St George Bank v Active Property Investment Pty Ltd [2010] NSWSC 736 | Case summary

2010/152992 ST GEORGE BANK - A DIVISION OF WESTPAC BANKING CORPORATION v ACTIVE PROPERTY INVESTMENT PTY LTD JUDGMENT 1 The plaintiff has filed an originating process dated 18 June 2010 by which it seeks the following orders: "1. That this Originating Process be returnable and heard instanter in the absence of the Defendant. 2. That the requirement on the Plaintiff to serve this originating process on the Defendant before the date fixed for hearing be dispensed with, pursuant to rule 1.8 of the Supreme Court (Corporations) Rules 1999 (NSW). 3. That, pursuant to rule 10.14(1) of the Uniform Civil Procedure Rules 2005 (NSW) and sub-section 109X(6)(b) of the Act, the Plaintiff's Creditor's Statutory Demand and Accompanying Affidavit sworn by Rodney David Lawless on 18 June 2010 and this Originating Process and its supporting affidavit/s be served on the Defendant by: a) delivering those documents marked to the attention of 'Mr Shanmuganathan Gnanasothy (aka Mr Sam Sothy)'; the sole director of the Defendant, to the offices of Banket Quin Investments Pty Ltd ACN 132 426 834 ( Banket Quin ) at Level 46, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000; b) posting a copy of those documents marked to the attention of 'Mr Shanmuganathan Gnanasothy (aka Mr Sam Sothy)' by pre-paid post to PO Box 303, Bondi Junction NSW 1355; and c) sending a private message to Sam Sothy (aka Shanmuganathan Gnanasothy) via computer to his Facebook page informing him that the Plaintiff has issued the Creditor's Statutory Demand against the Defendant and that a copy of the documents above were delivered to the offices of Banket Quin at Level 46, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000 and also posted to PO Box 303, Bondi Junction NSW 1355. 4. That, the Plaintiff's Creditor's Demand and Accompanying Affidavit be deemed to have been served upon the Defendant under sub-sections 109X(1)(a) and/or (b) upon the expiry of 2 business days after the day upon which the Plaintiff has complied with orders 3(a) to (c) above. 5. An order that the Defendant pay the Plaintiff's costs of the Originating Process. 6. Such further or other orders as this Honourable Court sees fit in the circumstances." 2 The proposition advanced by the plaintiff is thus that the court can (and should) make an order for substituted service of a statutory demand intended to be served by it under s 459E of the Corporations Act 2001 (Cth).

6 This provision does not give the court power to prescribe a manner of service. It merely preserves any separately existing power of the court to authorise a manner of service on a company differing from those in s 109X(1). Section 109X(6) is thus not a source of jurisdiction to make an order prescribing some method of service different from those the Act itself allows. In this respect, s 109X is quite different from, for example, s 170 of the Conveyancing Act 1919 (see s 170(1)(d)). 7 The plaintiff relies, in the alternative, on the court's power under rule 10.14 of the Uniform Civil Procedure Rules: "If a document that is required or permitted to be served on a person in connection with any proceedings: (a) cannot practicably be served on the person, or (b) cannot practicably be served on the person in the manner provided by law, the court may, by order, direct that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person concerned". 8 The difficulty for the plaintiff here is that the court's power to prescribe some manner notification "instead of service" extends only to a document "that is required or permitted to be served on a person in connection with any proceedings". The reference to "proceedings" is, clearly enough, a reference to proceedings in a court to which the Uniform Civil Procedure Rules apply. 9 It cannot be argued that a statutory demand is such a "proceeding". Statutory demands, of their nature, are created and served (and take effect) without resort to any process of a court: Clarke & Walker Pty Ltd v Thew [1967] HCA 28; (1967) 116 CLR 465. It is generally only when service of a statutory demand gives rise to an application by the company served for an order setting aside the demand or when a winding up application founded on non-compliance with the demand is made by the serving party that the statutory demand comes to play a part in any proceeding before the court. 10 The plaintiff says, however, that by filing the originating process dated 18 June 2010 it has created a proceeding in which the order for substituted service it seeks may be made. On the view the plaintiff takes, that proceeding may now serve as the vehicle for the filing of any s 459G application that the defendant in due course chooses to make and for any winding up application based on non-compliance with the statutory demand that may be made by the plaintiff. Either such application - or, if circumstances permit, both - may, it is said, be advanced under rule 2.2(1)(b) of the Supreme Court (Corporations) Rules 1999 by interlocutory process "in a proceeding already commenced in the Court", being the proceeding commenced by the originating process of 18 June 2010. 11 The problem with this analysis is that the claim for an order allowing an alternative method of notification of the statutory demand, looked at in its own right divorced from any claim for substantive relief, cannot sensibly be made and is not, in terms of rule 2.2 of the Supreme Court (Corporations) Rules, "an application required or permitted by the Corporations Act to be made to the Court". There is the added and similar point that, under rule 1.3, the Supreme Court (Corporations) Rules apply to "a proceeding in the Court under the Corporations Act, or the ASIC Act". The stand-alone application for an order dispensing with service and sanctioning a substitute does not satisfy either description. 12 If, as here, a proceeding is ostensibly commenced for the specific and sole purpose of obtaining an order sanctioning some substitute for service in respect of a document that otherwise plays no part in the proceeding so commenced, it is impossible to say that that document is one required or permitted to be served "in connection with" that proceeding. Rule 10.14(1) of the Uniform Civil Procedure Rules is addressed to the various provisions of those rules that deal with service of documents brought into existence to commence or to prosecute or to take some step in proceedings in the court, that is, documents by means of which such proceedings are conducted. 13 The plaintiff's resort to rule 1.8 of the Supreme Court (Corporations) Rules does not advance matters. That rule is in the following terms: "The Court may give directions in relation to the practice and procedure to be followed in a proceeding if it is satisfied, in the circumstances of the proceeding, that: (a) the provisions of the Corporations Act, the ASIC Act, or the rules of this Court do not adequately provide for the practice and procedure to be followed in the proceeding, or (b) a difficulty arises, or doubt exists, in relation to the practice and procedure to be followed in the proceeding." 14 Again, there must be some proceeding to which the Supreme Court (Corporations) Rules apply; and the situation must be such that there is some lacuna, doubt or difficulty in relation to the "practice and procedure to be followed" in or in relation to that proceeding. For reasons already given, a statutory demand is not a "proceeding" in the relevant sense and this present proceeding is not one to which rule 1.3(1) causes the Supreme Court (Corporations) Rules to apply. 15 If and when it becomes necessary to address the question whether a statutory demand was "served" on the defendant by the plaintiff, that question will be answered solely by reference to the provisions of the Corporations Act and the general law concepts relevant to them. The "service" that may ultimately ground a submission of non-compliance with the statutory demand will be what the Corporations Act regards as "service", not what might, under rules of court, be allowed by the court to be regarded as a substitute for service in relation to a document connected with a proceeding in the court. 16 The plaintiff has shown no basis on which it is open to the court to make an order for substituted service in respect of a statutory demand. Since that conclusion leaves no undetermined claim for relief in these proceedings, the proceedings must be dismissed and thereby brought to an end. The court cannot allow the fully determined originating process to survive indefinitely in a state of hibernation against the possibility that, as the plaintiff suggests, this present proceeding may at some future time prove useful as a vehicle for any s 459G application that the defendant may choose to bring or any s 459P application that the plaintiff itself may wish to initiate. If either of those courses eventuates, it can only be by way of a new proceeding initiated by originating process. 17 The originating process is dismissed. **********

St George Bank v Active Property Investment Pty Ltd

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