Reported Decision : 49 ACSR 714 (2004) 22 ACLC 971 New South Wales Supreme Court CITATION : Perpetual Nominees v Masri Apartments; Perpetual Nominees v AUS Constructions [2004] NSWSC 500 HEARING DATE(S) : 7 June 2004 JUDGMENT DATE : 9 June 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Statutory demand validly served CATCHWORDS : CORPORATIONS - winding up in insolvency - statutory demand - statutory demand served by post to old address on the day before a notice of change of address of registered office took effect - whether service effective Acts Interpretation Act 1901 (Cth) s 29 LEGISLATION CITED : Corporations Act 2001 (Cth) ss 5C, 109X, 459A, 459C, 459E, 459F, 459P, 459S, 461 Evidence Act 1995 (Cth) ss 4, 160 Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 149 FLR 179 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 CASES CITED : FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136 Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 Re Gasbourne Pty Ltd (1984) 8 ACLR 618 Re Rustic Homes Pty Ltd (1988) 13 ACLR 105 2513/04 Perpetual Nominees Ltd (P) PARTIES : Masri Apartments Pty Ltd (D) 2514/04 Perpetual Nominees Ltd (P) AUS Constructions Pty Ltd (D) FILE NUMBER(S) : SC 2513/04, 2514/04 COUNSEL : D McIntosh (Sol) (P) J Chippindall (D) SOLICITORS : Gadens Lawyers (P) M D Nikolaidis & Co (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST AUSTIN J WEDNESDAY 9 JUNE 2004 2513/04 PERPETUAL NOMINEES LTD V MASRI APARTMENTS PTY LTD 2514/04 PERPETUAL NOMINEES LTD V AUS CONSTRUCTIONS PTY LTD JUDGMENT 1 HIS HONOUR: These two cases raise a practical but important point about the service of statutory demands. I shall deal with the issue by reference to proceeding No 2513 of 2004, and then note the facts and some factual differences in proceeding No 2514 of 2004, although they do not in the end affect the application of legal principles. 2 In proceeding No 2513 of 2004 the plaintiff ("Perpetual") seeks an order for the winding up of the defendant ("Masri") for insolvency under s 459A, and on the just and equitable ground under s 461(1)(k) of the Corporations Act. Perpetual's case on the insolvency ground is based on Masri's failure to comply with a statutory demand. It does not seek to prove insolvency by recourse to any other evidence. There is some other evidence before the court suggesting insolvency, but it is inconclusive. Thus, Perpetual relies upon the presumption of insolvency arising under s 459C(2)(a). 3 Section 459C(1) says that the section has effect for the purposes, inter alia, of an application under s 459P to wind a company up under s 459A in insolvency. Section 459C(2) provides: "The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made: (a) the company failed (as defined in set by section 459F) to comply with a statutory demand …". 4 Section 459F is (to the extent relevant) as follows: "(1) If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period. (2) The period for compliance with a statutory demand is: ... (b) otherwise - 21 days after the demand is served." 5 Thus, the presumption of insolvency upon which Perpetual wishes to rely depends upon it being established that the statutory demand was "served" for the purposes of s 459F(2)(b). To the same effect, s 459E provides a person may "serve on a company" a demand relating to a debt that is due and payable. 6 Section 109X provides (to the extent relevant): "(1) For the purposes of any law, a document may be served on a company by: (a) leaving it at, or posting it to, the company's registered office …". 7 Section 109X does not deal with the question when service by post takes effect. However, according to s 5C(1) of the Corporations Act, the Acts Interpretation Act 1901 (Cth) as in force on 1 November 2000 applies to the Corporations Act. 8 Section 29(1) of the Acts Interpretation Act is (to the extent relevant) as follows: "Where an Act authorises … any document to be served by post, … then unless the contrary intention appears 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." 9 There is nothing to indicate any legislative intention in the provisions of the Corporations Act to which I have referred, which would exclude the application of s 29(1) of the Acts Interpretation Act. 10 The application of s 29(1) is affected by s 29(2), which says that the section "does not affect the operation of section 160 of the Evidence Act 1995". The reference to the Evidence Act 1995 is a reference to the Evidence Act of the Commonwealth, not the Evidence Act of New South Wales: Acts Interpretation Act, s 38(1) and (3). But the Evidence Act of the Commonwealth, according to its own terms, has no application to a proceeding in this court: Evidence Act 1995 (Cth), s 4(1); the extended application to Australian courts, found in s 5, does not encompass s 160. 11 Therefore so far as this court is concerned, s 29(1) is applicable because of s 5C of the Corporations Act, and the court's proceeding is also governed by s 160 of the Evidence Act of New South Wales, which is in terms identical to s 160 of the Evidence Act of the Commonwealth. The provisions applicable in this court are inconsistent with one another. Section 29(1) says that service is effected when the letter is delivered in the ordinary course of post, while s 160 says that a postal article sent by pre-paid post addressed to a person at a specified address in Australia was received at that address on the fourth working day after having been posted. 12 It seems to me that the court should follow and apply s 29(1) of the Acts Interpretation Act, in conjunction with ss 5C and 109X of the Corporations Act, which are Commonwealth provisions that prevail over inconsistent state legislation under s 109 of the Constitution. Additionally, those provisions apply specifically to the service of a document such as a statutory demand, whereas s 160 of the Evidence Act of New South Wales is a more general provision creating a presumption as to time of receipt of a postal article. 13 There is some general support for my conclusion that s 29(1) rather than s 160 is the applicable provision in this case. In Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542, Young J held that service of a summons seeking an order to set aside a statutory demand under s 459G of the Corporations Law (being, at that time, State law) was governed by particular provisions of the Corporations Law equivalent to s 29(1), rather than by the more general provisions of s 160 of the Evidence Act. 14 In the present case the plaintiff's solicitors made a search of the records of the Australian Securities & Investments Commission on 5 March 2004, which disclosed that the registered office of Masri was 502 Forest Road, Penshurst NSW. On 10 March 2004 the plaintiff's solicitors caused a statutory demand dated 5 March 2004, addressed to Masri at the Penshurst address, to be posted by pre-paid post, together with a letter and an affidavit accompanying the statutory demand. The demand alleged that Masri was indebted to Perpetual under a loan agreement dated 17 September 2003 in the sum of $2,820,628.90, including interest up to that time. It was posted from the Gold Coast in Queensland. 15 One of the two directors of Masri has given affidavit evidence that Masri never received the statutory demand, and that the first notice he had of the application to wind up Masri was when he received service of the originating process for winding up. He asserted that 502 Forest Road, Penshurst ceased to be the registered office of Masri from September 2003. 16 On 19 April 2004 Perpetual's solicitors conducted another search of ASIC's records. This new search revealed that the registered office of Masri had become 16 Newman Street, Mortdale NSW. The search indicated that a form of notice of change of address of registered office had been received by ASIC on 4 March 2004, and had been processed on 11 March 2004. This is pursuant to s 142(3) of the Corporations Act, according to which a notice of change of address takes effect (relevantly) from the seventh day after the notice was lodged. 17 I should note that according to the new ASIC search, the notice of change of address of registered office purported to be effective from 17 September 2003, but under s 142(3) it could not take effect until 11 March 2004. I should also note that under s 142(2), a company is required to lodge a notice of change of address of its registered office with ASIC not later than 28 days after the date on which the change occurs, and that by virtue of s 142(2A), an offence based on s 142(2) is an offence of strict liability. 18 On 21 April 2004, two days after conducting the new search, Perpetual filed the originating process for winding up Masri, which is now before the court. It did not issue and serve a new statutory demand at Masri's new registered office. It is accepted that the originating process was properly served. 19 Masri contends that Perpetual cannot take advantage of the presumption of insolvency arising out of failure to comply with a statutory demand, because the statutory demand in this case was not served on Masri's correct registered office. Section 459S(1) prevents the defendant company, faced with an application to wind it up on insolvency which relies on its failure to comply with a statutory demand, from opposing the application, without the leave of the court, on any grounds that the company could have relied on in an application by it for the demand to be set aside. That section does not apply in present case, because according to the evidence, Masri and its directors did not receive and become aware of statutory demand until service of the originating process, and therefore Masri could not have relied on the ground of incorrect service in an application to set the demand aside. 20 In my opinion it is clear from s 142(3) that the change in Masri's registered office took effect on 11 March 2004. The effect of s 109X of the Corporations Act and s 29(1) of the Acts Interpretation Act is that the service of the statutory demand was not effected until the time when the documents posted from the Gold Coast on 10 March 2004 would be delivered in the ordinary course of post. There being no relevant evidence before me, I indicated at the hearing that I would proceed on the assumption that a letter posted from the Gold Coast to suburban Sydney would not be delivered, in the ordinary course of post, until at least the second day after posting. I proceeded in that fashion in order to save costs, on the basis that I would grant Perpetual liberty to apply to adduce further evidence, if I found that service effected on the second day after posting was not proper service. As I have found in favour of Perpetual, it will not be necessary to grant that liberty to apply. 21 Even making that assumption, my view is that the statutory demand has been properly served on Masri. For service to be effected by post under s 109X(1), a document must be posted to the company's registered office. That requirement is satisfied, in my opinion, if the address on the envelope was the company's registered office at the point of time when the letter entered the mailing system. Section 29(1) deems service to be effected by properly addressing, prepaying and posting the document as a letter. The envelope containing the statutory demand, required by s 109X(1) to be directed to the registered office, was properly addressed to the Penshurst address, which is the registered office as at the date of posting. The fact that, under s 29(1), service is taken to be effected at a time after posting, does not derogate from the proposition that, by force of the section, service is deemed to be effected (admittedly, effective at the later date) by the act of posting a properly addressed document by pre-paid mail. 22 There is nothing to suggest that Perpetual knew of the change of registered office and sought to gain advantage by posting the statutory demand to the old address. In such a case the court would prevent the creditor from taking advantage of the company by relying on literal compliance with the statutory provisions for service: see Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 149 FLR 179, and paragraphs [26] to [28]. 23 Section 29(1) would allow Masri to prove that a demand properly addressed to its registered office was not delivered in the ordinary course of post, but it has not done so. Its evidence only establishes non-receipt, which is not sufficient to prove non-delivery: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; see also FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136; Re Rustic Homes Pty Ltd (1988) 13 ACLR 105; Re Gasbourne Pty Ltd (1984) 8 ACLR 618. Specifically, there is no evidence that anyone on behalf of Masri made inquiries at the Penshurst address to ascertain whether the document was delivered there. 24 My conclusion, therefore, is that Perpetual is able to take advantage of the presumption of insolvency, because the statutory demand dated 5 March 2004 was properly served and Masri has failed to comply with it. It has therefore established its case for winding up on the ground of insolvency, and it is unnecessary for me to deal with the just and equitable ground. 25 The defendant in proceeding No 2514 of 2004, AUS Constructions Pty Ltd, is related to Masri, since it has the same directors and its function was to construct home units on property at Liverpool acquired by Masri. It was the borrower from Perpetual, and Masri was a guarantor of the borrowing. Its registered office was 232 The Boulevarde, Punchbowl, NSW. It lodged a notice of change of address of registered office with ASIC on 4 March 2004, which according to ASIC's records, was processed and became effective on 11 March 2004. The new registered office is 16 Newman Street, Mortdale, NSW. Perpetual's statutory demand, dated 5 March 2004, was posted from the Gold Coast to the address of the old registered office on 10 March 2004. There is a difference between the Masri case and the AUS Constructions case regarding service of the originating process. The Originating Process was mistakenly served by a process server at the address of the old registered office. However, it is too late for AUS Constructions to claim that the originating process was not validly served, as it has filed a notice of appearance and has appeared by counsel at the hearing. In all other respects, the facts of the AUS Constructions case are indistinguishable from the facts of the Masri case. 26 The hearing was conducted on the basis that, if I reached a conclusion adverse to his client, counsel for Masri and AUS Constructions would wish to adduce additional evidence or make some application. I shall stand the two proceedings into the Corporations List to hear whatever application counsel for Masri wishes to make, and subject to that, conclude the hearing of the proceedings. ********** Last Modified: 06/10/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.