| ; UUDGMENT No. OAS 2. CATCHWORD CORPORATIONS LAW - application to set aside statutory demand - total amount of debt shown on demand - no specification of interest and charges - whether demand defective - "defect" - requirement of substantial injustice. CORPORATIONS LAW - service of documents - documents left at registered office of company - question of credit. Corporations Law s 9, s 459E, s 459G, s 459J, s 4598S. AZED Developments Pty Ltd v Frederick & Co Ltd (1994) 12 ACLC 949 Kalamunda Meat Wholesalers Pty Ltd vy Reg Russell & Sons Pty Ltd (1994) 12 ACLC 391. Topfelt Pty Ltd v State Bank of New South Wales (1993) 47 FCR 226. 22 DEC 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTAY CHAINS & POWER _ (AUST PTY LIMITED v COMMONWEALTH BANK OF AUSTRALIA No. NG 3458 of 1994 Sackville J. 22 December, 1994 Sydney. ane treet Soe aye fost FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. NG 3458 of 1994 — eee BETWEEN: CHAINS & POWER (AUST) PTY LIMITED Applicant AND: COMMONWEALTH BANK OF AUSTRALIA Respondent CORAM: SACKVILLE J. PLACE: SYDNEY DATE : 22 DECEMBER 1994 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondent's costs. ft " NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3458 OF 1994 GENERAL DIVISION ) BETWEEN: CHAINS & POWER (AUST) PTY LIMITED Applicant AND: COMMONWEALTH BANK OF AUSTRALIA Respondent CORAM: SACKVILLE J. PLACE : SYDNEY DATE: 22 DECEMBER 1994 REASONS FOR JUDGMENT Chains & Powers (Aust) Pty Ltd ("the company") applies to the Court, pursuant to s.459G of the Corporations Law, to set aside a statutory demand served by the Commonwealth Bank of Australia ("the Bank"). The demand was made on the company pursuant to s.459E of the Corporations Law and required the company to pay the sum of $752,995.22 to the creditor within 21 days. The Bank claimed that the statutory notice had been served on the company on 19 August 1994, Although several grounds for setting aside the notice were asserted in correspondence, at the hearing the company relied on two grounds only. First, the company contended that the demand should be set aside because it did not contain a breakdown to show how the amount had been calculated. In particular, the company asserted that the demand failed to specify how much of -2- the sum demanded represented principal and how much represented interest and other charges levied by the Bank. Secondly, it claimed that service of the statutory notice had not been effected on 19 August 1994. This issue involves questions of credit relating to the evidence of Mr Alex Georgievski, a director of the company, and Mr Andre Mondon, a process server who attended the premises of the company on 19 August 1994. The Demand The demand, insofar as relevant, was as follows: "FORM 509H Corporations Law CREDITOR'S STATUTORY DEMAND FOR PAYMENT OF DEBT To Chains & Power (Aust) Pty Limited (ACN 003 945 079) ("the Company") of 35 Alexander Avenue, Taren Point in the State of New South Wales, 2229. 1. The Company owes The Commonwealth Bank of Australia incorporated in the Australian Capital Territory (ACN 123 123 124) of 2 Martin Place, Sydney in the State of New South Wales, 2000 ("the creditor") the amount of $752,995.22, being the total amounts of the debts described in the Schedule. 2. Attached is the affidavit of Nicholas Kalikajaros, dated 9th August 1994, verifying that the amount is due and payable by the Company. 3. The creditor requires the Company, within 21 days after service on the Company of this demand: (a) to pay to the creditor the total of the amounts of the debts; or (b) to secure or compound for the total of the amount of the debts, to the creditor's reasonable satisfaction. -3- SCHEDULE Description of the debt Amount of the debt Fully drawn loan $195,954.85 Bills matured account 557,040.37 TOTAL: as at 9th August 1994 752 5.22 Dated: 9th August 1994 Signed: NICHOLAS KALIKAJAROS Capacity: Authorised Officer of the Creditor Corporation or partnership name (if applicable): Commonwealth Bank of Australia (ACN 123 123 124)" Subject to the question of service, which I shall consider later, the demand was accompanied by an affidavit of debt, sworn by a manager of the Bank on 9 August 1994. The deponent swore that the debtor was indebted to the Bank in the sum of $195,954.85 in respect of a fully drawn loan account No. 2204-0029-5145 on which interest was accruing at 11.25% per annum, being $60.19 per day. The deponent also swore that the company was indebted in respect of a bills matured account No. 2204-1001-7977 in the sum of $557,040.37. Interest on this account was accruing at the rate of 11% per annum, or $167.32 per day. Background There was relatively little evidence relating to the circumstances of the company's indebtedness. However, on 29 November 1990 the Bank advised the debtor in writing that it had approved a bills discount facility of $438,000 to take over the company's total indebtedness to the Bank. In addition, the letter stated that an overdraft limit of $50,000 had been ~-4- approved to assist with working capital requirements. The letter also advised that a loan establishment fee had been debited to the company's account No. 29-5145. A letter of 25 July 1991 showed that the Bank on that day negotiated a bill for $438,000 for a term of 35 days, providing $432,508.78 to the company after discount and charges. On 15 October 1991 the Bank demanded payment from the company of $536,354.01, being the amount said to be due by it. The letter referred in its heading to "Loan Account No. 2204-29-5145". The demand stated that interest was accruing at the rate of $226.13 per day. A further demand was made by the Bank on 29 January 1992 requiring the company to pay $548,650.61. This letter referred to the company's "fully drawn loan account" and to interest accruing at the rate of $219.40 per day. By a letter of 19 February 1992 the Bank advised that the Company's fully drawn loan account No. 2204-295/45 had a debit balance of $542,728.22, together with interest accrued of $10,711.94. Daily interest was $204.50 at a then current interest rate of 13.75% per annum. On 7 April 1992 the Bank demanded from Mr Alex Georgievski, as guarantor of the company's debt, the sum of $563,447.95 then due, together with interest at a daily rate of $211.70. On the same day a demand was made by the Bank on the company for payment of identical amounts. The evidence did not explain the relationship between the amount due under the fully drawn loan account and that due under the bills matured account. There was no evidence that the company disputed the amounts due. Nor was there any evidence that the company had suffered any specific prejudice by reason of the failure to segregate in the demand amounts of principal and interest and other charges. The Legislation Part 5.4, Division 2 of the Corporations Law, which contains the provisions relating to statutory demands, was inserted by the Corporate Law Reform Act 1992 (No. 210 of 1992). The structure of the legislation is explained in Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226 (FCA/Lockhart J.) and Kalamunda Meat Wholesalers Pty Ltd v_ Reg Russell & Sons Pty Ltd (1994) 12 ACLC 391 (FCA/Hill J.). Those judgments contain extracts from the report of the Australian Law Reform Commission, General Insolvency Inquiry (Report No. 45) on which the legislation is based, together with extracts from the Second Reading Speech by the then Attorney-General. I do not reproduce those extracts here. As Lockhart J. observed in Topfelt Pty Ltd vw State Bank of New South Wales Ltd, at 231, the provisions were intended to introduce a new regime for proving insolvency of a debtor company in winding-up proceedings, especially where insolvency is to be proved by the company's non-compliance with a statutory demand served upon it. The Corporations Law empowers the Court, on an application by a person or body specified in s.459P, to order that an insolvent -6- company be wound up in insolvency: s.459A. The Court must presume that a company is insolvent if, during or after the three months ending on the day when the application was made, the company failed to comply with a statutory demand: s.459C(2)(a). The company fails to comply with the demand if, at the end of the period for compliance, the demand is still in effect and the company has failed to comply with it: s.459F. Part 5.4, Division 2 of the Corporations Law deals with the statutory demand. Section 459E(1) permits a person to serve on a company a demand relating to a single debt that the company owes to the person, that is due and payable. The demand may cover two or more debts due and payable by the company to the person. The amount of the single debt, or the amounts of the debts, must total at least the statutory minimum of $2,000. The statutory demand, if it relates to a single debt, must specify the debt and its amount; if the amount relates to two or more debts, it must specify "the total of the amounts of the debts": S.459E(2)(a),(b). There are other requirements specified in s.459E(2), but it is not suggested in this case that the notice did not comply with any of those requirements. The period for compliance with a statutory notice is 21 days, unless the Court makes an order, upon an application under s.459G to set aside the demand, extending the period for compliance: s.459F(2). Unless the debt, or each of the debts, is a judgment debt, it must be accompanied by an affidavit that verifies that the debt, or the total amount of the debts, is due and payable by the -7J- company: s.459E(3). As I have already noted, the statutory demand in this case was accompanied by an affidavit sworn by a manager of the Bank. A company may apply to the Court for an order setting aside a statutory demand served on the company: s.459G(1). Such an application must be made within 21 days of service of the notice and must be supported by an affidavit: s.459G(2),(3). Section 459H provides for the case where there is a genuine dispute between the company and the creditor, or the company has an offsetting claim. No issue of this kind arises in the present case. Section 459J provides for setting aside the demand on other grounds: "459J3(1) [Defect or other reason] On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or (b) there is some other reason why the demand should be set aside. 4593(2) [Mere defect] Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect." The word "defect", in relation to a statutory demand in s.9, is defined to include "(a) an irregularity; and (b) a misstatement of an amount or total; and - g- (Cc) a misdescription of a debt or other matter...". A statutory demand has no effect while an order is in force under s.459J setting it aside: s.459K. However, unless on an application under s.459J the Court makes an order under s.459H or s.459J, the Court must dismiss the application: s.459L. The effect of a statutory notice is specified by s.4595. It provides as follows: "459S(1) [Demand may not ground opposition] In so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand, the company may not, without the leave of the Court, oppose the application on a ground: (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). 459S(2) [Ground material to solvency] The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent." In the case of an application to wind up a company, the application is not to be dismissed merely because of a defect in a statutory demand, unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied: s.467A. As to the interaction between s.459S and s.467A see Topfelt Pty Ltd v State Bank of NSW, at 238-239. Was the Demand Defective? Mr Blackburn-Hart argued that the statutory demand should be set aside on the ground that the sums specified in the demand did not segregate the principal due in each case and the components of each sum representing interest, fees and charges. Nor did the demand specify how the amount claimed had been computed. As I understood his argument, Mr Blackburn-Hart relied on both s.459J(1)(a) and s.459J(1)(b) of the Corporations Law. First, he argued that the failure to segregate the components of the sums due amounted to a "defect" in the statutory demand. While there was no specific evidence of prejudice, Mr Blackburn-Hart contended that the demand was misleading and this of itself was enough to constitute "substantial injustice" within s.459J(1)(a). Secondly, he contended that the company was entitled to rely on 8.459J(1)(b) because the failure to specify the components representing interest and charges produced an "indeterminable sum". This meant that the company could not ascertain whether the company had an offsetting claim as contemplated by s.459H of the Corporations Law. Mr Blackburn-Hart relied on passages in Topfelt Pty Ltd v State Bank of NSW, in which Lockhart J. set aside a statutory demand that failed to specify the amount of interest claimed by the creditor. The relevant passages are as follows (at 241-242): "The statutory demand served by the respondent on the applicant states that the judgment in the Supreme Court amounted to $429,722.73 together with interest thereon, less amount received on sale of the mortgaged property; that the claim is made for $179,722.73 together with interest from 11 March 1993 "to date and continuing". The demand does not specify the rate at - 10 - which interest had been calculated or a daily figure calculated with reference to the rate. Also, it claims interest that is "continuing". In particular, the demand fails to specify the amount of the interest claimed to the date of the demand.... Rules of courts which provide for the payment of interest on judgments change not infrequently. Why should the applicant have to consult its solicitor or otherwise gain access to the Supreme Court Act 1970 or the rules of the Supreme Court or speak to the respondent in order to determine the amount of interest which is claimed from it? The statutory demand served by the respondent upon the applicant is plainly defective. A Creditor who issues a statutory demand under the Corporations Law gains the benefit of the presumption of insolvency if the notice is not complied with; and the additional benefit that the company may not oppose the application to wind it up on a ground relating to a defect in the statutory demand, without the leave of the Court, because of the provisions of s.459S of the Corporations Law. It is not asking too much that creditors who issue statutory demands under the Corporations Law should ensure that the demands are expressed in clear, correct and unambiguous terms. If the creditors wish to have the benefit of the presumption of insolvency, the least they can do is to tell the debtor companies in clear terms what amounts are due, whether they include interest or not, and, if so, the amount. I do not accept, however, the argument of counsel for the applicant that, because of the nature and extent of its defects, the demand does not answer the description of a statutory demand for the purposes of Part 5.4 of the Corporations Law. The demand purports to follow the prescribed form of statutory demand, but falls into error in its description of the monies claimed to be due by the applicant. Nevertheless, it purports to be a statutory demand. The demand is erroneous because it cannot be complied with on its face even allowing for misstatements. The applicant must make enquires of one kind or another in order to ascertain the amount of interest that is said to be payable, whether he makes the enquires from his solicitor or from the Supreme Court or others. - 11 - There is no evidence before the Court from the applicant or any specific injustice that it has suffered or may suffer became of the defects in the statutory demand. Indeed, it vigorously contested the proceedings in the Supreme Court relating to the exercise by the respondent of its power of sale, both at the trial and appellate level. Nevertheless, it is not the obligation of a debtor company to calculate the interest which the creditor calls upon him to pay; to make certain and specific something which the creditor has left uncertain and unspecified. Also, in winding up proceedings the Court acts not merely inter partes, but in the public interest. An order for winding up operates in rem. It is in the public interest that provisions of the Corporations Law which require a statutory demand to state the amount of a debt that is due and payable, should be observed. In all the circumstances I am satisfied that the defects in the statutory demand in this case are of such a kind and magnitude that they constitute good reasons why the demand should be set aside under s.459J(1)(b)." In my opinion Topfelt _v State Bank of NSW involved a very different factual situation to the case before me. The difficulty presented by the statutory demand in Topfelt was that the demand itself did not specify the amount of the debt due by the respondent to the applicant. Because the demand did not specify the rate of interest, and because it claimed interest on a "continuing" basis, the debtor could ascertain the amount due by making inquiries to ascertain what the relevant rates of interest were from time to time after March 1993. As Lockhart J. observed, the demand could not be complied with on its face, even allowing for misstatements. The demand was "uncertain" and "unspecified". It must be remembered that the requirement specified in s.459E(2)(b) is that, where a claim relates to two or more debts, - 12 - the demand "must specify the total of the amounts of the debts". Unlike the demand in Topfelt, the demand in the present case specified an amount - namely $752,995.22 - which represented the total of the amount of the debts due by the company to the Bank. In Topfelt, Lockhart J. accepted (at 235) that a creditor may claim in a statutory demand the payment of interest upon a judgment debt. His Honour continued as follows (at 235): "But, if a creditor claims the payment of interest upon his judgment he must specify the amount of interest in the statutory demand (it may be sufficient if he states as one figure the amount of the judgment debt and the interest due thereon). It is not sufficient compliance with this requirement for a creditor to claim interest on the amount of a judgment debt by specifying either a rate of interest or a daily or other periodic figure representing the interest component, without stating the precise amount of it, and leaving it or the debtor to make the precise calculation of the interest. It is not the debtor's obligation to calculate the interest which the creditor calls upon him to pay." In this passage his Honour accepts that it "may be sufficient", where the amount claimed includes interest on a judgment debt, to specify as one figure the amount of the debt plus interest thereon. In the present case the demand specified a total of $752,995.22, made up of the balance due under a fully drawn loan and under a bills matured account. It was clear from the accompanying affidavit that the balance due in each account included an interest component, accruing on a daily basis. However, the demand itself was for a specific amount and included interest and charges up to the date of the demand (9 August 1994). In the circumstances of this case, I think that the demand -~13- complies with the requirements of s.459E(2). On its face, the demand shows that there were two debts due to the Bank - one designated as a "fully drawn loan", the other as a debt due under a bills matured account. The statutory requirement in these circumstances is that the demand must specify the total of the amounts of the debt: s.459E(2)(b). This the demand did. As I have mentioned, it was not suggested that the demand failed to comply with the requirements of s.459E in any other way. No point was taken in relation to the delay between the date of the demand (9 August 1994) and service of the demand (19 August 1994). Mr Blackburn-Hart contended that a demand in the form used in this case was misleading to the company. Clearly, there was nothing in the evidence to support this contention. The company did not put on evidence to show that it had been misled. Mr Alex Georgievski, a director of the company, gave oral evidence but did not suggest either in his affidavit or oral evidence that the amounts due to the Bank had been mis-stated or that the company was in doubt as to the amount due or how it had been calculated. Indeed, Mr Georgievski acknowledged in cross-examination that there was no doubt that the company was indebted to the Bank and that the indebtedness arose out of arrangements that he had made with the Bank to put in place a bill facility and an overdraft account. Insofar as Mr Blackburn-Hart submitted that a failure in the demand to specify or segregate interest and charges was - 14 - necessarily misleading to the recipient, in my opinion he was seeking to import a requirement that is not in the legislation. To accept his submission, in my opinion, would run counter to the expressed intent of the Australian Law Reform Commission (at para. 688) that the "provisions in relation to the setting aside of a statutory demand are intended to be a complete code for the resolution of disputes involving statutory demands, and to do so on the basis of the commercial justice of the matter, rather than on the basis of technical deficiencies" (emphasis supplied). Furthermore, if there were a requirement of the kind Mr Blackburn-Hart contended for, it would be difficult to determine how much information a creditor would have to include in a statutory demand. Mr Blackburn-Hart suggested that it was enough to specify interest and charges from the date of the debtor's last payment. (In this case the evidence was that the company had made no payments since April 1992). But it is not apparent why any such obligation should be limited by reference to the date of the last payment. If the object is to ensure that the debtor can follow from the demand itself the precise calculations leading to the final amount due, it would presumably be necessary to record all transactions in the relevant accounts from the dates of the original advances. It seems to me that a requirement of this or a similar kind would reintroduce technicalities that the 1992 legislation was intended to avoid. The conclusion I have reached is, in my view, consistent with the approach taken by Hayne J. in AZED Developments Pty Ltd vy -15 - Frederick & Co Ltd (1994) 12 ACLC 949 (S Ct Vic/Hayne J.). There Hayne J. held that the requirement in s.459E(3), that the demand be accompanied by an affidavit that "verifies" the debt, is satisfied by a formal affirmation on oath that a certain sum of money is due and payable by the company to the creditor, rather than proof of the elements of the cause of action (at 951). While the decision rests on the construction of the word "verifies", Hayne J. (at 951) was of the view that: "s.459J plainly indicates a statutory intention that the statutory demand procedure should be one where the effective onus of demonstrating that the debt claimed is subject either of a genuine dispute, or an offsetting claim should rest upon the party to whon the demand is directed". I respectfully agree with these observations. No Substantial Prejudice In my opinion, Mr Blackburn-Hart's submissions face a further difficulty, although it was referred to only obliquely in argument. In Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd, at 394-395, Hill J. held that, where a statutory demand contains a "defect" as defined in the Corporations Law, it can be set aside because of that defect only if substantial injustice would be caused if it were not to be set aside: "As a matter of construction, I think that paras.(a) and (b) of s.459J(1) should be read so as to be mutually exclusive. Such a construction would, but for the terms of s.459J(2), be clearly correct. But notwithstanding the reference in s.459J(2) to sub-sec. (1), not merely sub-sec.(1)(a), I am of the view that the provisions of s.459J(1)(b) relate only to cases where there is a reason other than the existence of a - 16 - defect in the demand. Put in another way, if the case is one where a defect in the demand is alleged, a notice could only be set aside if the case is one where because of the defect substantial injustice would be caused unless the demand was set aside. Such a construction accords with what is said in the Second Reading Speech and Explanatory Memorandum to which I have referred. This question of construction appears not to have been argued in Topfelt, nor considered by Lockhart J. in that case. Although the reference by his Honour to s.459J(1)(b) (at ACLC 27-28; ALR 171) might suggest that his Honour took a different view from that which I have suggested, the case before his Honour was not one of a mere defect falling within s.4593(2)." Hill J. pointed out (at 395) that the definition of "defect" in the Corporations Law is an inclusive one, so that anything that would be a defect in the ordinary sense would be a "defect" for the purposes of the Corporations Law. His Honour cited with approval (at 395) the observations of Lockhart J. in Topfelt (at 237): "According to its ordinary usage a 'defect' means a lack or absence of something necessary or essential for completeness; a shortcoming or deficiency; an imperfection. A defect according to ordinary understanding is not necessarily something which is of a minor nature, it may be either major or minor". Lockhart J. made these additional observations (at 237): "The reference to the inclusive definition of 'defect' in s.9 to include, not only an irregularity, but a misstatement of an amount or total and a misdescription of a debt or other matter and a misdescription of a person or entity, is plainly designed to ensure that the interpretation of s.459J (and other sections) is not to be susceptible of rigorous or narrow reading down of the word 'defect' to exclude major defects and confine its meaning to minor defects or irregularities. The notion of a 'defect' is not to be confined to a misstatement of an amount of a debt to a small or minor misstatement or to an immaterial or minor misdescription of a debt or a person or entity. Misdescriptions of debts, -17- persons, entities or amounts all fall within the statutory definition of "defect", whether large or small..." Hill J. in Kalamunda also cited (at 395) Lockhart J.'s qualification that {tjhere may, however, be cases where deficiencies in the form of demands are so fundamental that the demands are incapable of assuming the description of statutory demands within the meaning of the Corporations Law. This is a question to be decided in future cases. The demand in the present case is not, for reasons mentioned later, a demand of this kind." I respectfully agree with Hill J. that s.459J(1)(a) and (b) are to be read as mutually exclusive. In this connection, I do not entirely share Hill J.'s view that Lockhart J. in Topfelt did not regard the failure to specify the total amount due in the demand in that case as a "defect". I incline to the view that Lockhart J. did regard the failure as a defect, but applied s.459J(1)(b) in the absence of an argument that substantial injustice had to be shown if the demand were to be set aside. Be that as it may, I think that the statutory regime is intended to allow a demand to be set aside for a "defect" only if substantial injustice would otherwise be caused. If I am incorrect in concluding that the Bank's demand complied with the statutory requirements, I think that the failure to specify interest, fees and charges constituted a "defect" in the demand, for the purposes of s.459J of the Corporations Law. The failure would constitute an "irregularity" or a "misdescription" of the debt, within the definition of "defect". Alternatively, - 18 - to use the language of Lockhart J. in Topfelt (at 237), the failure to specify interest, fees and charges would accurately be described as "the absence of something necessary or essential for completeness". Certainly I would not regard the omission of these details as so fundamental that the demand would be incapable of amounting to a statutory demand within the meaning of the Corporations Law. I have previously referred to the fact that no evidence was adduced by the company to suggest that it had suffered prejudice or injustice by the absence of a breakdown of the amount claimed in the demand. As I have noted, there was no evidence that the amount claimed was not due or that the company had been unable to calculate the sums due to the Bank. It may be that specific evidence that the defect has caused prejudice is not always required; in some cases, for example, the form of the demand coupled with evidence of the nature of the alleged debt, may make it apparent that the company concerned will suffer substantial prejudice by reason of the defect in the demand. However, in my opinion, the present is not such a case. Service The requirements for service of documents on a company under the Corporations Law are specified in s.220(1): "A document may be served on a company by leaving it at, or by sending it by post to, the registered office of the company." Evidence as to delivery of the demand and the accompanying -19 - affidavit was given by Mr Andrew Mondon, a licensed commercial sub-agent. Mr Mondon was cross-examined by Mr Blackburn~Hart. I should say at once that I have no hesitation in regarding Mr Mondon as a witness of truth and I accept his evidence. Mr Mondon attended the premises known as 35 Alexander Avenue, Taren Point, the registered office of the company, shortly before 5 p.m. on Friday 19 August 1994. Upon arrival, he found that the property had a wire fence around it, topped by barbed wire. There were also gates about eight to ten feet high, locked with a chain. These were also topped by barbed wire. He moved his car to the gate, stood on the car and used a canvas bag to shield himself from the barbed wire and scaled the gate. Mr Mondon proceeded to the door of the office building. The door was locked. Mr Mondon taped the documents to the left side of the door, about half way up. He then left the premises. Mr Alex Georgievski swore an affidavit in which he deposed that on Friday afternoons the company's business at 35 Alexander Avenue, Taren Point closed at 1.30 p.m., although he remained there until about 3 p.m. The gates were left open to enable drivers from two transport companies to collect goods to be delivered to customers outside Sydney. The practice was that the second driver locked the gates when leaving the premises. The regular routine was also that the first company's driver arrived at the premises not earlier than 4.30 p.m. and the second company's driver not earlier than 5 p.m. Mr Georgievski swore that he left the premises on 19 August 1994 at about 3 p.m. He - 20 - returned at about 8 a.m. on Monday 22 August 1994. The gates were locked. He unlocked them and proceeded to the front door of the office and observed no documents affixed to the door. Nor did he observe documents anywhere in the vicinity of the front door. Mr Georgievski said in oral evidence that there was no mail box on the perimeter fence or gate at the premises and that there was no mail box or slot on the external wall or door of the office. A flap at the bottom of the door to the office prevented documents being pushed under the door, although there was another door providing access to the office. Mr Georgievski's evidence was not necessarily inconsistent with Mr Mondon's account. In cross-examination, Mr Georgievski accepted that the gates may have been closed on 19 August 1994 prior to 5 p.m., because he had been unable to confirm that the second transport company had in fact picked up goods from the company's premises on that day. However, for the documents to be removed from where Mr Mondon had left them, somebody would presumably have had to scale the fence and take the documents from where they had been taped to the door of the office. Because Mr Georgievski was cross-examined and it was squarely put to him that he was telling the truth about the documents left at the premises by Mr Mondon, I do not think it appropriate simply to let the question of service rest on inference. In my opinion, Mr Georgievski was not a reliable witness. I do not accept his account that he did not observe or receive the documents when he arrived at the company's premises on 22 August 1994. I find not -21- only did Mr Mondon affix the documents to the door as he described, but that they were in place when Mr Georgievski arrived on 22 August 1994 and that Mr Georgievski was aware of the nature of the documents that had been left at the premises. Mr Georgievski's evidence contained several inconsistencies. He gave a completely unconvincing account of circumstances in which he was served with papers intended for his brother. In particular his assertion that he did not know the person who approached him was a process server was not credible. Mr Georgievski was shown to have prepared or signed documents that were false to his knowledge. These documents were provided to the Bank. Mr Georgievski's explanation for preparing such documents was, in my view, disingenuous at best. Mr Georgievski shifted ground, when pressed with the significance of his own evidence and his own actions. I am not prepared to accept Mr Georgievski's denial that he saw the documents left at the premises by Mr Mondon. I appreciate that this of itself does not establish that Mr Georgievski saw the documents on 22 August 1994 and understood their Significance. However, I have accepted Mr Mondon's account of the way in which the documents were left at the premises. On the evidence, the overwhelming likelihood is that the documents remained in place until Mr Georgievski's arrival at the premises on the Monday morning. There was nothing to suggest that a third party interferred with the documents over the weekend. Moreover, Mr Georgievski acknowledged in evidence that he had been told - 22 - before 19 August 1994 to expect service of documents by the Bank. Mr Blackburn-Hart accepted that the question of service turned on the credit of the two witnesses. On my findings, it is clear that the statutory demand and supporting affidavit were served on the company on 19 August 1994. In the alternative, Mr Cotman submitted that, even if Mr Georgievski had not seen or received the documents on 22 August 1994, they had been left at the registered office of the company on 19 August 1994, as required by s.220 of the Corporations Law. On the findings of fact already made, the documents were left at the registered office of the company shortly before 5 p.m. on 19 August 1994, by being affixed to the door of the office. The process server could not reasonably have done more, having regard to the facts that the office was closed at the time (notwithstanding that service of the documents occurred during ordinary business hours) and that there was no box or receptacle for the receipt of documents. The authorities make it clear that what is required by s.220(1) is delivery of the documents to the registered office, not necessarily receipt by the company: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, at 97; F.P. Leonard Advertising v K.D. Travel Services Pty Ltd (1993) 11 ACLC 1203 (S Ct NSW/Santow J.); Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559, (S Ct NSW/McLelland C.J.) at 564-565. Thus I accept Mr Cotman's alternative submission. ~ 23 - Conclusion The company's application to set aside the statutory demand should be dismissed. The company should pay the Bank's costs. I certify that this and the preceding 22 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville. rosoetate Ve je, Fah Dated: 22 December, 1994 Heard: 13 December, 1994 Places Sydney Decision: 22 December, 1994 Appearances: Mr P. Blackburn-Hart instructed by Denis Solari, Son and Associates, Solicitors and Attorneys, appeared for the applicant. Mr N. Cotman instructed by Abbott Tout, Solicitors, appeared for the respondent.