Sheraz Pty Ltd v Rumsley

Federal Court of Australia|2019-04-09|Before: Mr P, Smith J

The originating process filed 7 February 2019 seeking to set aside a creditor's statutory demand be dismissed.
The applicant pay the respondent's costs as assessed or agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 7 February 2019 the plaintiff (Sheraz) filed an application and supporting affidavit seeking orders to set aside a statutory demand served by the defendant, Alan Rumsley. The application is brought under s 459G of the Corporations Act 2001 (Cth) (Act) and asserts there is a genuine dispute with respect to the debt referred to in the statutory demand. Somewhat prematurely, Sheraz also sought orders under s 459S of the Act, but that can be put to the side for now. 2 By interlocutory application dated 1 March 2019, Mr Rumsley seeks orders that Sheraz's application be dismissed on the basis that service was not effected within the 21 day period prescribed by s 459G(3)(b) of the Act. 3 It is appropriate to first deal with the question of whether Sheraz's application was properly served within the 21 day period, because if it was not properly served then (absent further the application) it is unnecessary to deal with the questions raised by the application to set aside the demand: Austar Finance Group Pty Ltd v Campbell [2007] NSWSC 1493; (2007) 215 FLR 464 at [2]. The parties were on notice that the issue of service would be addressed first.

The statutory demand 4 Mr Rumsley is a solicitor who between 2011 and 2016 retained the services of Philip Clifford, a barrister who is a director and shareholder of Sheraz. 5 Mr Rumsley contends that in payment for Mr Clifford's legal services he paid sums totalling $248,667.50 to Sheraz. According to Mr Rumsley, Sheraz has never been an incorporated legal practice within the meaning of the Legal Profession Act 2008 (WA) (LPA). Rather, Sheraz claimed payment for legal services that were provided by Mr Clifford. 6 On 24 January 2019 Mr Rumsley served a statutory demand on Sheraz. The debt allegedly owing is set out in the statutory demand as follows: Debt due under s 12(7) of the Legal Profession Act 2008 for $12,622.50 payment made to the company 18 April 2013 Debt due under s 12(7) of the Legal Profession Act 2008 for $5,445.00 payment made to the company 19 September 2013 Debt due under s 12(7) of the Legal Profession Act 2008 for $33,763.95 payment made to the company 2 October 2014 Debt due under s 12(7) of the Legal Profession Act 2008 for $56,998.75 payment made to the company 1 June 2015 Debt due under s 12(7) of the Legal Profession Act 2008 for $50,837.30 payment made to the company 25 November 2015 Debt due under s 12(7) of the Legal Profession Act 2008 for $89,000.00 payment made to the company 16 August 2016 Total amount $248,667.50

7 Section 12(7) of the LPA provides that: A person may recover from another person in a court of competent jurisdiction, as a debt due to the person, any amount the person paid to the other person in respect of anything the other person did in contravention of subsection (2). 8 Section 12(2) of the LPA provides that: A person must not engage in legal practice in this jurisdiction unless the person is an Australian legal practitioner. Penalty: a fine of $20 000. 9 It is not necessary to develop the arguments raised by Sheraz for the purpose of its s 459G application, but in essence Sheraz alleges a genuine dispute as to the existence of the debt and that it has an offsetting claim arising from ongoing proceedings in the District Court of Western Australia between Mr Clifford, Sheraz and Mr Rumsley about payment of legal fees.

Service of the statutory demand 10 It is not in issue that the statutory demand was served on Sheraz on 24 January 2019 by hand delivery to its registered office.

Service of the application to set aside the demand 11 Section 459G provides as follows: Company may apply (1) A company may apply to the Court for an order setting aside a statutory demand served on the company. (2) An application may only be made within 21 days after the demand is so served. (3) An application is made in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company. 12 It is common ground that under s 459G(2) Sheraz had until 14 February 2019 to comply with the statutory demand or make an application to set it aside. 13 The statutory demand was in the standard format referred to in s 459E(2)(e) of the Act and prescribed by Schedule 2 of the Corporations Regulations 2001 (Cth), being Form 509H. Form 509H includes at cl 6 a requirement to include an address for service of any application to set aside the demand and supporting affidavit as follows: 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). 14 The statutory demand issued by Mr Rumsley states the following at cl 6: The address of the creditor for service of copies of any application and affidavit is 13 Broome Street, Forrestdale WA 6112. 15 On 7 February 2019 Sheraz filed in this Court an application to set aside the statutory demand, accompanied by the requisite supporting affidavit. The application was filed within the 21 day period required by s 459G of the Act. 16 Between 4.58 pm and 5.00 pm on 14 February 2019, the last day of the 21 day period under s 459G(3)(b), Mr Clifford's personal assistant, Ms Kiel, sent two emails to Mr Rumsley attaching a covering letter dated 14 February 2019, the application to set aside the statutory demand, the affidavit in support and an outline of submissions. The covering letter read: Attached is Federal Court matter WAD 77 of 2019 being an application to set aside a statutory demand, affidavit in support and outline of submissions. I also attach a consent order for you to sign and return. The $12,000 in costs include the filing fee of $4,045. 17 Mr Rumsley deposes that due to a series of personal circumstances he did not have cause to clear his emails and therefore was not notified of the application until 25 February 2019. 18 More particularly, his evidence was as follows: 5. On 25 February 2019 I opened two emails from Sheree Kiel, the personal assistant to Philip Clifford. I replied to the email of Ms Kiel on 25 February 2019. Annexed hereto marked by way of "APR3" is a copy my email dated 25 February 2019 with attachments. 6. The email of Ms Kiel which I replied to, attached a letter dated 14 February 2019, a minute of consent orders, submissions, a list of authorities and an originating summons. Annexed hereto marked by way of "APR4" is a copy of the letter dated 14 February 2019 and minute of consent orders. 7. The second email of Ms Kiel attached a copy affidavit of Philip Clifford dated 5 February 2019. Annexed hereto marked by way of "APR5" is a copy of the email from Sheree Kiel. 8. Prior to opening Ms Kiel's emails on 25 February 2019, I had not received any documents in relation to these proceedings and have not received any since, either at my address for service, 13 Broome Street, Forrestdale, my post box at Australia Post in Success, or elsewhere. 9. On 14 February 2019, my father-in-law [Mr W] came home from Fremantle hospital, to receive palliative care at our home. [Mr W] has lived in the granny flat at our home since 2004. At 4pm I left my office to collect materials required for [Mr W's] care. Prior to leaving my office I cleared my email inbox and there was nothing related to these proceedings. 10. 15 February 2019, was my wife's 50th birthday, so other than dealing with an urgent Supreme Court matter, I spent the day with my wife and caring for [Mr W]. 11. On the afternoon of 17 February 2019, [Mr W] passed away. It has been a very difficult time for my family and myself, particularly as I have had a very close relationship with [Mr W] since 1985 and he has lived at our home, as a member of our family since 2004. My time from 17 February 2019 has been spent with my family and dealing with arrangements for [Mr W], while dealing with urgent work matters only. 19 Mr Clifford gave evidence by affidavit on behalf of Sheraz. By affidavit dated 8 March 2019 Mr Clifford said: On my reading of the Court filed documents and the Respondent's affidavit dated 28 February 2019, the section 459G application… was filed within time and received electronically by the Respondent within time along with a brief set of written submissions prepared, filed and sent … 20 Mr Rumsley's affidavit of 28 February 2019 to which Mr Clifford referred does not assist Sheraz. The affidavit does not establish that the email was received on 14 February 2019. It does not establish that the emails sent by Ms Keil were opened or that their contents otherwise came to Mr Rumsley's attention until 25 February 2019. 21 In an affidavit dated 18 March 2019 Mr Clifford said: It is my understanding the letters I wrote on 14 and 15 February 2019 were received by the Defendant on or about those dates. 22 Mr Clifford did not provide the basis for his stated understanding. The reference to the letter of 14 February 2019 is a reference to the covering letter of that date noted above. The letter of 15 February 2019 was not in evidence. 23 I am satisfied on the basis of Mr Rumsley's evidence that the application did not come to his attention until 25 February 2019.

Relevant principles 24 It is well recognised that if an application is made outside the 21 day period, the court cannot exercise jurisdiction under s 459G(1): David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265 at 277-278. The Court has no power to extend the period within which an application may be made (and noting that under s 459G(3) an application is 'made' only where the application and affidavit are served within 21 days). 25 Although s 459G does not define 'service', the meaning of the term in this context was described by Young J in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 at 544, as follows: Section 459G itself does not deal with what is service. The ordinary meaning of "service" is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope (1854) 4 De GM & G 328 at 341-345; 43 ER 534 at 539-540; R v Heron; Ex parte Mulder (1884) 10 VLR 314 at 315; Pino v Prosser [1967] VR 835 at 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them. If this were not so, one would get the absurd situation referred to by McInerney J in Pino v Prosser (at 837), that the conclusion would be one which is: "… remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ … should be held not to have been served." 26 Palmer J described this rule in Woodgate v Garard Pty Ltd [2010] NSWSC 508; (2010) 239 FLR 339 at [42] as the 'effective informal service rule'. This rule has recently been applied by this Court with respect to the personal service of the statutory demand itself: TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd, in the matter of TCL Airconditioner (Zhongshan) Co Ltd (No 2) [2019] FCA 257 at [41]. See also more generally Carter v Australian Securities & Investments Commission [2018] FCA 1064 at [21] and the cases cited by Colvin J. 27 A party invoking the effective informal service rule bears the onus of proving the time at which the documents came to the actual attention of the recipient, and in view of the serious consequences which may follow, the court will not lightly draw inferences or make assumptions as to the time of service: Woodgate at [44], citing Howship at 548. 28 In Austar Finance Group Pty Ltd v Campbell, Young J held at [49] that email transmission cannot constitute service for the purposes of s 459G(3) unless either it is shown that the documents electronically transmitted have actually been received in a readable form by the person to be served, or the case falls within one of the special exceptions permitted by the rules of court. In that case, a provision of the Uniform Civil Procedure Rules 2005 (NSW) permitted service via email if the notice advising the address for service included an email address (and similarly see s 28A of the Acts Interpretation Act 1901 (Cth) and s 9(1) and s 14A(1)(b)(ii) of the Electronic Transactions Act 1999 (Cth)). 29 The approach in Austar was adopted in this Court by Jagot J in Opensoft Australia Pty Ltd v Miller Street Pty Ltd [2011] FCA 653. In that case, an unsealed application and affidavit was served at the address for service in person, and the sealed version of each document was subsequently emailed to the creditor's agent when email was not listed as an address for service. 30 Jagot J held that neither method of service was effective. Her Honour held: [54] As noted above, the statutory demand specified that the address of the creditor for service of copies of any application and affidavit was TW Agency, 251 Elizabeth St, Sydney, New South Wales 2000. The creditor did not specify any electronic address for service. Furthermore, this is not a case in which Mr Tayles as director of the creditor received himself an email attaching copies of the documents as filed. Indeed, on the evidence available, Mr Tayles has never received copies of the documents as filed. As the defendant submitted, in the context of this statutory scheme, it is not the place of TW Agency or Mr Daoud as its principal to accept service by means other than those specified in the statutory demand itself. Even if TW Agency were authorised to do so, I do not see how the dealings between Mr Daoud and Mr Price could be seen to constitute any form of acceptance of service by email for the purposes of s 459G(3)(b) of the Corporations Act. [55] The situation might have been different if Mr Tayles himself had received an email at the address for service specified in the statutory demand, opened the email, and read the attachments - thereby having brought to his actual attention the application and supporting affidavit as filed. However, that is not what occurred. Despite the efforts to which Mr Price went on 11 May 2011, I cannot see how what was done constituted compliance with s 459G(3)(b). I do not consider that anything in the relationship between the Corporations Act and the Federal Court (Corporations) Rules can lead to a different conclusion.

Consideration 31 Sheraz, through written submissions signed by Mr Clifford, asserts that: 8. There is no dispute the section 459G application and supporting affidavit were served electronically and electronically received into the Respondent's computer by email within the statutory time limit. That is 4.58pm and 5pm on 14 February 2019. 9. In a time of electronic filing and service, this is the equivalent of service by post or hand-delivery notwithstanding the recipient does not open the envelope or read the document. 10. Speed and efficiency in the sense of minimal delay and expense are essential to a just resolution of proceedings. 11. Unduly technical and costly disputes about non-essential issues are clearly to be avoided in favour of focusing upon facilitating a just, quick and cheap resolution of the real issues in proceedings. Here, whether the statutory demand is valid and/or an abuse of process. (footnotes omitted) 32 That submission cannot be accepted. Mr Clifford in essence asserts that the body of law as to the 21 day rule and service should be disregarded. The question of service under s 459G is neither 'unduly technical' nor 'non-essential', but goes to the very question of the Court's jurisdiction to entertain the application. 33 In this case the address for service that was provided by Mr Rumsley was a physical address. There was no provision in the statutory demand for email service of any application. Further, there is no evidence that the email came to the actual attention of Mr Rumsley within the 21 day period. There is no evidence that the email sent by Ms Kiel was opened at the physical address until 25 February 2019. There is no evidence of any other agreement or consent on the part of Mr Rumsley to service by email. There is clearly a risk in purporting to serve such an application by email late in the day on the last day for service, and in circumstances where email is not the given address for service and the movements of the email recipient, and so the prospects that the recipient will check emails, are unknown. 34 The fact that rigid time frames apply under s 459G is long established and recognised. Sheraz bears the onus of establishing service of its application within the rigid time frame imposed by s 459G: Jin Xie Investment & Trade (Australia) Pty Ltd v ISC Property Pty Ltd [2006] NSWSC 7 at [6]. It has failed to do so and accordingly its application under s 459G is dismissed. 35 During today's hearing Mr Lafferty on behalf of Sheraz informed the Court that if Sheraz's application under s 459G was dismissed because of the service point, it intends to seek declaratory or other relief based on asserted non-compliance of the statutory demand with the requirements of s 459E and Form 509H. It was said that such relief might include, if necessary, injunctive relief to prevent Mr Rumsley from seeking to rely on non-compliance with the statutory demand as the basis of a winding up application. 36 As I understand it, the relief that is being considered by Sheraz is of the kind referred to in Beralt Pty Ltd v Joe Battaglia Plastering Pty Ltd [1999] QSC 202 at [74]; and Deliver Western Australia Pty Ltd v Truckworld (WA) Pty Ltd [2014] WASC 411 at [17], citing 2020 Construction Systems Pty Ltd v Dryka & Associates Pty Ltd [2010] WASC 22 at [8]. 37 Mr Rumsley properly agreed to undertake that he would not bring any winding up application based on non-compliance with the statutory demand for a period of some weeks. The parties were content to confer separately about the period of such undertaking. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Banks-Smith.

Legal Profession Act 2008(WA)s 12

Corporations Act 2001(Cth)ss 459E, 459G

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