invalid'.[59]
64 The existence of conflicting single judge decisions and appellate authority indirectly addressing the issue bears some resemblance to authority regarding circumstances where the prescribed warning has been omitted from the statutory demand:
65 In Townview Holdings Pty Ltd v Sunstate Design & Construction Pty Ltd [2012] FCA 1296 (16 November 2012), in an ex tempore judgment Greenwood J determined that failure to include the warning notice was more than a defect, it was fatal to the validity of the notice. The application for winding up was subsequently dismissed.
66 In the later decision of Inter Mining Pty Ltd v Lake Johnston Pty Ltd,[60] McKerracher J followed authority of the Queensland Court of Appeal, McElligott v Boyce [2011] QCA 117, rather than Townview Holdings. In McElligott the Court of Appeal found that the omission of the warning did not require the demand to be set aside. In Inter Mining, counsel for the debtor submitted that McElligott and the decision which it cited, were not authority for whether omission of the warning made the statutory demand invalid, as both proceeded on the assumption that the omission was a defect, a characterisation which was not open to question. In response, McKerracher J determined:
It would appear that the Court in Townview was not referred to a number of prior authorities, including one decision of an intermediate appellate court, in which courts had held that the omission to provide a boxed warning was a defect only...
The Court in Townview expressly relied on the assurance from counsel that there were no relevant authorities. If the assurance to the Court was confined to the issue of whether the demand was a nullity, not merely defective, then it may have been correct. It may be accepted entirely that there is a slight difference between the 'defect' approach and the 'nullity' approach and that reasonable minds may differ on which approach is to be preferred...
Nonetheless, the earlier authorities (including those that conclude that the magnitude of the defect is no longer the issue), appear not to have been cited to the Court (and are not mentioned in the reasons which were given on the day of the hearing). That may be because counsel submitted that 'this application may well be the first to confront the question' on which his researches had revealed no precedent - which was possibly correct on a narrow view. In my respectful assessment it is likely that had the Court been taken to those authorities, it would have referred to and considered them. It is difficult to conclude that they were not at least in the broader sense 'dealing with this question' of whether the omission of the warning rendered the demand invalid. On proper analysis of the authorities, in my view, McElligott is binding on me. It is not apparent that the Court was referred to McElligott in Townview. I consider I must follow McElligott.[61]
All of this is not to say that a demand could never be a nullity. Although the issue is not presently relevant, it is to be noted that courts have alluded to the possibility that a demand may be so fundamentally defective that it would not be treated as a statutory demand and, therefore, it will be a nullity: see, for example, Topfelt (at 238); Kalamunda (at 452); 2020 Construction Systems Pty Ltd v Dryka & Associates Pty Ltd [2010] WASC 22 (at [39], [40]-[43]). However, that can only occur in the 'very rare' case where the demand falls outside anything that could be a purported demand for the purpose of the s 9 definition of statutory demand: Dromore Fresh Produce Pty Ltd v W Paton (Fertilizers) Pty Ltd (1997) 137 FLR 307 (at 311) per Young J. The deficiencies would have to be of a 'gross and exceptional character': Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338; (2006) 58 ACSR 631 (at [110]) per Dodds-Streeton J. Since Kalamunda it has been accepted that if a demand professes or claims to be a demand served under s 459E, then it is a statutory demand notwithstanding any defects...
In the present case, no one receiving the document could have been in any doubt that it was, or purported to be, a demand under s 459E CA. That is very clear from the text of the document.[62]
68 The conflict between Townview and Inter Mining was the basis for a matter to be referred from a deputy register to a single judge of the Federal Court in Poolrite Australia Pty Ltd (in liq) v Structural Pools Australia.[63] The issue again concerned omission of the warning on the statutory demand. Rangiah J found that counsel in Townsview:
failed to draw the attention of Greenwood J to several cases that had previously decided that the omission of the warning box was a defect that could not be set aside unless substantial injustice was demonstrated. One of those cases was McElligott v Boyce. The decision in McElligott v Boyce that the omission of the warning box was a defect in the statutory demand does not leave room for the view that the omission is fatal to the validity of the demand. If the earlier authorities had been drawn to Greenwood J's attention, his decision may well have been different.
Like McKerracher J in Inter Mining, I consider that I am bound to follow McElligott v Boyce. A single judge should not depart from a decision of an intermediate appellate court in another jurisdiction on the interpretation of Commonwealth legislation unless convinced that the interpretation is plainly wrong: Farah Constructions Pty Limited v Say-dee Pty Limited (2007) 230 CLR 89 at [135]. I am not convinced that the decision in McElligott v Boyce is plainly wrong, or even wrong at all, despite the reasons for the contrary view stated by Greenwood J in Townview Holdings.[64]
...
I agree with McKerracher J that account must also be taken of the broader policy of the Corporate Law Reform Act 1992 (Cth) which introduced Pt 5.4 "Winding Up in Insolvency" into the then Corporations Law. That policy, reflected in the Explanatory Memorandum to the Corporate Law Reform Bill 1992 (Cth) and in ss 459H, 459J, 459S and 467A of the Corporations Act, was to increase the efficiency of the winding up process by disregarding technical deficiencies, at least where no substantial injustice is caused by the deficiency.[65]
69 Elan Copra and possibly Spencer Constructions, which although not expressly considering the issue of validity, stated that the incorrect use of an interstate address on a statutory demand was a defect, leaves no room for a finding that that such a deficiency results in invalidity of the demand for the purposes of the Act.
70 With regards to e commentary, McPherson's Law of Company Liquidation[66] has noted the divergence of judicial views about 'fundamental defects' in relation to statutory demands and asserted that the issue may require resolution at the appellate level. In McPherson's Law of Company Liquidator sets out:
It is submitted, with respect, that the views of Dodds-Streeton J (which do not appear to have been brought to the attention of Greenwood J [in Townview Holdings], but discussed and taken into account by Brereton J) are to be preferred as more in line with the legislative intention of preventing statutory demands and winding-up proceedings being invalidated due to defects...
Further, even if there might be some defects in statutory demands that are so fundamental that they prevent a demand being a demand under s 459E, non-compliance with which creates a presumption of insolvency under s 459C, the defect ...would have to be of a gross and exceptional character before the demand is treated as a nullity.[67]
Am I bound to follow Re International Materials?
71 According to rules of precedent, 'courts are bound to apply principles laid down by courts higher in the appellate hierarchy'.[68] As an Associate Justice determining an application under s 459G of the Act, pursuant to r 16.5(3) of the Supreme Court (Corporations) Rules 2013, any appeal from my decision would be heard by the Court of Appeal rather than a single judge as provided for in s 17(3) of the Supreme Court Act 1986 (Vic). I am bound by decisions of the Court of Appeal and the High Court. Arguably, this may also extend to decisions of a single judge at a time when it appeared that s 459G appeals from a Master were to a single judge only.[69]
72 In the context of uniform national legislation, an intermediate appellate court and the courts below it should not depart from an interpretation adopted by another intermediate appellate court.[70] Further, while courts of equal rank in differing jurisdictions are not bound by each other, according to principles of judicial comity decisions of such courts should be followed in the absence of binding authority unless they are considered to be 'clearly wrong'.[71] The principle is flexible however, depending upon the circumstances of each case.[72] Where two single judges conflict, a later judge should reconsider the issue for him or herself.[73]
73 I am not technically bound to follow Re International Materials as it is not a case that falls within the court's appellate hierarchy. Ordinarily, on principles of judicial comity, I should follow the decision unless consider it to be clearly or plainly wrong. In the current circumstances though, factors indicate that I should not follow the decision:
(a) the decision did not consider the earlier case of Sustainable Organics which it conflicts with. In the context of two conflicting authorities, each a decision of a single judge in courts of equal rank, it is open to me to reconsider the issue;
(b) at the very least, I should follow the broad interpretation of the definition of 'statutory demand' and Part 5.4 as espoused in Topfelt, Spencer Constructions, Elan Copra and Crema.[74] On one view, Re International appears inconsistent with comments in Elan Copra and Spencer Constructions, which were not considered in detail by Brereton J. I opt to follow those appellate decisions, as was analogously done in Inter Mining and Poolrite in the context of omissions of the prescribed warning;
(c) I have particular regard to the statement by Black J in Re Urban Solutions Group Pty Ltd:
... Brereton J took that course where there was an issue as to the validity of an address for service specified in a creditor's statutory demand. However, it seems to me that position is the exception rather than the rule, and cannot be permitted to become the rule, lest the time limit within which an application to set aside a creditor's statutory demand under s 459G of the Act must be brought is subverted and the legislative purpose which it is intended to achieve is defeated. For reasons that will emerge below, it does not seem to me that this case engages that exceptional jurisdiction.[75]
(d) to follow Re International, directly or indirectly subverts the legislative purpose of Division 3 of Part 5.4;
(e) any injustice can be explored or overcome in any injunction application;
(f) the validity of the demand is best dealt with in a s 459S in the event that the debtor misses the 21 day period under s 459G; and
(g) the validity of the demand might be considered in a winding up application under s 459A.
74 Counsel for the plaintiff submitted that I ought to find that there were exceptional circumstances and follow Re International. I decline to find any such exceptional circumstances as:
(a) this is a case where the 459G application was late on any view. The lateness was not caused by the defect in the demand but by not having a system to monitor mail at the registered office over the holiday period. Further, it seems that instructions may not have been provided to the plaintiff's solicitors once the plaintiff became aware of the statutory demand by the email transmissions;
(b) the defect in the demand was not criticised in the original s 459G application;
(c) the plaintiff did not set out any prejudice which might have ensued in the 21 day affidavit;
(d) from a philosophical view, I would rather adopt a course which preserves the regime in Division 3, Part 5.4 rather than erodes it;
75 Counsel for the defendant submitted that I ought to determine the question of whether there is a 'genuine offsetting claim' in any event. I decline to do so. Given the finding about the efficacy of the s 459G application there is no jurisdiction to entertain such an issue. Further, it does not bear upon the issues to be ventilated in the plaintiff's amended originating process. It cannot be said that in making an order such as in Re International Materials would serve no utility if there was no genuine dispute or genuine offsetting claim. Accordingly, it is appropriate that I do not make any comments about the efficiency of the offsetting claim which were propounded by the plaintiff.
[1] [2010] VSC 385 [22].
[2] Exhibit PJS-13 of Affidavit of Peter James Sams sworn on 20 February 2017.
[3] [2015] WASCA 44 [28]-[33].
[9] (2007) NSWCA 354 [76]
[16] (1995) 13 ACLC 1268 (11 August 1995).
[24] Topfelt Pty Ltd v State Bank of New South Wales [1993] FCA 589; (1993) 47 FCR 226, 238 ('Topfelt'); Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons [1994] FCA 1059; (1994) 51 FCR 446, 452 ('Kalamunda'); Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd [1995] NSWSC 31; (1995) 13 ACLC 1,220, 1224 ('Vicbar'); Crema Pty Ltd v Land Mark Property Developments Ltd [2006] VSC 338; (2006) 58 ACSR 631 ('Crema').
[26] Crema Pty Ltd v Land Mark Property Developments Ltd [2006] VSC 338; (2006) 58 ACSR 631, 648.
[30] In the matter of Beralt [2001] 1 Qd R 232 [240].
[35] [2015] NSWSC 201. See also In the matter of Armcor Heating Pty Ltd [2014] NSWSC 137 in which his Honour referred to an interstate address being specified for service as 'no small matter'.
[39] At [26]; the decisions relied upon where Re International; Re Glenevan Pty Ltd [2015] NSWSC 201; and Re Armcor Heating & Cooling Pty Ltd [2014] NSWSC 137.
[41] Re Leasing Holdings At [2015] NSWSC 771 [16].
[55] Spencer Constructions Pty Ltd v G&M Aldridge Pty Ltd [1997] FCA 681; (1997) 147 ALR 444, 450.
[59] Timbercorp Finance Pty Ltd (In Liq) v Allan [2016] VSC 481 [47] and [50].
[66] Michael Gronow and Rosalind Mason, McPherson's Law of Company Liquidation (Thomson Lawbook Co, 2012) [3.1210].
[68] See Westlaw Australia, Laws of Australia (at 15 April 2013) 25 Interpretation and Use of Legal Sources '25.4 Judicial Statements' [25.4.150] quoting Trident v McNiece [1988] HCA 44; (1988) 165 CLR 107, 129.
[69] See eg Crema v Land Mark Property [2006] VSC 338.
[70] Farah Constructions v Say-Dee [2007] HCA 22 [135]; see Lexis Nexis, Halsbury's Laws of Australia (at 17 February 2017) 125 Courts and Judicial System, '(2) Jurisdiction of Courts', [125-160].
[71] La Macchia v Minister for Primary Industries (1992) 110 ALR 201, ; See Westlaw Australia, The Laws of Australia, 25. Interpretation and Use of Legal Sources, '25.4 Judicial Statements'[25.4.270].
[72] La Macchia v Minister for Primary Industries (1992) 110 ALR 201, 204.
[73] Westlaw Australia, Laws of Australia, 25 Interpretation and Use of Legal Sources, '25.4 Judicial Statements' [25.4.280].
Slap Corporation Pty Ltd
Civil, Infrastructure & Logistics Pty Ltd [2017] VSC 168
(1997) 76 FCR 452
(1993) 47 FCR 226
(1997) 137 FLR 307
(2007) 230 CLR 89
(1995) 184 CLR 265
(1994) 51 FCR 446
(1997) 147 ALR 444
(1988) 165 CLR 107
(1992) 110 ALR 201