FEDERAL COURT OF AUSTRALIA TPG Newbridge Myer Ltd v The Deputy Commissioner of Taxation [2011] FCA 1157 Citation: TPG Newbridge Myer Ltd v The Deputy Commissioner of Taxation [2011] FCA 1157 Parties: TPG NEWBRIDGE MYER LTD and NB QUEEN S. à r.l. v THE DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA File number(s): VID 898 of 2011 Judges: MIDDLETON J Date of judgment: 4 October 2011 Catchwords: CORPORATIONS ACT – Pt 5.7 winding up – manner of service of demand on foreign company – need to satisfy Court debtor a Pt 5.7 body before approving or directing manner of service under s 585(a) Legislation: Corporations Act 2001 (Cth), s 583, s 585(a) Cases cited: Eltran Pty Ltd v Starport Futures Trading Corporation [2009] QSC 94 Battenberg v Restrom (2006) 149 FCR 128 Date of hearing: 4 October 2011 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 25 Counsel for the Applicants: Mr A Myers QC with Mr E Woodward SC Solicitor for the Applicants: Mallesons Stephen Jaques Counsel for the Respondent: Mr P Crutchfield SC with Mr S Rosewarne Solicitor for the Respondent: Australian Taxation Office IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 898 of 2011 BETWEEN: TPG NEWBRIDGE MYER LTD First Applicant NB QUEEN S. à r.l. Second Applicant AND: THE DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent JUDGE: MIDDLETON J DATE OF ORDER: 4 OCTOBER 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The orders made on 23 August 2011 be set aside. 2. The respondent pay the applicants' costs of the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 898 of 2011 BETWEEN: TPG NEWBRIDGE MYER LTD First Applicant NB QUEEN S. à r.l. Second Applicant AND: THE DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent JUDGE: MIDDLETON J DATE: 4 OCTOBER 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 23 August 2011, the Court ordered that leaving demands to be issued by the respondent under s 585(a) of the Corporations Act 2001 (Cth) ('the Corporations Act') as against the first applicant and second applicant, with Benjamin Cameron Gray, shall be good and sufficient service of those demands (the Orders). 2 The respondent relied upon an affidavit of Mr Aris Zafiriou, sworn on 19 August 2011 ('the Zafiriou affidavit'), in support of the application for directions concerning service of the s 585(a) demands. The material contained in the Zafiriou affidavit established the service of the demands on Mr Gray would, in all probability, bring the demands to the attention of the applicants. The demands were served in accordance with the Orders on 14 September 2011. The demands were in fact brought to the attention of the applicants. 3 By interlocutory application dated 27 September 2011 the applicants have applied to set aside the Orders and any service effected under the Orders. 4 Section 585(a) is found within Pt 5.7 of the Corporations Act, and relevantly provides: For the purposes of this Part, a Part 5.7 body is taken to be unable to pay its debts if: (a) a creditor, by assignment or otherwise, to whom the Part 5.7 body is indebted in a sum exceeding the statutory minimum then due has served on the Part 5.7 body, by leaving at its principal place of business in this jurisdiction or by delivering to the secretary or a director or senior manager of the Part 5.7 body or by otherwise serving in such manner as the Court approves or directs, a demand, signed by or on behalf of the creditor, requiring the body to pay the sum so due and the body has, for 3 weeks after the service of the demand, failed to pay the sum or to secure or compound for it to the satisfaction of the creditor; (emphasis added) 5 The main contention of the applicants is that before making an order under s 585(a) of the Corporations Act, the Court must be satisfied (on proper material) that each of the applicants is a Pt 5.7 body within the meaning of the Corporations Act. 6 A Part 5.7 body is defined in section 9 of the Corporations Act as follows: Part 5.7 body means: (a) a registrable body that is a registrable Australian body and: (i) is registered under Division 1 of Part 5B.2; or (ii) is not registered under that Division but carries on business in this jurisdiction and outside its place of origin; or (b) a registrable body that is a foreign company and: (i) is registered under Division 2 of Part 5B.2; or (ii) is not registered under that Division but carries on business in Australia; or (c) a partnership, association or other body (whether a body corporate or not) that consists of more than 5 members and that is not a registrable body; but does not include an Aboriginal and Torres Strait Islander corporation. 7 In my view, there is no evidence that either of the applicants are Pt 5.7 bodies. The best the evidence reaches is that the applicants "might be" such bodies. Obviously, the respondent asserts that they are such bodies. 8 The question arises whether the Court needs to be satisfied that the applicants are such bodies. 9 I consider this question is to be answered by reference to the wording of s 585(a) of the Corporations Act and the context in which it appears. 10 The subject matter of s 585 (and s 583) deals with the winding up of a Pt 5.7 body. That body is taken to be unable to pay its debts where a creditor has served a demand. However, the only creditor who is able to do this is a creditor "to whom the Pt 5.7 body is indebted". This is the only class of creditor who is able to serve the demand. Therefore, the power of the Court to order service "in such manner as the Court approves or directs" relates only to where there is a creditor to whom the Pt 5.7 body is indebted. 11 It seems to me, therefore, that a Court will need to be satisfied that the applicants were Pt 5.7 bodies before approving or directing a manner of service. 12 To do otherwise would be to ignore the context of the task placed upon the Court. The Court is to consider methods of service other than specifically set out in the Corporations Act, but only for the purpose of the situation where a Pt 5.7 body is indebted. If that fact is not demonstrated, the Court cannot be satisfied that it is properly approving or directing service within the scope of s 585(a). 13 The parties have referred me to a number of authorities, which I do not consider detract from the above conclusion. None of the authorities concern the issue before me and the construction of s 585(a) of the Corporations Act. 14 The applicants specifically relied upon a number of authorities concerning bankruptcy petitions. It is to be recalled that the issue before me is that of service of a demand, not of a court process. The cases relied upon may inform the way in which the Court may approve or direct service of a demand, but they do not set out inflexible rules of application, nor are they necessarily applicable to the operation of s 585(a). For instance, in considering whether or what to approve or direct by way of service, I do not believe the Court needs to be satisfied of "some need for substituted service" when considering an application pursuant to s 585(a). 15 The purpose of s 585(a) is to bring to the attention of a foreign company the fact that a demand has been served on it for a debt that is claimed to be due and owing: see, for example, Eltran Pty Ltd v Starport Futures Trading Corporation [2009] QSC 94 at [35] and [38], per Applegarth J. 16 Accordingly, when considering the exercise of the power to approve or direct service as conferred by s 585(a) of the Corporations Act, it is necessary for the Court to determine whether the proposed alternative method of service will achieve this objective. The most important consideration, therefore, would be to be satisfied that the manner of service, approved or directed will, in all probability, be effective to bring the demand to the knowledge of the debtor. 17 I agree with the respondent that in approving or directing an alternative method of service of the s 585(a) demands, the Court is not exercising or asserting jurisdiction over the applicants. This important distinction was explained by the Full Court in Battenberg v Restrom (2006) 149 FCR 128 at [15] as follows: The decision [in Laurie v Carroll] concerns the jurisdiction of the Court. We see no reason to apply well-settled rules concerning jurisdiction to the administrative issue and service of a bankruptcy notice. The bankruptcy notice contains a command in the sense that it indicates that the debtor is required, within a specified period, to pay the amount of the debt or make appropriate arrangements with the creditor. The consequence of non-compliance is that bankruptcy proceedings may be taken. It is, in effect, a notice of intention to commence such proceedings in the event that payment is not made. Even if such a notice were analogous to a writ of summons, we doubt whether it would be appropriate to apply to a modern commercial document the learning relating to what is now little more than a legal fiction. There is another basis for rejecting the appellant's argument. Again assuming that the considerations addressed in Laurie v Carroll can be applied by analogy to the issue and service of a bankruptcy notice, that case demonstrates that parliament may confer extra-territorial jurisdiction upon a court. Thus, in Laurie v Carroll, rules of court made under the relevant legislation provided for service out of the jurisdiction in certain identified cases. By analogy the only questions in this case would be whether the Act permits service of a bankruptcy notice out of Australia and as to relevant formalities. They are, we think, in any case, the only relevant questions. 18 Those principles that have developed in relation to the service of court process outside of the jurisdiction have, in my view, no role to play in looking at the service of s 585(a) demand. 19 However, as I have said, I do not agree with the contention of the respondent that it is not necessary for the Court to be satisfied that the applicants are Pt 5.7 bodies before making an order approving or directing service of a demand. 20 The applicants and respondent referred to some comments of the Full Court in Battenberg per Heerey, Dowsett and Conti JJ at [18]: In Re Mendonca; Ex parte Commissioner of Taxation (Cth) (1969) 15 FLR 256 at 261, Gibbs J, sitting as a judge of the Federal Court of Bankruptcy, observed that s 309(2) and r 113(1) (which authorised the Court to give directions as to practice and procedure) conferred "ample power to order service outside the jurisdiction", of a bankruptcy petition. In that case the petition was issued after the debtor had left Australia. It seems that his Honour did not consider that fact to be a bar to such an order. In other words, exercise of the power conferred by s 309(2) is not conditional upon a debtor's presence in Australia. It is true that Gibbs J considered that an order for such service would be made only if one of the criteria identified in s 43(1)(b) were present. In this case the evidence does not presently establish, or deny the existence of, any of those criteria. That is no doubt because issue and service of the bankruptcy notice (as opposed to making a sequestration order) are not conditional upon the existence of one of those criteria. 21 It is important to observe that Battenberg concerned the operation of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) where an order for substituted service under s 309(2) had been made. Section 309(2) concerns the mechanics of service, where a notice or other document is required to be served on or given to a person. If there is no requirement, then the Court would have no power to make an order under s 309(2). In other words, there is in s 309(2) a pre-condition to the making of an order relating to the giving and serving of a notice and other document, although not relevant to the issues before the Full Court in Battenberg. 22 In the same way, before the Court embarks upon making an order under s 585(a), it will need to be satisfied that there is a creditor to whom a Pt 5.7 body is indebted. 23 In any event, I can approach the matter in another way. If the Court has no basis to be satisfied that there is a Pt 5.7 body involved, the Court in considering its "discretion" to approve or direct, may refuse to give such approval or make such direction as it could be a futile order. If the Court is moved to approve or direct something to occur, the moving party should normally indicate the utility of the order being sought. The Court would need to be satisfied in the context of s 585(a) of the Corporations Act that the method of service approved or directed will, in all probability, achieve the result desired. Specifically the method of service should bring the demand to the attention of the Pt 5.7 body. After all, s 585 is part of the Corporations Act dealing specifically the winding up of Pt 5.7 bodies. If there is no satisfactory evidence at all, as is the case here, to indicate that the applicants are Pt 5.7 bodies, then the Court could be justified in not making the order. Moreover, if the order is made ex parte, it could set it aside absence such evidence. 24 The fact that there are other occasions where the issue whether the applicants are Pt 5.7 bodies will be tested, for instance, if a winding up proceedings are brought, does not detract from my conclusion. All that is required at this stage is some evidence for the Court to reach a level of satisfaction that s 585(a) is engaged. This could be achieved in a variety of ways, including through hearsay evidence. It may be that evidence, in some cases, may be difficult to bring to the Court. However, this conclusion should not lead the Court to construe the Corporations Act other than the way I have suggested. 25 Therefore, as there is no satisfactory evidence at all to suggest the applicants are Pt 5.7 bodies, the ex parte orders either could not have been made, or should not have been made. Accordingly, I order that the orders made on 23 August 2011 be set aside. I order that the respondent pay the applicants' costs of the application. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate: Dated: 10 October 2011